A. The organizational environment is a set of forces and conditions that have the potential to affect the way the organization operates.
B. As these forces change, they present opportunities and threats that managers must perceive and respond to.
C. Consider both the internal environment (within the organization, from structure and culture) and the external environment (outside the organization). The stakeholders are all those people, groups and institutions that are affected by the environment.
D. Major categories of external environment: task and general environment.
II. The Task Environment
– set of forces that have a direct, and often daily, effect on the organization’s ability to obtain inputs, sell its outputs, and other short-term decisions.
A. Suppliers – provide the organization with input resources (raw materials, component parts, workers) to produce goods and services.
B. Distributors – help organizations to sell their goods and services
C. Customers – people and groups that buy the organization’s goods and services
D. Competitors – organizations that produce similar goods and services (that provide same benefit) and compete for the same customers.
Barriers to entry can result from:
1. Economies of scale – cost advantages associated with large-scale operations.
2. Brand loyalty – customers prefer the organization’s products
3. Government regulations – such as provincial or import restrictions
The General Environment
A. Economic Forces – interest rates, inflation, unemployment, and economic growth.
B. Technological Forces – caused by changes in technology (which is the skills and equipment used to design, produce, and distribute goods and services).
C. Demographic Forces – outcomes of changes in (or changing attitudes toward), the characteristics of people such as age, gender, ethnic origin, and social class
D. Sociocultural forces – pressure coming from the social structure of a country
1. Social structure – the relationships between individuals and groups
2. National culture – the values & norms considered important by the society
E. Political and Legal Forces – changes in laws and regulations, (such as deregulation, privatization, environmental protection, Competition Act)
F. Global Forces -- falling trade barriers and increasing economic integration of countries create opportunities and pose threats.
1. shaped by flow of capital (human, financial, resource and political) as it moves through companies and world regions seeking where it can earn the greatest returns (wealth)
III. Impact of National Culture
A. National culture includes values, norms, knowledge, beliefs, moral principles, laws, customs, and other practices that unite the citizens of a country
B. Effective global managers can understand and work with diverse cultures
C. Hofstede provides five dimensions to define how national cultures differ:
1. individualism (worldview that values individual freedom, expression and achievement) vs. collectivism (values goals of the group more);
2. power distance: (determines degree to which inequalities in power and well-being are accepted in a society);
3. achievement orientation (where assertiveness, success, results are valued ) vs. nurturing orientation (value quality of life, personal relationships, and caring for the weak)
4. uncertainty avoidance; (degree to which societies are willing to tolerate uncertainty and risk).
5. long-term orientation (worldview that values thrift and persistence in achieving goals) vs. short-term orientation (values personal stability or current happiness
D. A culturally diverse management team that can adapt practices to cultural differences can be a source of strength.
IV. Managing the External Environment
– managing opportunities and threats in the organization’s environment
A. Managers measure 1) environmental complexity (number and impact of forces) and 2) rate of environmental change and then choose the best strategy
B. Reducing the Impact of Environmental Forces– Managers at all levels contribute to gathering information and finding ways to reduce the negative impact of environmental forces as they evolve over time
C. Managers as Agents of Change – change in the environment is a two-way process as the choices managers make also affect the system as a whole.
V. Challenges for Management in a Global Environment
A. Building a competitive advantage
1. Increasing efficiency – reducing the resources needed to produce goods
2. Increasing quality – total quality management (TQM)
3. Increasing innovation – creating new goods, services and processes
4. Increasing responsiveness to customers
B. Maintaining ethical standards – avoiding bribes and other unethical behaviour
C. Utilizing new information systems and technologies – to increase performance
