Griffin Chap03

CHAPTERCHAPTER

33

The Environment of Organizations and Managers

The Environment of Organizations and Managers

Copyright Copyright © by Houghton Mifflin Company.© by Houghton Mifflin Company.All rights reserved.All rights reserved.

PowerPoint PresentationPowerPoint Presentation by Charlie Cook by Charlie Cook

Copyright © by Houghton Mifflin Company. All rights reserved. 3–2

Learning ObjectivesLearning Objectives

After studying this chapter, you should be able to:– Discuss the nature of the organizational environment and

identify the environments of interest to most organizations.– Describe the components of the general and task

environments and discuss their impact on organizations.– Identify the components of the internal environment and

discuss their impact on organizations.– Identify and describe how the environment affects

organizations and how organizations adapt to their environment.

– Discuss the meaning of and approaches to organizational effectiveness.

After studying this chapter, you should be able to:– Discuss the nature of the organizational environment and

identify the environments of interest to most organizations.– Describe the components of the general and task

environments and discuss their impact on organizations.– Identify the components of the internal environment and

discuss their impact on organizations.– Identify and describe how the environment affects

organizations and how organizations adapt to their environment.

– Discuss the meaning of and approaches to organizational effectiveness.


Chapter OutlineChapter Outline• The Organization’s

Environments• The External Environment

– The General Environment

– The Task Environment

• The Internal Environment– Owners

– Board of Directors

– Employees

– Physical Work Environment

• The Organization’s Environments

• The External Environment– The General Environment

– The Task Environment

• The Internal Environment– Owners

– Board of Directors

– Employees

– Physical Work Environment

• Organizational-Environment Relationships– How Environments Affect

Organizations

– How Organization Adapt to Their Environments

• The Environment and Organizational Effectiveness– Models of Organizational

Effectiveness

– Examples of Organizational Effectiveness

• Organizational-Environment Relationships– How Environments Affect

Organizations

– How Organization Adapt to Their Environments

• The Environment and Organizational Effectiveness– Models of Organizational

Effectiveness

– Examples of Organizational Effectiveness


The Business EnvironmentThe Business Environment

• External Environment– General environment is everything outside an organization’s

boundaries—economic, legal, political, socio-cultural, international, and technical forces.

– Task environment is composed of specific groups and organizations that affect the firm.

• Internal Environment– Conditions and forces present and at work within an

organization

• External Environment– General environment is everything outside an organization’s

boundaries—economic, legal, political, socio-cultural, international, and technical forces.

– Task environment is composed of specific groups and organizations that affect the firm.

• Internal Environment– Conditions and forces present and at work within an

organization


The Organization and Its The Organization and Its EnvironmentsEnvironments

OwnersEmployees

Physical environmentBoard of directors

Culture

Competitors

Internationaldimension

Political-legal

dimension

Technologicaldimension

Socioculturaldimension

Economicdimension

Regulators Customers

Strategicpartners

Suppliers

Internal environment

Task environmentExternal environment

General environmentFigure 3.1


The External EnvironmentThe External Environment

• The General Environment– The set of broad dimensions and forces in an organization’s

surroundings that create its overall context.– Economic dimension is the overall health and vitality of the

economic system in which the organization operates.– Technological dimension refers to the methods available for

converting resources into products or services.– Sociocultural dimension includes the customs, mores,

values, and demographic characteristics of the society in which the organization functions.

– Political-legal dimension is the extent of government regulation of business and the general relationship between business and government.

– International dimension is the extent to which the organization is affected by business in other countries.

• The General Environment– The set of broad dimensions and forces in an organization’s

surroundings that create its overall context.– Economic dimension is the overall health and vitality of the

economic system in which the organization operates.– Technological dimension refers to the methods available for

converting resources into products or services.– Sociocultural dimension includes the customs, mores,

values, and demographic characteristics of the society in which the organization functions.

– Political-legal dimension is the extent of government regulation of business and the general relationship between business and government.

– International dimension is the extent to which the organization is affected by business in other countries.


McDonald’s General EnvironmentMcDonald’s General Environment

McDonald’s

International Dimension• Restaurants in 115

countries• About two-thirds of sales from outside

the United States

Political-LegalDimension• Government

food standards• Local zoning

climate• General posture

toward businessregulation

TechnologicalDimension• Improved information

technology• More efficient

operating systems

Sociocultural Dimension• Demographic shifts in

number of single adultsand dual-income families

• Growing concerns abouthealth and nutrition

EconomicDimension• Strong economic

growth• Low unemploy-

ment• Low inflation


Task environmentExternal environment

General environment

Figure 3.2


The External Environment The External Environment (cont’d)(cont’d)

• Dimensions of the Task Environment– Specific groups affecting the organization

• Competitors seeking the same resources as the organization.

• Customers who acquire an organization’s products or resources.

• Suppliers that provide resources for the organization.

• Regulators that control, legislate, or influence the organization’s policies or practices:– regulatory agencies.

– interest groups.

• Strategic partners (allies) who are in a joint venture or partnership with the organization.

• Dimensions of the Task Environment– Specific groups affecting the organization

• Competitors seeking the same resources as the organization.

• Customers who acquire an organization’s products or resources.

• Suppliers that provide resources for the organization.

• Regulators that control, legislate, or influence the organization’s policies or practices:– regulatory agencies.

– interest groups.

• Strategic partners (allies) who are in a joint venture or partnership with the organization.


McDonald’s Task EnvironmentMcDonald’s 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


Task environmentFigure 3.3


The Internal EnvironmentThe Internal Environment

• Conditions and stakeholder forces within an organization– Owners are persons with legal property rights to a business.– Board of directors are elected by the stockholders and are

charged with overseeing the general management of the firm to ensure that it is run in a way that best serves the stockholders’ interest.

– Employees are persons who work for the firm and have a vested interest in its continued operation and existence.

– Physical work environment is the actual physical environment of the organization and the work that people do.

• Conditions and stakeholder forces within an organization– Owners are persons with legal property rights to a business.– Board of directors are elected by the stockholders and are

charged with overseeing the general management of the firm to ensure that it is run in a way that best serves the stockholders’ interest.

– Employees are persons who work for the firm and have a vested interest in its continued operation and existence.

– Physical work environment is the actual physical environment of the organization and the work that people do.


How Environments Affect How Environments Affect OrganizationsOrganizations

• Change and Complexity– Environmental change occurs in two ways:

• Degree to which change in environment is occurring

• Degree of homogeneity or complexity of the environment

– Uncertainty is a driving force that influences organizational decisions.

• Change and Complexity– Environmental change occurs in two ways:

• Degree to which change in environment is occurring

• Degree of homogeneity or complexity of the environment

– Uncertainty is a driving force that influences organizational decisions.


Environmental Change, Complexity,Environmental Change, Complexity, and Uncertainty and Uncertainty

Simple

Complex

Stable Dynamic

Moderateuncertainty

Mostuncertainty

Moderateuncertainty

Leastuncertainty

Degree of Change

Deg

ree

of

Ho

mo

gen

eity

Source: Adapted from J.D. Thompson, Organizations in Action. Copyright © 1967 by McGraw-Hill. Reprinted by permission of McGraw-Hill Companies. Figure 3.4


How Environments Affect How Environments Affect Organizations (cont’d)Organizations (cont’d)

• Competitive Forces– Porter’s Five Competitive Forces

• Threat of new entrants into the market

• Competitive rivalry among present competitors

• Threat of substitute products

• Power of buyers

• Power of suppliers

• Environmental Turbulence– Unexpected changes and upheavals in the

environment of an organization.

• Competitive Forces– Porter’s Five Competitive Forces

• Threat of new entrants into the market

• Competitive rivalry among present competitors

• Threat of substitute products

• Power of buyers

• Power of suppliers

• Environmental Turbulence– Unexpected changes and upheavals in the

environment of an organization.


Porter’s Five Competitive ForcesPorter’s Five Competitive Forces

• Threat of new entrants– Extent to and ease with which competitors can enter market.

• Competitive rivalry– Competitive rivalry between firms in an industry.

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

the need for existing products/services.

• Power of buyers– Extent to which buyers influence market rivals.

• Power of suppliers– Extent to which suppliers influence market rivals.

• Threat of new entrants– Extent to and ease with which competitors can enter market.

• Competitive rivalry– Competitive rivalry between firms in an industry.

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

the need for existing products/services.

• Power of buyers– Extent to which buyers influence market rivals.

• Power of suppliers– Extent to which suppliers influence market rivals.


How Organizations Respond to Their How Organizations Respond to Their EnvironmentsEnvironments

General Environment

Task Environment

Informationmanagement

Socialresponsibility

Strategicresponse

Mergers, takeovers,acquisitions,alliances

Directinfluence

Organizationdesign andflexibility

TheOrganization

Figure 3.5


How Organizations Respond toHow Organizations Respond toTheir Environments (cont’d)Their Environments (cont’d)

• Information Management in Organizations– A boundary spanner is an employee who accumulates

information through contacts outside the organization.– Environmental scanning is the process of monitoring the

environment.– Information systems summarize and deliver information in a

form pertinent to a manager’s needs.

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

adopting a new strategy.

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

new venture partnerships or alliances with another firm.

• Information Management in Organizations– A boundary spanner is an employee who accumulates

information through contacts outside the organization.– Environmental scanning is the process of monitoring the

environment.– Information systems summarize and deliver information in a

form pertinent to a manager’s needs.

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

adopting a new strategy.

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

new venture partnerships or alliances with another firm.


How Organizations Respond toHow Organizations Respond toTheir Environments (cont’d)Their Environments (cont’d)

• Organizational Design and Flexibility– An organization may adapt to its 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– An organization may attempt 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 can alter the organization’s environment in a way that favors the organization.

• Organizational Design and Flexibility– An organization may adapt to its 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– An organization may attempt 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 can alter the organization’s environment in a way that favors the organization.


The Environment and The Environment and Organizational EffectivenessOrganizational Effectiveness

• Models of Organizational Effectiveness– Systems resource approach focuses on acquiring inputs.– Internal processes approach focuses on the transformation

processes (production efficiencies).– Goal approach focuses on outputs (achieving organizational

goals).– Strategic constituencies approach focuses on feedback

(satisfying stakeholders).

• Models of Organizational Effectiveness– Systems resource approach focuses on acquiring inputs.– Internal processes approach focuses on the transformation

processes (production efficiencies).– Goal approach focuses on outputs (achieving organizational

goals).– Strategic constituencies approach focuses on feedback

(satisfying stakeholders).


A Model of Organizational A Model of Organizational EffectivenessEffectiveness

(Systems resource approach)

Acquiring the resourcesneeded from theenvironment…

making it easier toacquire futureresources.

(Combined approach)

and satisfies thestrategic constituentsin the environment, . . .

(Strategic constituencies approach)

and combining themin an efficient andproductive manner…

(Internal processes approach)

OrganizationalSystem

Feedback

(Goal approach)

facilitates the attainmentof organizational goals…

Inputs

Transformation

Outputs

1 2 3

5 4

Figure 3.6


Examples of Admired andExamples of Admired andHigh-performing FirmsHigh-performing Firms

Fortune’s Most Admired Companies (2000)

Business Week’s Best Performing Companies (2000)

1. General Electric 1. Microsoft

2. Microsoft 2. Time Warner

3. Dell Computer 3. Cisco Systems

4. Cisco Systems 4. Oracle

5. Wal-Mart 5. EMC

6. Southwest Airlines 6. Citrix Systems

7. Berkshire Hathaway 7. Morgan Stanley Dean Witter

8. Intel 8. Gap

9. Home Depot 9. Warner-Lambert

10. Lucent Technologies 10. Lucent Technologies

Table 3.1Source: “America’s Most Admired Companies,” Fortune, February 21, 2000, pp. 108–110; “The Business Week 50,” Business Week, March 27, 2000, pp. 123–125.

Technology

Griffin Chap03