Chapter-3( Organization Environment).pptx

Principles of Management book
Chapter-3
topic- The Organization’s Environments

1. Instructor : Bristi Bhowmik , Lecturer MGT 201 – Principles of Management School of Business Administration Semester: Fall ‘2022

2. The Organization’s Environments The external environment is everything outside an organization’s boundaries that might affect it. There are actually two separate external environments: the general environment and the task environment. An organization’s internal environment consists of conditions and forces within the organization

3. The Economic Dimension The economic dimension of an organization’s general environment is the overall health and vitality of the economic system in which the organization operates.5 Particularly important economic factors for business are general economic growth, inflation, interest rates, and unemployment.

4. 2. The Technological Dimension The technological dimension of the general environment refers to the methods available for converting resources into products or services. Predetermined path Drive through location.

5. 3. The sociocultural dimension of the general environment includes the customs, mores, values, and demographic characteristics of the society in which the organization functions. Sociocultural processes are important because they determine the products, services, and standards of conduct that the society is likely to value. McDonald’s has added salads to its menus and experimented with other low-fat foods. And the firm was among the first fast-food chains to provide customers with information about the ingredients used in its products. School of Economics Semester: Spring ‘2022 School of Business Administration Semester: Fall ‘2022

6. 4. The Political-Legal Dimension The politicallegal dimension of the general environment refers to government regulation of business and the relationship between business and government. First, the legal system partially defines what an organization can and cannot do. political stability has ramifications for planning. No business wants to set up shop in another country unless trade relationships with that country are relatively well defined and stable School of Business Administration Semester: Fall ‘2022

7. 5. The International Dimension Yet another component of the general environment for many organizations is the international dimension, or the extent to which an organization is involved in or affected by businesses in other countries multinational firms such as General Electric, Boeing, Nestlé, Sony, Siemens, and Hyundai clearly affect and are affected by international conditions and markets Even firms that do business in only one country may face foreign competition at home, and they may use materials or production equipment imported from abroad. School of Business Administration Semester: Fall ‘2022

8. The Task Environment Because the impact of the general environment is often vague, imprecise, and long term, most organizations tend to focus their attention on their task environments. These environments include competitors, customers, suppliers, strategic partners, and regulators. School of Business Administration Semester: Fall ‘2022

9. 1. Competitors An organization’s competitors are other organizations that compete with it for resources. Competition also occurs between substitute products. Traditional Non financial ; two totally unrelated organizations might compete to acquire a loan from a bank that has only limited funds to lend. Two retailers might compete for the right to purchase a prime piece of real estate School of Business Administration Semester: Fall ‘2022

10. School of Economics Semester: Spring ‘2022 School of Business Administration Semester: Fall ‘2022

11. 2. Customers A second dimension of the task environment is customers, or whoever pays money to acquire an organization’s products or services. Most of McDonald’s customers are people who walk into a restaurant to buy food. But customers need not be individuals. Schools, hospitals, government agencies, wholesalers, retailers, and manufacturers are just a few of the many kinds of organizations that may be major customers of other organizations. Some institutional customers, such as schools, prisons, and hospitals, also buy food in bulk from restaurants like McDonald’s.

12. 3. Suppliers are organizations that provide resources for other organizations. McDonald’s buys soft-drink products from Coca-Cola; individually packaged servings of ketchup from various suppliers; ingredients from wholesale food processors; and napkins, sacks, and wrappers from packaging manufacturers. . Pick low price supply . Japanese firms have a history of building major ties with only one or two major suppliers. . Honda picked Donnelly Corporation to make all the mirrors . Motorola goes even further, providing its principal suppliers with access to its own renowned quality training program and evaluating the performance of each supplier.

13. 4. Strategic Partners Another dimension of the task environment is strategic partners (also called strategic allies)—two or more companies that work together in joint ventures or other partnerships.. . Disney and Steven Spielberg’s Dreamworks film studio formed a partnership . McDonald’s has several strategic partners. For example, it has one arrangement with Walmart whereby small McDonald’s restaurants are built into some Walmart stores. The firm also has a long-term deal with Disney: McDonald’s promotes Disney movies in its stores, and Disney has built McDonald’s restaurants and kiosks at some of its resorts

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15. 5. Regulators are elements of the task environment that have the potential to control, legislate, or otherwise influence an organization’s policies and practices. There are two important kinds of regulators. The first, regulatory agencies, are created by the government to protect the public from certain business practices or to protect organizations from one another. The second, interest groups, are organized by their members to try to influence organizations.

16. The Internal Environment 1. The owners of a business are, of course, the people who have legal property rights to that business. Owners can be a single individual who establishes and runs a small business, partners who jointly own the business, individual investors who buy stock in a corporation, or other organizations. 2. A corporate board of directors is a governing body elected by the stockholders and charged with overseeing the general management of the firm to ensure that it is being run in a way that best serves the stockholders’ interests. Some boards are relatively passive. They perform a general oversight function but seldom get actively involved in how the company is really being run.

17. 3. An organization’s employees are also a major element of its internal environment. Of particular interest to managers today (as discussed later) is the changing nature of the workforce, as it becomes increasingly diverse in terms of gender, ethnicity, age, and other dimensions. Workers are also calling for more job ownership—either partial ownership in the company or at least more say in how they perform their jobs. 4. Physical Work Environment A final part of the internal environment is the actual physical environment of the organization and the work that people do.

18. The Organization’s Culture Organization culture is the set of values, beliefs, behaviors, customs, and attitudes that helps the members of the organization understand what it stands for, how it does things, and what it considers important.

19. The Multicultural Environment In particular, the people comprising an organization, as well as other organizations with which it interacts, come from different backgrounds and locations and reflect different values, beliefs, customs, viewpoints, attitudes, and experiences. These and other differences, in turn, pose unique opportunities and challenges for managers. These broad issues are generally referred to as multiculturalism Diversity exists in a community of people when its members differ from one another along one or more important dimensions. These differences can obviously reflect the multicultural composition of a community.

20. The reason for increasing DIVERSITY AND MULTICULTURALISM

21. Dimensions of Diversity and Multiculturalism 1. Age Distributions 2. Gender 3. Ethnicity

22. Organization–Environment Relationships ***** 1. Environmental Change and Complexity One of the first perspectives on how environments affect organizations focused on two dimensions: the rate of change and the degree of homogeneity The rate of change is the extent to which the environment is relatively stable or relatively dynamic. The degree of homogeneity is the extent to which the environment is relatively simple (few elements, little segmentation) or relatively complex (many elements, much segmentation). These two dimensions interact to determine the level of uncertainty faced by the organization Uncertainty , in turn, is a driving force that influences many organizational decisions

23. Organization–Environment Relationships

24. 2. ** Competitive Forces F ive competitive forces / Five Forces Model: the threat of new entrants, competitive rivalry, the threat of substitute products, the power of buyers, and the power of suppliers. The threat of new entrants is the extent to which new competitors can easily enter a market or market segment. It takes a relatively small amount of capital to open a dry-cleaning service or a pizza parlor , but it takes a tremendous investment in plant, equipment, and distribution systems to enter the automobile business. Thus the threat of new entrants is fairly high for a local sub shop or pizzeria but fairly low for Ford and Toyota. T

25. Competitive rivalry is the nature of the competitive relationship between dominant firms in the industry. In the soft-drink industry, Coca-Cola and PepsiCo often engage in intense price wars, comparative advertising, and new-product introductions. The threat of substitute products is the extent to which alternative products or services may supplant or diminish the need for existing products or services *** The advent of personal computers, in turn, reduced the demand for calculators as well as for typewriters and large mainframe computers . And now digital tablets like the iPad are cutting demand for personal computers. DVD players have rendered VCRs obsolete, but high-definition DVD technology and streaming video services are now replacing today’s conventional DVD players

26. The power of buyers is the extent to which buyers of the products or services in an industry can influence the suppliers . For example, a Boeing 777 has relatively few potential buyers . Only companies such as Delta, Emirates, and KLM Royal Dutch Airlines can purchase them. Hence, these buyers may have considerable influence over the price they are willing to pay. The power of suppliers is the extent to which suppliers can influence potential buyers. The local electric company may be the only source of electricity in your community. WASA.

27. How Organizations Adapt to Their Environments 1. Information Management One technique for managing information is relying on boundary spanners. A boundary spanner is an employee, such as a sales representative or a purchasing agent, who spends much of his or her time in contact with others outside the organization. Established computer-based information systems to gather and organize relevant information for managers and to assist in summarizing that information. 2. S trategic Response

28. 3. Mergers, Acquisitions A related strategic approach that some organizations use to adapt to their environments involves mergers, acquisitions, and alliances. A merger occurs when two or more firms combine to form a new firm. For example, Delta merged with Northwest Airlines . 4. Direct Influence: For example, firms can influence their suppliers by signing long-term contracts with fixed prices as a hedge against inflation. Or a firm might become its own supplier

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