Organizational Environments and Cultures External environments the forces and events outside a company that have the potential to influence or affect it LO1 Changing Environments Environmental change the rate at which a company s general and specific environments change o Stable environments rate of environmental change is slow Ex Bread bakeries change is fast o Dynamic environments the rate of environmental Ex Videogames Microsoft s Xbox o Punctuated equilibrium theory companies go though long simple periods of stability equilibrium during which incremental changes occur followed by short complex periods of dynamic fundamental change revolutionary periods which end with a return to stability new equilibrium Ex US airline industry Environmental complexity the number and intensity of factors in the external environment that affect organizations o Simple environments have few environmental o Complex environments have many environmental factors that affect organizations Ex Dairy industry factors that affect organizations Ex Newspaper business Resource scarcity the abundance or shortage of critical resources in an organization s external environment o Ex LCD TV high building costs few buildings higher price TV Uncertainty the extent to which managers can understand or predict the external changes and trends affecting their businesses o Lowest when environmental change and complexity are at low levels and resource scarcity is small Highest when environmental change and complexity are extensive and resource scarcity is a problem General environment the economy and the technological sociocultural and political legal trends that indirectly affect all organizations o EX Federal Reserve lowering prime lending rate Specific environment unique to that firm s industry and directly affects the way it conducts day to day business LO2 General Environment o EX Toy industry increasing safety in products Business confidence indices show how confident actual managers are about future business growth o Ex Conference Board s CEO Confidence Index Small Business Research Boards Confidence Index Technology an umbrella term for the knowledge tools and techniques used to transform inputs raw materials information so on into outputs products and services o Changes in technology can help companies provide better products or produce their products more efficiently Sociocultural changes and trends influence organizations o Changes in demographic characteristics affect how a companies staff their businesses o Changes in behavior attitudes and beliefs also affect the demand for businesses products and services Political legal component of general environment includes the legislation regulations and court decisions that govern and regulate business behavior Each organization has a specific environment that is unique to that firms industry and directly affects the way it conducts day to day business Two basic strategies for monitoring customers o Reactive customer monitoring identifying and addressing customer trends and problems after they occur Listen closely to customer complaints and respond to customer concerns o Proactive customer monitoring identifying and addressing customer needs trends and issues before they occur Address common problems and find a way to fix them before they can occur Competitors companies in the same industry that sell similar products or services to customers Competitive analysis identifying competitors anticipating competitors moves and determining competitors strengths and weaknesses Suppliers companies that provide material human financial and informational resources to other companies Supplier dependence the degree to which a company relies on a supplier because of the importance of the supplier s product to the company and the difficulty of finding other sources of that product Buyer dependence the degree to which a supplier relies on a buyer because of the importance of that buyer to the supplier s sales and the difficulty of finding other buyers for its products Opportunistic behavior one party benefits at the expense of the other Relationship behavior focuses on establishing a mutually beneficial long term relationship between buyers and suppliers Industry regulation consists of regulations and rules that govern the practices and procedures of specific industries businesses and professions o Regulatory agencies affect businesses by creating and enforcing rules and regulations to protect consumers workers or society as a whole Advocacy groups groups of concerned citizens who band together to try to influence the business practices of specific industries businesses and professions o Cannot force businesses to change their practices rather they use techniques to try to influence companies Public communications relies on voluntary participation by the news media and the advertising industry to send out an advocacy group s message Media advocacy typically involves framing the groups concerns as public issues affecting everyone exposing questionable exploitative or unethical practices and forcing media coverage by buying media time or creating controversy that is likely to receive extensive news coverage Product boycott a tactic in which an advocacy group actively tries to persuade consumers not to purchase a company s product or service Because external environments can be dynamic confusing and complex managers use a three step process to make sense of the changes in their external environments 1 Environmental Scanning searching the environment for important events or issues that might affect an organization o To stay up to date on important factors in their industry o To reduce uncertainty o Managers pay close attention to trends and events that are directly related to their companies ability to compete in the marketplace o Contributes to organizational performance 2 Interpreting environmental factors LO4 Making sense of Changing Environments o managers determine what the perceived environmental events and issues mean to the organization 3 Acting on threats and opportunities o managers rely on simplified models of external environments called cognitive maps o Cognitive maps summarize the perceived relationships between environmental factors and possible organizational actions Internal environments consists of the trends and events within an organization that affect the management employees and organizational culture o Affect what people think feel and do at work Organizational
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