Chapter 3 Organizational Environments and Cultures PDF

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This is the lecture notes for chapter 3. Chapter 3 talks about organizational environments and cultures....

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External Environments: ALl events outside a company that can influence or affect it ● Basic characteristics ○ Environmental change -- rate at which a company’s general and specific environments change ■ Stable environment: rate of change is slow ■ Dynamic environment: rate of change is fast ■ Factors that affect this include technological innovations, changes in competition, suppliers/buyers needs and preferences, and changes in government regulations ○ Environmental complexity -- the number and intensity of external factors in the environment that affect organizations ■ Simple environment: has few factors (dairy industry) ■ Complex environment: has many factors (less-than-truckload distribution companies) ○ Resource scarcity -- abundance or shortage of critical organizational resources in an organization’s external environment ○ All three combine to make environmental uncertainty -- extent to which managers can predict which external changes and trends will affect their business

Punctuated equilibrium Theory ● Companies go through long periods of stability during which incremental changes occur ○ This is followed by short periods of dynamic, fundamental change and then a new equilibrium

General Environment ● Sociocultural trends ○ Demographic characteristics, general behavior, attitudes, and beliefs of people in society ■ Changes in demographic characteristics affect how companies staff their business ■ Sociocultural changes in behavior, attitudes, and beliefs affect the demand for a business’ products and services ● Technology ○ Knowledge, tools, and techniques used to transform inputs into outputs ○ Technological changes help companies: ■ Provide better products ■ Produce products more efficiently ○ Must be used effectively to improve products or decrease costs ○ Can threaten business by changi nature of competitive advantage and who can keep competitive advantage ● Political/Legal trends ○ Includes the legislation regulations and court decisions that govern and regulate

business behavior Managers must be aware of the laws, regulations, and potential lawsuits that could affect their businesses ○ Recession and natural disasters Economy ○ Growing economy provides a favorable environment for business growth ■ Consumers have more money to spend ○ Influences basic business decisions ■ Managers scan their environment by business confidence indices ● Business confidence indices: show managers’ level of confidence about future business growth ○

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Specific Environment ● Competition ○ Companies in the same industry that sell similar products or services to customers ○ Competitive analysis: Process for monitoring the competition ■ Involves identifying competition, anticipating their moves, and determining their strengths and weaknesses ● Managers typically do a poor job at identifying proper competition ● Managers typically underestimate competitors abilities ● Customers ○ Customers purchase products and services ○ Companies cannot exist without customer support ○ Basic strategies for monitoring customers wants and needs ■ Reactive -- identifying and addressing customer trends and problems after they occur ■ Proactive -- identifying and addressing customer needs, trends, and issues before they occur ● Suppliers ○ Companies that provide material, human, financial, and informational resources to other companies ○ Supplier dependence: degree to which a company relies on a supplier because of the importance of their product to the company and the difficulty of finding other courses for that product ■ A high degree of buyer or seller dependence can lead to opportunistic behavior in which one party benefits at the others expense ■ Relationship behavior focuses on establishing a mutually beneficial longterm relationship between the buyer and seller ● Industry Regulation ○ Consists of regulations and rules that govern the practices and procedures of specific industries, businesses, and professions ● Advocacy Groups

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Concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions ○ Examples: ■ ACLU (American Civil Liberties Union) ■ Issue One ■ Feeding america ■ Share Our Strength ○ Social media has made it easier ○ Some techniques used by advocacy groups to influence companies: ■ Public communications ● Relies on voluntary participation of the news media and advertising industry ■ Media advocacy ● Framing groups’ concerns as public issues that affect everyone ● Exposing unethical practices ■ Web pages ■ Blogs ■ Product boycotts ● Actively tries to persuade consumers not to purchase a company’s product or service Organization

Steps of Making sense of changing environments 1. Environmental scanning a. Involves searching the environment for important events or issues that might affect an organization 2. Interpreting environmental factors a. Viewed by managers as either threats or opportunities i. Decide how to act on threats and opportunities ii. Use cognitive maps to summarize perceived relationships between environmental factors and possible organizational actions 3. Acting on threats and opportunities

Internal Environments ● Events and trends inside an organization that affects management, employees, and organizational culture ○ Organizational culture: values, beliefs, and attitudes shared by organizational members ○ Source of organizational culture is company founders ■ Create organizations in their own images and imprint them with their beliefs, attitudes, and values ○ Organizational stories: help makes sense of organizational events

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■ Emphasize culturally consistent assumptions, decisions, and actions Organizational culture is sustained by recognizing and celebrating organizational heroes and holding organizational ceremonies ■ Organizational heroes are organizational people admired for their qualities and achievements within the organization

Keys to Organizational Culture that fosters success ● Adaptability ○ The ability to notice and respond to changes in the organizational environment ● Employee involvement ● Clear Mission ○ Organization's strategic purpose and direction ● Consistency ○ Company actively defines and teaches organizational values, beliefs, and attitudes

Changing Organizational Culture ● Behavioral addition ○ Having managers and employees perform new behaviors that are central and symbolic of the desired organizational culture ● Behavioral substitution ○ Having managers and employees perform new behaviors central to the new organizational culture in place of behaviors that were central to the old culture ● Managers should focus on the parts of the organizational culture they can control ○ These include observable surface-level items, such as workers’ behaviors, symbolic artifacts, and expressed values and beliefs, which can be influenced through employee satisfaction ■ Office design ■ Company dress code ■ Recipients or non-recipients of company benefits and perks ● Stock options ● Additional parking species ● Private company dining room ● Hiring and selecting people who have the values and beliefs consistent with the company's desired culture ○ Selection is the process of gathering information about job applicants to decide who should be offered a job

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Changing environments affect a firm’s decisions and performance...