5chapter powerpoint presentation by charlie cook © copyright the mcgraw-hill companies, inc., 2003....
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55Chapter
PowerPoint Presentation by Charlie Cook© Copyright The McGraw-Hill Companies, Inc., 2003. All rights reserved.
Managing the Managing the OrganizationalOrganizationalEnvironmentEnvironment
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Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives
• After studying the chapter, you should be able to:After studying the chapter, you should be able to:Explain why the ability to perceive, interpret, Explain why the ability to perceive, interpret,
and respond to the organizational and respond to the organizational environment is crucial for managerial success.environment is crucial for managerial success.
Identify the main forces in an organization’s Identify the main forces in an organization’s task and general environments, and describe task and general environments, and describe the challenges that each force presents to the challenges that each force presents to managers.managers.
Discuss the main ways in which managers can Discuss the main ways in which managers can manage the organizational environment.manage the organizational environment.
Explain why boundary-spanning activities are Explain why boundary-spanning activities are importantimportant
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Chapter OutlineChapter OutlineChapter OutlineChapter Outline
• What Is the Organizational Environment?What Is the Organizational Environment?
• The Task EnvironmentThe Task EnvironmentSuppliersSuppliersDistributorsDistributorsCustomersCustomersCompetitorsCompetitors
• The Industry Life CycleThe Industry Life CycleThe Culture of the Industry EnvironmentThe Culture of the Industry Environment
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Chapter Outline (cont’d)Chapter Outline (cont’d)Chapter Outline (cont’d)Chapter Outline (cont’d)
• The General EnvironmentThe General EnvironmentEconomic ForcesEconomic ForcesTechnological ForcesTechnological ForcesSociological ForcesSociological ForcesDemographic ForcesDemographic ForcesPolitical and Legal ForcesPolitical and Legal ForcesGlobal ForcesGlobal Forces
• Managing the Organizational EnvironmentManaging the Organizational EnvironmentReducing the Impact of Environmental ForcesReducing the Impact of Environmental ForcesCreating an Organizational StructureCreating an Organizational Structure
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Chapter Outline (cont’d)Chapter Outline (cont’d)Chapter Outline (cont’d)Chapter Outline (cont’d)
• Managing the Organizational Environment Managing the Organizational Environment (cont’d)(cont’d)Utilizing IT and the InternetUtilizing IT and the InternetBoundary-Spanning RolesBoundary-Spanning RolesManagers as Agents of ChangeManagers as Agents of Change
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What Is the Organizational What Is the Organizational EnvironmentEnvironment
What Is the Organizational What Is the Organizational EnvironmentEnvironment
• Organizational EnvironmentOrganizational EnvironmentThe set of forces and conditions that operate The set of forces and conditions that operate
beyond an organization’s boundaries but beyond an organization’s boundaries but affect a manager’s ability to acquire and affect a manager’s ability to acquire and utilize resourcesutilize resources
Forces and conditions change over time Forces and conditions change over time creating:creating:
• Opportunities for managers to enhance revenues, Opportunities for managers to enhance revenues, enter new markets, and strengthen the firm’s enter new markets, and strengthen the firm’s competitive position.competitive position.
• Threats to the firm from new competitors, economic Threats to the firm from new competitors, economic downturns, and diminished access to critical downturns, and diminished access to critical resources.resources.
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Forces in the Organizational EnvironmentForces in the Organizational EnvironmentForces in the Organizational EnvironmentForces in the Organizational Environment
Figure 5.1
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The Task EnvironmentThe Task EnvironmentThe Task EnvironmentThe Task Environment
• SuppliersSuppliersIndividuals and organizations that provide an Individuals and organizations that provide an
organization with the input resources that it organization with the input resources that it needs to produce goods and servicesneeds to produce goods and services
• Raw materials, component parts, labor (employees)Raw materials, component parts, labor (employees)
Relationships with suppliers can be difficult Relationships with suppliers can be difficult due to materials shortages, unions, and lack of due to materials shortages, unions, and lack of substitutes.substitutes.
• Suppliers that are the sole source of a critical item are Suppliers that are the sole source of a critical item are in a strong bargaining position to raise their prices.in a strong bargaining position to raise their prices.
Managers can reduce these supplier effects by Managers can reduce these supplier effects by increasing the number of suppliers of an input.increasing the number of suppliers of an input.
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The Task Environment (cont’d)The Task Environment (cont’d)The Task Environment (cont’d)The Task Environment (cont’d)
• DistributorsDistributorsOrganizations that help other organizations Organizations that help other organizations
sell their goods or services to customerssell their goods or services to customers• Powerful distributors can limit access to markets Powerful distributors can limit access to markets
through its control of customers in those markets.through its control of customers in those markets.
• Managers can counter the effects of distributors by Managers can counter the effects of distributors by seeking alternative distribution channels.seeking alternative distribution channels.
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The Task Environment (cont’d)The Task Environment (cont’d)The Task Environment (cont’d)The Task Environment (cont’d)
• CustomersCustomersIndividuals and groups that buy goods and Individuals and groups that buy goods and
services that an organization producesservices that an organization produces• Identifying an organization’s main customers and Identifying an organization’s main customers and
producing the goods and services they want is crucial producing the goods and services they want is crucial to organizational and managerial success.to organizational and managerial success.
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The Task Environment (cont’d)The Task Environment (cont’d)The Task Environment (cont’d)The Task Environment (cont’d)
• CompetitorsCompetitorsOrganizations that produce goods and Organizations that produce goods and
services that are similar to a particular services that are similar to a particular organization’s goods and servicesorganization’s goods and services
Potential CompetitorsPotential Competitors• Organizations that presently are not in the task Organizations that presently are not in the task
environment but could enter if they so choseenvironment but could enter if they so chose
Strong competitive rivalry results in price Strong competitive rivalry results in price competition, and falling prices reduce access competition, and falling prices reduce access to resources and lower profits.to resources and lower profits.
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The Task Environment (cont’d)The Task Environment (cont’d)The Task Environment (cont’d)The Task Environment (cont’d)
• Barriers to EntryBarriers to EntryFactors that make it difficult and costly for Factors that make it difficult and costly for
the organization to enter a particular task the organization to enter a particular task environment or industryenvironment or industry
Economies of scaleEconomies of scale• Cost advantages associated with large operationsCost advantages associated with large operations
Brand loyaltyBrand loyalty• Customers’ preference for the products of Customers’ preference for the products of
organizations currently existing in the task organizations currently existing in the task environment.environment.
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Barriers to Entry and CompetitionBarriers to Entry and CompetitionBarriers to Entry and CompetitionBarriers to Entry and Competition
Figure 5.2
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The Industry Life CycleThe Industry Life CycleThe Industry Life CycleThe Industry Life Cycle
• Industry Life CycleIndustry Life CycleThe changes that take place in an industry as The changes that take place in an industry as
it goes through the stages of birth, growth, it goes through the stages of birth, growth, shakeout, maturity, and decline.shakeout, maturity, and decline.
Birth: industry competitors seek to develop Birth: industry competitors seek to develop the winning technologythe winning technology
Growth: industry products gain acceptance Growth: industry products gain acceptance and rapid growth in product demand attracts and rapid growth in product demand attracts new competitorsnew competitors
Shakeout: industry growth slows, weak firms Shakeout: industry growth slows, weak firms exit the industry, and rivalry increasesexit the industry, and rivalry increases
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The Industry Life Cycle (cont’d)The Industry Life Cycle (cont’d)The Industry Life Cycle (cont’d)The Industry Life Cycle (cont’d)
• Industry Life Cycle (cont’d)Industry Life Cycle (cont’d)Maturity: the market stabilizes as demand Maturity: the market stabilizes as demand
levels off, the industry is now dominated by a levels off, the industry is now dominated by a few large competitorsfew large competitors
Decline: demand for industry products Decline: demand for industry products declines, competition increases, failing declines, competition increases, failing competitors either exit the market or are competitors either exit the market or are acquired by rival firmsacquired by rival firms
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Stages in the Industry Life CycleStages in the Industry Life CycleStages in the Industry Life CycleStages in the Industry Life Cycle
Figure 5.3
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The General EnvironmentThe General EnvironmentThe General EnvironmentThe General Environment
• Economic ForcesEconomic ForcesInterest rates, inflation, unemployment, Interest rates, inflation, unemployment,
economic growth, and other factors that economic growth, and other factors that affect the general health and well-being of a affect the general health and well-being of a nation or the regional economy of an nation or the regional economy of an organizationorganization
Managers usually cannot impact or control Managers usually cannot impact or control these.these.
Forces have profound impact on the firm.Forces have profound impact on the firm.
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The General EnvironmentThe General EnvironmentThe General EnvironmentThe General Environment
• Technological ForcesTechnological ForcesOutcomes of changes in the technology that Outcomes of changes in the technology that
managers use to design, produce, or managers use to design, produce, or distribute goods and servicesdistribute goods and services
• Results in new opportunities or threats to managersResults in new opportunities or threats to managers
• Often makes products obsolete very quickly.Often makes products obsolete very quickly.
• Can change how managers manage.Can change how managers manage.
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The General Environment (cont’d)The General Environment (cont’d)The General Environment (cont’d)The General Environment (cont’d)
• Sociocultural ForcesSociocultural ForcesPressures emanating from the social Pressures emanating from the social
structure of a country or society or from the structure of a country or society or from the national culturenational culture
• Social structure: the arrangement of relationships Social structure: the arrangement of relationships between individuals and groups in societybetween individuals and groups in society
• National culture: the set of values that a society National culture: the set of values that a society considers important and the norms of behavior that considers important and the norms of behavior that are approved or sanctioned in that society.are approved or sanctioned in that society.
Cultures and their associated social Cultures and their associated social structures, values, and norms differ widely structures, values, and norms differ widely throughout the world.throughout the world.
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The General Environment (cont’d)The General Environment (cont’d)The General Environment (cont’d)The General Environment (cont’d)
• Demographic ForcesDemographic ForcesOutcomes of change in, or changing attitudes Outcomes of change in, or changing attitudes
toward, the characteristics of a population, toward, the characteristics of a population, such as age, gender, ethnic origin, race, such as age, gender, ethnic origin, race, sexual orientation, and social classsexual orientation, and social class
• During the past two decades, women have entered During the past two decades, women have entered the workforce in increasing numbers and most the workforce in increasing numbers and most industrial countries’ populations are aging.industrial countries’ populations are aging.
• This will change the opportunities for firms competing This will change the opportunities for firms competing in these areas as demands for child care and health in these areas as demands for child care and health care are forecast to increase dramatically.care are forecast to increase dramatically.
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The General Environment (cont’d)The General Environment (cont’d)The General Environment (cont’d)The General Environment (cont’d)
• Political ForcesPolitical ForcesOutcomes of changes in laws and Outcomes of changes in laws and
regulations, such as the deregulation of regulations, such as the deregulation of industries, the privatization of organizations, industries, the privatization of organizations, and increased emphasis on environmental and increased emphasis on environmental protectionprotection
• Increases in laws and regulations increase the costs Increases in laws and regulations increase the costs of resources and limit the uses of resources that of resources and limit the uses of resources that managers are responsible for acquiring and using managers are responsible for acquiring and using effectively and efficiently.effectively and efficiently.
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The General Environment (cont’d)The General Environment (cont’d)The General Environment (cont’d)The General Environment (cont’d)
• Global ForcesGlobal ForcesOutcomes of changes in international Outcomes of changes in international
relationships; changes in nations’ economic, relationships; changes in nations’ economic, political, and legal systems; and changes in political, and legal systems; and changes in technology, such as falling trade barriers, the technology, such as falling trade barriers, the growth of representative democracies, and growth of representative democracies, and reliable and instantaneous communicationreliable and instantaneous communication
Important opportunities and threats to Important opportunities and threats to managers:managers:
• The economic integration of countries through free-The economic integration of countries through free-trade agreements (GATT, NAFTA, EU) that decrease trade agreements (GATT, NAFTA, EU) that decrease the barriers to trade.the barriers to trade.
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Managing the Organizational Managing the Organizational EnvironmentEnvironment
Managing the Organizational Managing the Organizational EnvironmentEnvironment
• Environmental ChangeEnvironmental ChangeThe degree to which forces in the task and The degree to which forces in the task and
general environments change and evolve over general environments change and evolve over timetime
• Reducing the Impact of Environmental ForcesReducing the Impact of Environmental ForcesTop management: devise strategies that take Top management: devise strategies that take
advantage of opportunities and counter threatsadvantage of opportunities and counter threatsMiddle managers: collecting about competitors’ Middle managers: collecting about competitors’
intentions, new customers, and new suppliers intentions, new customers, and new suppliers for the firm’s crucial or low-cost inputsfor the firm’s crucial or low-cost inputs
First-line managers: use resources efficiently First-line managers: use resources efficiently and get closer to customersand get closer to customers
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Managing the Organizational Managing the Organizational Environment (cont’d)Environment (cont’d)
Managing the Organizational Managing the Organizational Environment (cont’d)Environment (cont’d)
• Creating an Organizational StructureCreating an Organizational StructureIncreasing the complexity of the Increasing the complexity of the
organization’s structure in response to the organization’s structure in response to the changing organizational environment changing organizational environment
Departments are assigned to develop the Departments are assigned to develop the skills and knowledge necessary to deal with skills and knowledge necessary to deal with environmental changes and to cooperate environmental changes and to cooperate with other departments to efficiently and with other departments to efficiently and effectively get products to customerseffectively get products to customers
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How Managers Use Functions to Manage Forces in How Managers Use Functions to Manage Forces in the Task and General Environmentsthe Task and General Environments
How Managers Use Functions to Manage Forces in How Managers Use Functions to Manage Forces in the Task and General Environmentsthe Task and General Environments
Figure 5.4
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Utilizing IT and the InternetUtilizing IT and the InternetUtilizing IT and the InternetUtilizing IT and the Internet
• Business-to-Business (B2B) NetworksBusiness-to-Business (B2B) NetworksCompanies that use the same IT software to Companies that use the same IT software to
link to each other and the industry’s link to each other and the industry’s suppliers to acquire their inputs more reliably suppliers to acquire their inputs more reliably and at less costand at less cost
• Facilitates comparisons of suppliers’ pricesFacilitates comparisons of suppliers’ prices
• Informs suppliers of changes in purchasers’ Informs suppliers of changes in purchasers’ specification and allows them to bid on contracts to specification and allows them to bid on contracts to supply inputssupply inputs
• Informs customers about new and existing productsInforms customers about new and existing products
• Provides information to other stakeholdersProvides information to other stakeholders
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Boundary-Spanning RolesBoundary-Spanning RolesBoundary-Spanning RolesBoundary-Spanning Roles
• Boundary SpanningBoundary SpanningInteracting with individuals and groups Interacting with individuals and groups
outside the organization to obtain valuable outside the organization to obtain valuable information from the task and general information from the task and general environmentsenvironments
• Boundary-spanning managers seek ways to respond Boundary-spanning managers seek ways to respond and to influence stakeholder perceptions to gain and to influence stakeholder perceptions to gain access to resourcesaccess to resources
• Gaining information from outside the organization, Gaining information from outside the organization, helps managers make better decisions about how to helps managers make better decisions about how to deal with changedeal with change
• Involving more levels of management yields better Involving more levels of management yields better overall decision makingoverall decision making
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Boundary-Spanning Roles (cont’d)Boundary-Spanning Roles (cont’d)Boundary-Spanning Roles (cont’d)Boundary-Spanning Roles (cont’d)
• Boundary Spanning (cont’d)Boundary Spanning (cont’d)GatekeepingGatekeeping
• Deciding what information to allow into the Deciding what information to allow into the organization and what information to keep out.organization and what information to keep out.
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The Nature of Boundary-Spanning RolesThe Nature of Boundary-Spanning RolesThe Nature of Boundary-Spanning RolesThe Nature of Boundary-Spanning Roles
Figure 3.5
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Managers as Agents of ChangeManagers as Agents of ChangeManagers as Agents of ChangeManagers as Agents of Change
• Environmental change can be the direct Environmental change can be the direct consequence of actions taken by managers in consequence of actions taken by managers in an organization.an organization.
Figure 5.6
Change in the Change in the Environment as a Environment as a Two-Way ProcessTwo-Way Process