Chapter 2 The Environment and Culture of Organizations Copyright © Houghton Mifflin Company. All rights reserved.3–1 General Task Internal

Chapter 2The Environment and Culture

of Organizations

Copyright © Houghton Mifflin Company. All rights reserved. 3–1

General

Task

Internal


The Organization’s Environment

3 Environments of an organization:Internal, Task, General

• Environmental Factors play a major role in determining an organization’s success or failure

• Managers should strive to maintain the proper alignment between their organization and its environments.

3–3

The Organization and its Environments


The External EnvironmentThe General EnvironmentThe set of broad dimensions and forces in an organization’s surroundings that create

its overall context.

• Economic dimension

– General economic growth, inflation, interest rates, unemployment

• Technological dimension

– Methods available for converting resources into products

• Sociocultural dimension

– Customs, values, demographic characteristics of society

• Political-legal dimension

– Government regulation of business

• International dimension

– Extent an organization is involved/affected by business in other countries


McDonald’s General Environment


The External EnvironmentThe Task Environment

• Competitors

– Organizations that compete with it for resources

• Customers

– Whoever pays money to acquire an organization’s products/services

• Suppliers

– Organizations that provide resources for other organizations

• Strategic Partners

– Companies that work together in joint ventures/partnerships

• Regulators

– Have potential to control, legislate, or otherwise influence and organization’s policies/practices

» Regulatory agencies – EPA, SEC, FDA, EEOC

» Interest Groups – PETA, MADD, NRA


Task Environment

McDonald’s

Competitors• Burger King• Wendy’s• Subway• Dairy Queen

Customers• Individual

consumers• Institutional

customers

Suppliers• Coca-Cola• Wholesale food

processors• Packaging

manufacturers

Strategic Partners• Wal-Mart• Disney• Foreign partners

Regulators• Food and Drug

Administration• Securities and

ExchangeCommission

• EnvironmentalProtectionAgency

Internal environment

Task environment


The Internal Environment

• Conditions and stakeholder forces within an organization– Owners– Board of directors (elected by stockholders,

act in best interests of stockholders) – Employees – Physical work environment– Culture


How Environments Affect Organizations

Change and Complexity– Environment can be described as being:

• Relatively stable or relatively dynamic and• Relatively simple or relatively complex

– Uncertainty• Unpredictability created by environmental change

and complexity

Stable/Simple – Least Uncertainty

Dynamic/Complex – Most Uncertainty


Environmental Change, Complexity, and Uncertainty

Source: From J.D. Thompson, Organizations in Action, 1967. Copyright © 1967 The McGraw-Hill Companies, Inc. Reprinted with permission.


Porter’s Five Competitive Forces• Threat of new entrants

Extent to and ease with which competitors can enter market.

• Competitive rivalryCompetitive rivalry between firms in an industry.

• Threat of substitute productsExtent to which alternative products/services may replace

the need for existing products/services.

• Power of buyersExtent to which buyers influence market rivals.

• Power of suppliersExtent to which suppliers influence market rivals.


How Organizations Adapt to Their Environments

• Information Management in Organizations– Boundary spanners– Environmental scanning – Information systems

• Strategic Response– Maintaining the status quo, altering the current

strategy, or adopting a new strategy.

• Mergers, Acquisitions, Alliances– Firms combine (merge), purchase (acquisition), or

form new venture partnerships or alliances with another firm.


How Organizations Respond to Their Environments (cont’d)

• Organizational Design and Flexibility– Adapting to environmental conditions by

incorporating flexibility in its structural design.• Mechanistic firms operate best in stable environments.• Organic firms are best suited for dynamic environments.

• Direct Influence of the Environment– Attempting to change the nature of the competitive

conditions in its environment to suit its needs.– Pursuing new or changed relationships with

suppliers, customers, and regulators.

Documents

Chapter 2 The Environment and Culture of Organizations Copyright © Houghton Mifflin Company. All rights reserved.3–1 General Task Internal