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Management
Chapter 3
Understanding External and Internal Environments
Objectives
To understand the external and internal environment of a
firm
To get an overview of models that managers use in
analyzing environmental conditions and how they manage
environmental elements
Environments
External environment
Mega forces outside the organization influence the
success of failure of the organization & its products /
services
Internal environment
General conditions within a firm also influence the
success of failure of the organization & its products /
services
Forces in the External Environment
Distributors
Firm
Task/Internal Environment
Suppliers
Competitors
Customer
s
General/external
Environment
Economic
Forces Global
Forces
Sociocultural
Forces
Demographic
Forces
Technological
Forces
Political &
Legal Forces
Analyzing environmental conditions-1
We will look at 3 models for analyzing environmental
conditions:
1. The Population ecology model
2. Resource Dependence model
3. The Perceived Environmental Uncertainty model
Analyzing environmental conditions-2
Senior Managers, strategic and Top managers use similar
models when planning.
These kinds of modeling are of special interest when
assessing the risk involved in doing business in an area, a
country or a region
Large corporation and leading multinationals use intricate
models on uncertainty and resource dependency for
assessing the risk they are likely to face
Population Ecology Model
This is based partly on Darwins natural selection
model applied to the environment, suggests that firms
with appropriate characteristics are more likely to survive
than others without them
Darwins natural selection argues that the environment is
based on the survival of the fittest, whereby only species
with appropriate characteristics will survive
Resource Dependency model
Pfieffers Resource Dependency model argues that
organizations dependence on the environment for
resources will lead it to try to manipulate the
environment in order to survive.
Perceived Environmental Uncertainty
The concept was original pioneered by Duncan (1972) &
Dess & Beard (1984) modified it
The model looks at the complexity and dynamism levels
of the environment
As environmental uncertainty increases, managers must
monitor, act, assess the complexity & dynamism levels as
required
Duncans Perceived Environmental
Uncertainty framework (exhibit 3.4 p75)
Managing Environmental elements-1
We look at 3 ways to do this =
Approach 1: Adaptation
This uses buffering, smoothing, forecasting, rationing
Approach 2: Domain shift
In this the firm diversifies or/and changes the domain (e.g.: product mix)
Managing Environmental elements-2
Approach 3: Favourability Influence
The firm undertakes all those activities that may
favourably influence its position in the environment (p.78-
79)
The Internal Environment
Corporate environment =
Organizational environment
The symbols Organizational culture are:
Symbols, stories, rites/ceremonies
The Internal Environment
Exercise: Class work for discussion
Do Exercise 1 & Exercise 2 and let us discuss it for 5
minutes before the break
BREAK
Management
Chapter 4
Corporate Social Responsibility
& Ethics
Objectives
To learn what is Corporate Social Responsibility
To learn about the approaches, issues and perspectives of
Corporate Social Responsibility
To learn about the Equator Principles & SRI approaches in
Corporate Social Responsibility
What do we mean by Corporate Social
Responsibility (CSR)?
CSR refers to a companys obligation to act to protect and improve societys welfare as well as its own interests
There are 3 major perspectives to CSR:
1. The invisible hand
2. The hand of government
3. The hand of management
CSR Perspectives-1
1. Milton Friedmans views that a firms only responsibility is to make as much money for shareholders are possible. Thus free market forces guide CSR. This is the Invisible Hand
2. Kenneth Galbraith argued that a regulatory hand of government was needed to guide business to manage its possible negative effects by enforcing various labour and product safety protections and pollution controls
CSR Perspectives -1
The hand of management argues that companies must
act to protect and improve societys welfare. It is based
on 3 arguments:
1. Anti-Freeloader
2. Capacity
3. Enlightened self interest
CSR Approaches
Approach Relevance
Activist Sustainability
Stakeholder Multiple shareholder concerns
Market Response to customers
Legal Environmental conservation
Issues in CSR
Is CSR is a theory or set of theories;
which stakeholder relationships are more important?
whether business commit CSR for moral, ethical, societal
or economic reasons?
Does business get any benefit out of it?
And is getting a benefit necessary?
Other approaches to CSR
Francesc Relao, (2011) of ESCEM Business School
(France) takes a social welfare approach.
He believes that it is possible for banks to be both
socially responsible and profit maximizing but divides
banks into social banks and Green washing banks
The Equator Principles & SRI
Developed by private sector banks: led by Citi, ABN
AMRO, Barclays and West Lb launched June 2003,
modelled on environmental standards of World Bank &
IFC. By Oct 2009, 67 FIs had adopted these
SRI are Socially responsible Investments that firms must
make in their environment
Class exercise
Take 15 minutes to think for discussion now:
1. Does Social Responsibility pay? If so how and if not, is
that a good thing?
2. How do organizations monitor social demands/
expectations?
3. What sort of Internal Social response
mechanisms do companies have?
All this is on pp102-107 but it would be better if you expressed
you own opinions & thoughts
Management
Chapter 4 continues
Business Ethics
What is Ethics?
Ethics: It is a set of beliefs about right and wrong
Managerial Ethics: We may consider 3 types:
1. Immoral Management
2. Amoral Management
3. Moral Management
Ethical Models
Social Ethics:
Legal rules, customs
Professional Ethics:
Values in workplace Individual Ethics:
Family influence
Organizations
Code of Ethics
Mechanisms for Ethical management
Organizations sometimes employ these tools for ethics:
1. Top management commitment
2. Codes of Ethics
3. Ethics Committees
4. Ethics audits
5. Ethics training
6. Ethics hotlines
7. Awareness of diversity
Reporting unethical Behaviour
Whistleblowers: a person reporting illegal or unethical acts.
Whistleblowers now protected by law in most cases.
Social audit: managers specifically take ethics and business into account when making decisions. This is similar to the Equator Principles in CSR
Exercise:
1. Let us read Exercise 2, p. 122 What do you think should
be done?
2. Let us discuss which organizations you consider as
having any one of the three types of managerial ethics