Changing Organisational Environment

8/4/2019 Changing Organisational Environment

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Changing Organizational Environment


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Forces in the Organizational Environment

Market environmentconsist of all factors that

in one way or another

affect or affected by the

organization decision.

There are external and

internal factors. Internal

factor are: (5M's)

Management

Manpower

Machine

Material and

Money


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Forces in the Organizational Environment

External factors includeare:

Micro factors: are those

which affect the

organization directly

Macro factors: are the

one that affect the

organization indirectly.


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The Task Environment

SuppliersIndividuals and organizations that provide an

organization with the input resources that it needsto produce goods and services

Raw materials, component parts, labor (employees)

Relationships with suppliers can be difficult due tomaterials shortages, unions, and lack of substitutes.

Suppliers that are the sole source of a critical item are

in a strong bargaining position to raise their prices.

Managers can reduce these supplier effects byincreasing the number of suppliers of an input.


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The Task Environment (contd)

DistributorsOrganizations that help other organizations sell

their goods or services to customers

Powerful distributors can limit access to markets

through its control of customers in those markets.

Managers can counter the effects of distributors byseeking alternative distribution channels.


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CustomersIndividuals and groups that buy goods and services

that an organization produces

Identifying an organizations main customers and

producing the goods and services they want is crucialto organizational and managerial success.


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CompetitorsOrganizations that produce goods and services that

are similar to a particular organizations goods andservices

Potential Competitors

Organizations that presently are not in the taskenvironment but could enter if they so chose

Strong competitive rivalry results in price

competition, and falling prices reduce access toresources and lower profits.


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The General Environment

Economic ForcesInterest rates, inflation, unemployment, economic

growth, and other factors that affect the generalhealth and well-being of a nation or the regional

economy of an organizationManagers usually cannot impact or control these.

Forces have profound impact on the firm.


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The General Environment

Technological ForcesTechnological developments can significantly alter

the demand for an organization's or industry'sproducts or services.

Technological change can decimate existingbusinesses and even entire industries, since itsshifts demand from one product to another.


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The General Environment (contd)

Sociocultural ForcesPressures emanating from the social structure of a

country or society.

Social structure: the arrangement of relationships between individuals

and groups in society National culture: the set of values that a society considers important

and the norms of behavior that are approved or sanctioned in thatsociety.

Cultures and their associated social structures,

values, and norms differ widely throughout the world.Example: male dominant or women empowered society, drinking & smoking inoffice / public areas,, regional languages, etc.


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Demographic ForcesOutcomes of change in, or changing attitudes

toward, the characteristics of a population, such asage, gender, ethnic origin, race and social class

During the past two decades, women have enteredthe workforce in increasing numbers and mostindustrial countries populations are aging.

This will change the opportunities for firms competing

in these areas as demands for child care and healthcare are forecast to increase dramatically.


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Political ForcesOutcomes of changes in laws and regulations, such

as the deregulation of industries, the privatizationof organizations, and increased emphasis on

environmental protection Increases in laws and regulations increase the costs

of resources and limit the uses of resources thatmanagers are responsible for acquiring and usingeffectively and efficiently.


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Global ForcesOutcomes of changes in international relationships;

changes in nations economic, political, and legalsystems; such as falling trade barriers, the growth

of representative democracies, and reliable andinstantaneous communication

Important opportunities and threats to managers:

The economic integration of countries through free-

trade agreements (GATT, NAFTA, EU) that decreasethe barriers to trade.

P Fi F


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Porters Five ForcesAssessing the Balance of Power in a Business Situation

The Porter's 5 Forces tool is a

simple but powerful tool for

understanding where power lies

in a business situation.

With a clear understanding ofwhere power lies, you can take

fair advantage of a situation of

strength, improve a situation of

weakness, and avoid taking

wrong steps.

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Porters Five ForcesA way of examining the attractiveness of an industry

Competitive Rivalry: What is important here is the number andcapability of your competitors. If you have many competitors, and they

offer equally attractive products and services, then you'll most likely

have little power in the situation, because suppliers and buyers will go

elsewhere if they don't get a good deal from you. On the other hand, if

no-one else can do what you do, then you can often have tremendousstrength.

Supplier Power: Here you assess how easy it is for suppliers to drive up

prices. This is driven by the number of suppliers of each key input, the

uniqueness of their product or service, their strength and control over

you, the cost of switching from one to another, and so on. The fewer

the supplier choices you have, and the more you need suppliers' help,

the more powerful your suppliers are.

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Porters Five ForcesA way of examining the attractiveness of an industry

Buyer Power: Here you ask yourselfhow easy it is for buyers to driveprices down. Again, this is driven by the number of buyers, the

importance of each individual buyer to your business, the cost to them

of switching from your products and services to those of someone else,

and so on. If you deal with few, powerful buyers, then they are often

able to dictate terms to you.

Threat of Substitution: This is affected by the ability of your customers

to find a different way of doing what you do for example, if you

supply a unique software product that automates an important

process, people may substitute by doing the process manually or by

outsourcing it. If substitution is easy and substitution is viable, then this

weakens your power.

P t Fi F


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Porters Five ForcesAssessing the Balance of Power in a Business Situation

Threat of New Entry: Power is also affected by the ability of people toenter your market. If it costs little in time or money to enter your

market and compete effectively, or if you have little protection for your

key technologies like patents or proprietary rights, then new

competitors can quickly enter your market and weaken your position. If

you have strong and durable barriers to entry, then you can preserve afavorable position and take fair advantage of it.

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Changing Organisational Environment