9 16 CHAPTER 3 TEXTBOOK READING Chapter 3 The Environment and Culture of Organizations The Organizations Environments o The organization needs to understand conditions within the environment o a key element in the effective management of an organization is determining the ideal alignment between the environment and the organization and then working to achieve and maintain that alignment o EXTERNAL ENVIRONMENT everything outside an organizations boundaries that might affect it TWO SEPARATE EXTERNAL ENVIRONMENTS 1 General Environment 2 Task Environment o INTERNAL ENVIRONMENT consists of conditions and forces within the organization Internal Environment consists of Owners Board of Directors Employees Physical Environment Culture The External Environment General Task Environment o General Environment the set of broad dimensions and forces in an organizations surroundings that create its overall context The general environment of most organizations has economic technological sociocultural political legal and international dimensions o Task Environment specific organizations or groups that influence an organization The task environment consists of regulators competitors customers suppliers strategic partners The General Environment Economic Dimension Technological Dimension Socio Cultural Dimension Political Legal Dimension International Dimension o The Economic Dimension is the overall health and vitality of the economic system in which the organization operates Particularly important economic factors for business are general economic growth inflation interest rates and unemployment Figure 3 2 since late 2008 McDonalds U S Operation has been functioning in an economy characterized by weak growth high unemployment and low inflation Higher employment means fewer people eat out but those who do are looking for cheaper options like McDonalds o The Technological Dimension refers to the methods available for converting resources into products or services For example computer assisted manufacturing design techniques More efficient operating systems o The Socio Cultural Dimension the customs mores values and demographic characteristics of the society in which the organization functions Socio Cultural processes are important because they determine the products services and standards of conduct that the society is likely to value Socio cultural factors influence how workers in a society feel about their jobs and organizations For example In the United States accepting bribes and bestowing political favors in return are considered unethical as well as illegal However payments to local politicians may be expected in return for a favorable response to such common business transactions as applications for zoning and operating permits Socio Cultural concern for McDonalds Growing concern about health and nutrition o The Political Legal Dimension refers to the government regulation of business and the relationship between business and government This Dimension is important for 3 basic reasons 1 the legal system partially defines what an organization can and cannot do there are major regulation of business activity despite the U S being a free market economy McDonalds for example is subject to a variety of political and legal forces including food preparation standards and local zoning requirements 2 Pro Anti Business Sentiment in government influences business activity for example during periods of probusiness sentiment firms find it easier to compete and have fewer concerns about anti trust issues o However during a period of antibusiness sentiment firms may find their competitive strategies more restricted and have fewer opportunities for mergers and acquisitions because of anti trust concerns 3 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 o The International Dimension the extent to which an organization is involved in or affected by businesses in other countries McDonalds operates restaurants in 118 different countries The Task Environment most organizations tend to focus their attention on their task environments THESE TASK ENVIRONMENTS INCLUDE o Competitors other organizations that compete with it for resources Reebok Nike Adidas are competitors Universities compete with trade schools the military other universities and the external labor market to attract good students Organizations might also compete for resources besides consumer dollars Two retailers might compete for the right to purchase a prime piece of real estate in a growing community o Customers whoever pays money to acquire an organizations products or services Customers are not just individuals Customers are also schools hospitals government agencies wholesalers retailers and manufacturers o Suppliers are organizations that provide resources for other organizations McDonald s buys soft drink products from Coca Cola individually packaged servings of ketchup from Heinz Common Wisdom in the United States used to be that a business should try to avoid depending exclusively on particular suppliers because a firm that buys all of a certain resource from one supplier may be vulnerable if the supplier raises its prices goes out of business or is shut down by labor strike This practice can also help maintain a competitive relationship among suppliers keeping costs down Honda picked Donnelly Corporation to make all of the mirrors for its U S Manufactured o Strategic Partners strategic allies an organization working together with one or more other organizations in a joint venture or similar arrangement For example Disney and Steven Spielberg s Dreamworks Films studio recently formed a partnership that calls for Disney to provide investment capital to Dreamworks and to distribute four to six Dreamworks films each year In return Disney gets 10 of the box office revenue from each film as well as additional revenue from the distribution of DVDS McDonalds has several strategic partners walmarts where small McDonalds are built long term deal with Disney promoting Disney movies in McDonalds stores Strategic Partnerships helps companies get from other companies the expertise they lack They also help spread risk and open new market opportunities o Regulators are elements of the task environment that have the potential to control legislate or otherwise influence an organizations policies and practices Two