The External Environment and Organizational CultureOrganization Inputs and OutputsOpen SystemsSlide 4Slide 5Slide 6The External EnvironmentLaws and RegulationsThe EconomySlide 10TechnologyDemographicsSlide 13Social Issues and the Natural EnvironmentThe Competitive EnvironmentCompetitorsNew EntrantsSubstitutes and ComplementsSuppliersSlide 20CustomersEnvironmental AnalysisEnvironmental UncertaintySlide 24Slide 25Slide 26Adapting to the EnvironmentInfluencing Your EnvironmentIndependent ActionCooperative ActionChanging the Environment You are InSlide 32Culture and the Internal Environment of the OrganizationCompeting Values Model of CultureThe External The External EnvironmentEnvironmentand and Organizational Organizational CultureCultureChapter 02Chapter 02Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinOrganization Inputs and OutputsOrganization Inputs and Outputs2-2Figure 2.1Open SystemsOpen SystemsOpen systemsOrganizations that are affected by, and that affect, their environment.2-3Open SystemsOpen SystemsInputsGoods and services organizations take in and use to create products or services.OutputsThe products and services organizations create.2-4Open SystemsOpen SystemsExternal environmentAll relevant forces outside a firm’s boundaries, such as competitors, customers, the government, and the economy.Competitive environmentThe immediate environment surrounding a firm; includes suppliers, customers, rivals, and the like.2-5Open SystemsOpen SystemsMacroenvironmentThe general environment; includes governments, economic conditions, and other fundamental factors that generally affect all organizations.2-6The External EnvironmentThe External Environment2-7Figure 2.1Laws and RegulationsLaws and RegulationsRegulators include agencies such as:Occupational Safety and Health Administration (OSHA)Interstate Commerce Commission (ICC)Federal Aviation Administration (FAA)Equal Employment Opportunity Commission (EEOC)National Labor Relations Board (NLRB)And many others2-8The EconomyThe EconomyThe economic environment dramatically affects managers’ ability to function effectively and influences their strategic choices. Interest and inflation rates affect the availability and cost of capital, growth opportunities, prices, costs, and consumer demand for products. 2-9The EconomyThe EconomyIn publicly held companies, managers may feel required to meet Wall Street’s earnings expectations.Managers may focus on short-term results at the expense of long-term successSome managers may be tempted to engage in unethical or unlawful behavior that misleads investors2-10TechnologyTechnologyTechnological advances create new products, advanced production techniques, and better ways of managing and communicating.As technology evolves, new industries, markets, and competitive niches develop.2-11DemographicsDemographicsDemographicsMeasures of various characteristics of the people who make up groups or other social units2-12DemographicsDemographicsDemographic trendsGrowth of the labor forceIncreasing education and skill levelsImmigrationIncreased numbers of women in the workforceIncreasingly diverse workforce2-13Social Issues and the Natural EnvironmentSocial Issues and the Natural EnvironmentSocietal trends regarding how people think and behave have major implications for management of the labor force, corporate social actions, and strategic decisions about products and markets.Family leave, domestic partner benefits2-14The Competitive EnvironmentThe Competitive Environment2-15Figure 2.4CompetitorsCompetitorsCompetition is most intense when:There are many direct competitorsIndustry growth is slowProduct/service is not easily differentiated2-16New EntrantsNew EntrantsBarriers to entry conditions that prevent new companies from entering an industrycapital requirements, restrictive distribution channels2-17Substitutes and ComplementsSubstitutes and ComplementsSubstitutes alternative products or servicesvideo games  watching televisionComplements products or services that increase purchases of other productscar insurance  automobile purchases2-18SuppliersSuppliersSuppliers provide resources or inputs needed for production Switching costs fixed costs buyer face if they change suppliers2-19SuppliersSuppliersSupply chain management managing the network of facilities and people that obtain materials from outside the organization, transform them into products, and distribute them to customers2-20CustomersCustomersFinal customers purchase products in their finished formIntermediate customers purchase raw material or wholesale products before selling them to final customers2-21Environmental AnalysisEnvironmental AnalysisEnvironmental uncertainty Lack of information needed to understand or predict the future.2-22Environmental UncertaintyEnvironmental UncertaintyEnvironmental complexityThe number of issues to which a manager must attend as well as the interconnectedness of these issuesEnvironmental dynamismThe degree of discontinuous change that occurs within an industry2-23Environmental AnalysisEnvironmental AnalysisEnvironmental scanning searching out information that is unavailable to most people and sorting that information to interpret what is important and what is not.Competitive intelligenceInformation that helps managers determine how to compete better.2-24Environmental AnalysisEnvironmental AnalysisScenario developmentA narrative that describes a particular set of future conditionsBest-case, worst-caseForecastingMethod for predicting how variables will change the future2-25Environmental AnalysisEnvironmental AnalysisBenchmarkingThe process of comparing an organization’s practices and technologies with those of other companies.2-26Adapting to the EnvironmentAdapting to the EnvironmentBufferingCreating supplies of excess resources in case of unpredictable needs.SmoothingLeveling normal fluctuations at the boundaries of the environment.2-27Influencing Your EnvironmentInfluencing Your EnvironmentIndependent strategiesStrategies that an organization acting on its own uses to change some aspect of its current environment.Cooperative strategiesStrategies used by two or more organizations working together to manage the