Chapter 03 The Environment and Corporate Culture

The Environment and Corporate Culture

Chapte

r 3

Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.

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Organizational Environment

All elements existing outside the

boundary of the organization that have

the potential to affect the organization

Manager’s Challenge: IBM, p. 77


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External Environment

● General environment – affects indirectly

● Task environment- Affects directly

- Influences operations and performances

● Internal environment – elements within the

organization’s boundaries


4

Organizational Environments

Management

Internal

Environment

Suppliers

Co

mp

etito

rsCustomers

Lab

or

Mark

et

Technological

General

Environment

Task

Environment

Technological

Suppliers


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International Dimension

● Provides New• Customers

• Competitors

• Suppliers

● Shapes:• Social trends

• Technological trends

• Economic trends


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Technological Dimension

Scientific and technological advances

– Specific industries

– Society at large

Impact

– Competition

– Relationship with Customers

– Medical advances

– Nanotechnology advances


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Socio-Cultural Dimension

Dimension of the general environment– Demographic characteristics

– Norms

– Customs

– Values


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Key Demographic Trends in U.S.

● By 2050 non-Hispanic whites will make up only about half of the population, down from 74% in 1995; and 69% in 2004

● Baby boomer generation is aging and losing interest in high-cost goods. Generation Y, rival them in size, will soon rival them in buying power.

● The single father household is the fastest growing living arrangement, which rose 62% in 10 years. Two-parent and single-mother households are still much more numerous

● Unprecedented demographic shift = married couple households slipped from 80% in 1950s to just over 50% in 2003. Couples with kids= 25%, with projection 20% by 2010 and 30% of homes inhabited by someone who lives alone.


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Economic Dimension

● General economic health

● Consumer purchasing power

● Unemployment rate

● Interest rates

● Recent Trends

● Frequency of mergers and acquisitions

● Small business sector vitality


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Task Environment

Sectors that have a direct working relationship

with the organization

● Customers

● Competitors

● Suppliers

● Labor Market


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Labor Market Forces

Labor Market Forces Affecting Organizations

today

● Growing need for computer literate information

technology workers

● Necessity for ongoing investment in human

resources – recruitment, education, training

● Effects of international trading blocks, automation,

outsourcing, shifting facility locations upon labor

dislocations


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Adopting to the Environment

Boundary-spanning

Inter-organizational partnerships

Mergers or joint ventures


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External Environment and Uncertainty

Number of Factors in Organization Environment

Adapt to

EnvironmentHigh

Uncertainty

Low

Uncertainty

HighLowLow

High

Rate of

Change in

Factors in

Environment


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Competitive Intelligence - CI

What - Activities to get as much information as

possible about one’s rivals

Where - Web sites, commercial databases,

financial reports, market activities, news clippings,

trade publications, personal contacts

Why – Spot potential threats or opportunities

Ethical Dilemma: Competitive Intelligence Predicament, P. 105


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Interorganizational Partnerships

Shift in paradigm

● Trust, value added to both sides

● Equity, fair dealing, everyone profits

● E-business links to share information and conduct

digital transactions

● Close coordination; virtual teams and people on site

● Involvement in partner’s product design and production

● Long-term contracts

● Business assistance goes beyond the contract


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Levels of Corporate Culture

Visible

1. Artifacts, such as dress, office

layout, symbols, slogans,

ceremonies

2. Expressed values, such as “The

Penney Idea,” “The HP Way”

3. Underlying assumptions and deep

beliefs, such as “people are lazy

and can’t be trusted”

Invisible

Culture

that can

be seen at

the

surface

level

Deeper values

and shared

understandings

held by

organization

members


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Visible Manifestations

Symbols

Stories

Heroes

Slogans

Ceremonies


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Environment and Culture

A big influence on internal corporate culture is the external environment

Cultures can vary widely across organizations

Organizations within same industry reveal similar cultural characteristics

Experiential Exercise: Working in an Adaptive Culture, p. 104


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Corporate Culture AdaptabilityAdaptive Culture Unadaptive Culture

Visible Behavior

Expressed Values

Managers pay close attention to

all their constituencies, especially

customers, and initiate change

when needed to serve their

legitimate interests, even if it

entails taking some risks.

Managers tend to behave

somewhat insularly, politically, and

bureaucratically. As a result, they

do not change their strategies

quickly to adjust to or take

advantage of changes in their

business environments.

Managers care deeply about

customers, stockholders, and

employees. They strongly value

people and processes that can

create useful change (e.g.,

leadership initiatives up and down

the management hierarchy).

Managers care mainly about

themselves, their immediate work

group, or some product (or

technology) associated with that

work group. They value the orderly

and risk-reducing management

process much more highly than

leadership initiatives.

Source: John P. Kotter and Jmaes L. Heskett, Corporate Culture and Performance (New York, The Free Press, 1992), 51.


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Four Types of Corporate Cultures

Adaptability

Culture

Achievement

Culture

Consistency

Culture

Involvement

Culture

External

Internal

Flexibility Stability

Str

ate

gic

Fo

cu

s

Needs of the Environment


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Cultural Leadership

● Articulates a vision that employees can believe in

● Defines and communicates central values that employees believe in

● Values are tied to a clear and compelling mission, or core purpose

● Heeds the day-to-day activities that reinforce the cultural vision – work procedures and reward systems match and reinforce the values


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High-Performance Culture

Creating and maintaining a high-performance culture in today’s turbulent environment and changing workplace is not easy.

– Managers widely communicate their cultural values through their words and particularly their actions

– Value statements that are not reinforced by management behavior are meaningless or even harmful for employees and the organization

– Cultural leaders uphold their commitment to values during difficult times or crises.

Chapter 03 The Environment and Corporate Culture

Leadership & Management

Transcript of Chapter 03 The Environment and Corporate Culture