Lesson 4 biz environment anelysis

1/29/20 Lesson Instructor: LTT Xuan 1 Contrast the actions of managers according to the omnipotent and symbolic views Describe the constraints and challenges facing managers in today’s external environment § Develop your skill at scanning the environment so you can anticipate and interpret changes taking place Discuss the characteristics and importance of organizational culture § Know how to read and assess an organization’s culture Describe current issues in organizational culture Instructor: LTT Xuan 2 1/29/20 What Is the Organizational Environment? • ORGANIZATIONAL ENVIRONMENT • The set of forces and conditions that operate beyond an organization’s boundaries but affect a manager’s ability to acquire and utilize resources • Forces and conditions change over time creating: üOpportunities for managers to enhance revenues, enter new markets, and strengthen the firm’s competitive position üThreats to the firm from new competitors, economic downturns, and diminished access to critical resources Instructor: LTT Xuan Instructor: LTT Xuan Forces in the Organizational Environment 1/29/20 Instructor: LTT Xuan 5 The General Environment ECONOMIC FORCES • Interest rates, inflation, unemployment, economic growth, and other factors that affect the general health and well-being of a nation or the regional economy of an organization • Managers usually cannot impact or control these • Forces have profound impact on the firm Instructor: LTT Xuan 6 1/29/20 The General Environment • TECHNOLOGICAL FORCES • Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services • Results in new opportunities or threats to managers • Often makes products obsolete very quickly • Can change how managers manage Instructor: LTT Xuan 7 The General Environment • SOCIOCULTURAL FORCES • Pressures emanating from the social structure of a country or society or from the national culture üSocial structure: the arrangement of relationships between individuals and groups in society üNational culture: the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society • Cultures and their associated social structures, values, and norms differ widely throughout the world Instructor: LTT Xuan 8 1/29/20 The General Environment • DEMOGRAPHIC FORCES • Outcomes of change in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class • During the past two decades, women have entered the workforce in increasing numbers and most industrial countries’ populations are aging • This will change the opportunities for firms competing in these areas as demands for childcare and health care are forecast to increase dramatically Instructor: LTT Xuan 9 Instructor: LTT Xuan 10 10 1/29/20 Instructor: LTT Xuan 11 11 The General Environment POLITICAL FORCES • Outcomes of changes in laws and regulations, such as the deregulation of industries, the privatization of organizations, and increased emphasis on environmental protection • Increases in laws and regulations increase the costs of resources and limit the uses of resources that managers are responsible for acquiring and using effectively and efficiently Instructor: LTT Xuan 12 12 1/29/20 The General Environment • GLOBAL FORCES • Outcomes of changes in international relationships; changes in nations’ economic, political, and legal systems; and changes in technology, such as falling trade barriers, the growth of representative democracies, and reliable and instantaneous communication • Important opportunities and threats to managers: üThe economic integration of countries through free-trade agreements (GATT, NAFTA, EU) that decrease the barriers to trade Instructor: LTT Xuan 13 13 The Task Environment Instructor: LTT Xuan 14 14 1/29/20 The Task Environment SUPPLIERS • Individuals and organizations that provide an organization with the input resources that it needs to produce goods and services üRaw materials, component parts, labor (employees) • Relationships with suppliers can be difficult due to materials shortages, unions, and lack of substitutes üSuppliers 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 by increasing the number of suppliers of an input Instructor: LTT Xuan 15 15 DISTRIBUTORS • Organizations that help other organizations sell their goods or services to customers üPowerful distributors can limit access to markets through its control of customers in those markets üManagers can counter the effects of distributors by seeking alternative distribution channels Instructor: LTT Xuan The Task Environment 16 16 1/29/20 The Task Environment CUSTOMERS • Individuals and groups that buy goods and services that an organization produces üIdentifying an organization’s main customers and producing the goods and services they want is crucial to organizational and managerial success Instructor: LTT Xuan 17 17 • COMPETITORS • Organizations that produce goods and services that are similar to a particular organization’s goods and services • Potential Competitors üOrganizations that presently are not in the task environment but could enter if they so chose • Strong competitive rivalry results in price competition, and falling prices reduce access to resources and lower profits Instructor: LTT Xuan The Task Environment 18 18 1/29/20 The Task Environment BARRIERS TO ENTRY • Factors that make it difficult and costly for the organization to enter a particular task environment or industry • Economies of scale üCost advantages associated with large operations • Brand loyalty üCustomers’ preference for the products of organizations currently existing in the task environment Instructor: LTT Xuan 19 19 The Task Environment Barriers to Entry and Competition Instructor: LTT Xuan 20 20 10 1/29/20 The Task Environment The Industry Life Cycle • The changes that take place in an industry as it goes through the stages of birth, growth, shakeout, maturity, and decline • Birth: industry competitors seek to develop the winning technology • Growth: industry products gain acceptance and rapid growth in product demand attracts new competitors • Shakeout: industry growth slows, weak firms exit the industry, and rivalry increases • Maturity: the market stabilizes as demand levels off, the industry is now dominated by a few large competitors • Decline: demand for industry products declines, competition increases, failing competitors either exit the market or are acquired by rival firms Instructor: LTT Xuan 21 21 The Task Environment The Industry Life Cycle Instructor: LTT Xuan 22 22 11 1/29/20 Managing the Organizational Environment — Environmental Change — The degree to which forces in the task and general environments change and evolve over time — Reducing the Impact of Environmental Forces — Top management: devise strategies that take advantage of opportunities and counter threats — Middle managers: collecting about competitors’ intentions, new customers, and new suppliers for the firm’s crucial or low-cost inputs — First-line managers: use resources efficiently and get closer to customers Instructor: LTT Xuan 23 23 Managing the Organizational Environment • Creating an Organizational Structure • Increasing the complexity of the organization’s structure in response to the changing organizational environment • Departments are assigned to develop the skills and knowledge necessary to deal with environmental changes and to cooperate with other departments to efficiently and effectively get products to customers Instructor: LTT Xuan 24 24 12 1/29/20 How Managers Use Functions to Manage Forces in the Task and General Environments Instructor: LTT Xuan 25 25 Utilizing IT and the Internet • Business-to-Business (B2B) Networks • Companies that use the same IT software to link to each other and the industry’s suppliers to acquire their inputs more reliably and at less cost üFacilitates comparisons of suppliers’ prices üInforms suppliers of changes in purchasers’ specification and allows them to bid on contracts to supply inputs üInforms customers about new and existing products üProvides information to other stakeholders Instructor: LTT Xuan 26 26 13 1/29/20 Managers as Agents of Change • Environmental change can be the direct consequence of actions taken by managers in an organization Change in the Environment as a Two-Way Process Instructor: LTT Xuan 27 27 Environmental uncertainty matrix Instructor: LTT Xuan 28 28 14 1/29/20 Instructor: LTT Xuan 29 29 The internal environment • • • • • • Organizational culture Ethics and Corporate Social Responsibility Human resource capabilities R&D Financial capabilities … Instructor: LTT Xuan 30 30 15 1/29/20 Organizational Culture Questions for consideration • What is organizational culture? • When is organizational culture functional? Dysfunctional? • How employees learn about the culture of their organization? Instructor: LTT Xuan 31 31 Organizational Culture • The pattern of shared values, beliefs and assumptions considered to be the appropriate way to think and act within an organization • • • • Culture is shared Culture helps members solve problems Culture is taught to newcomers Culture strongly influences behaviour Instructor: LTT Xuan 32 32 16 1/29/20 Organizational Culture Layers of culture Instructor: LTT Xuan 33 33 Characteristics of Organizational Culture • Innovation and risk-taking: The degree to which employees are encouraged to be innovative and take risks • Attention to detail: The degree to which employees are expected to exhibit precision, analysis, and attention to detail • Outcome orientation: The degree to which management focuses on results or outcomes rather than on technique and process • People orientation: The degree to which management decisions take into consideration the effect of outcomes on people within the organization • Team orientation: The degree to which work activities are organized around teams rather than individuals • Aggressiveness: The degree to which people are aggressive and competitive rather than easygoing • Stability: The degree to which organizational activities emphasize maintaining the status quo in contrast to growth Instructor: LTT Xuan 34 34 17 1/29/20 Instructor: LTT Xuan 34 35 35 Organizational Cultural Artifacts Do Organizations Have Uniform Cultures? • • • • • Organizational culture represents a common perception held by the organization members • Core values or dominant (primary) values are accepted throughout the organization • Dominant culture • Expresses the core values that are shared by a majority of the organization’s members Stories • Subcultures Rituals • Tend to develop in large Material Symbols organizations to reflect Language common problems, situations, or experiences Instructor: LTT Xuan 36 36 18 1/29/20 Instructor: LTT Xuan 37 37 Keeping a Culture Alive • Selection • Identify and hire individuals who will fit in with the culture • Top Management • Senior executives establish and communicate the norms of the organization • Socialization • Organizations need to teach the culture to new employees Instructor: LTT Xuan 38 38 19 1/29/20 Culture’s Functions • Social glue that helps hold an organization together • Provides appropriate standards for what employees should say or • Boundary-defining • Conveys a sense of identity for organization members • Facilitates commitment to something larger than one’s individual self-interest • Enhances social system stability • Serves as a “sense-making” and control mechanism • Guides and shapes the attitudes and behaviour of employees Instructor: LTT Xuan 39 39 Culture as a Liability Culture can have dysfunctional aspects in some instances • Culture as a Barrier to Change üWhen organization is undergoing change, culture may impede change • Culture as a Barrier to Diversity üStrong cultures put considerable pressure on employees to conform • Culture as a Barrier to Mergers and Acquisitions üMerging the cultures of two organizations can be difficult, if not impossible Instructor: LTT Xuan 40 40 20 1/29/20 • Is it possible to change organizational culture? If yes, how to change? Instructor: LTT Xuan 41 41 Organizational Culture Summary and Implications • Employees form an overall subjective perception of the organization based on such factors as degree of risk tolerance, team emphasis, and support of people üThis overall perception becomes, in effect, the organization’s culture or personality üThese favourable or unfavourable perceptions then affect employee performance and satisfaction, with the impact being greater for stronger cultures • Just as people’s personalities tend to be stable over time, so too strong cultures üThis makes strong cultures difficult for managers to change • One of the more important managerial implications of organizational culture relates to selection decisions üHiring individuals whose values don't align with those of the organization is not good • An employee's performance depends to a considerable degree on knowing what he should or should not Instructor: LTT Xuan 42 42 21 1/29/20 Point-Counter-Point • Why Culture Doesn’t Change ▲Culture develops over many years, and becomes part of how the organization thinks and feels ▲Selection and promotion policies guarantee survival of culture ▲Top management chooses managers likely to maintain culture Instructor: LTT Xuan • When Culture Can Change ▲There is a dramatic crisis ▲There is a turnover in leadership ▲The organization is young and small ▲There is a weak culture 43 43 22 ... Environment The Industry Life Cycle Instructor: LTT Xuan 22 22 11 1/29/20 Managing the Organizational Environment — Environmental Change — The degree to which forces in the task and general environments... currently existing in the task environment Instructor: LTT Xuan 19 19 The Task Environment Barriers to Entry and Competition Instructor: LTT Xuan 20 20 10 1/29/20 The Task Environment The Industry... LTT Xuan The Task Environment 18 18 1/29/20 The Task Environment BARRIERS TO ENTRY • Factors that make it difficult and costly for the organization to enter a particular task environment or industry