Lecture 3. Organization Environment

8/12/2019 Lecture 3. Organization Environment

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ORGANIZATION ENVIRONMENT AND CULTURE



Organizations are open systems that are

continuously affecting and are affected by theforces in the external environment.

The external environment are major forcesoutside the organization that presentpotential for the likely success of products

and services.



Management

Employees Culture

Internal

Environment

Suppliers

C o

m p e t i t or s

Customers

L a b o r M

a r k e t

Technological

General Environment

Task Environment



The most general elements in theenvironment that can influence manager’sstrategic decisions.

Includes the following:◦ Technological◦ Economic◦ Legal/political◦ Socio-cultural/Demographic◦ Global



The forces that are closer to the organization Includes environment that conduct day-to-day

transactions with the organization and directlyinfluence its basic operations and performance

which are also referred to as competitive forces Includes the following:

◦ Customer

◦ Suppliers

◦ Competitors



Technological Environment◦ Current state of knowledge regarding products

and services◦ New technologies create new products and

provide better ways of managing andcommunicating◦ Technology can rapidly change an industry and

management must be ready to respond◦ Technology may positively and negative affect

organizations



Economic Environment◦ describes the general economic health of the

country; forces involved producing, distributingand consuming wealth

◦ Affects the companies’ ability to functioneffectively

◦ Serves as bases for forecasts and strategic moves

◦ Includes the following: consumer purchasing

power, interest rates, unemployment rate,inflation, income levels



Legal/Political Environment◦ Policies/rules and regulations imposed by law that may

negatively and positively affect organization’s operationsby presenting strategic constraints and opportunities

◦ Includes the following:

Trends in legislation, politics, government regulations Business registration, monitoring and good

manufacturing practices

Environment protection

Occupational Safety policies

Consumer protection



Socio-cultural/Demographic Environment◦ Attitudes. Values, norms, beliefs, behaviors and

associated demographic trends

◦ Population, geographical distribution, population

density, age, education levels◦ The above have strategic implications in the

management of labor force and in makingdecisions regarding products and services



Natural Environment◦ Depletion of natural resources have serious

implications in production operations due to rawmaterials and supplies scarcity

◦ Protection of the natural environment isincreasingly becoming a managerial concern andcan be observed in how products



Global Environment◦ Developments outside the home country that have

potential impacts on the operations of anorganization

Oil price increase Supply and demand conditions in competing countries

Membership in regional economic blocs (AFTA, ASEAN,APEC, WTO)



Customers/Clients – those who purchaseorganizational products◦ Companies must be able to track down customer

needs and satisfaction

◦ Companies should monitor changes in buyingbehavior and attitudes



Competitors – organizations in the sameindustry producing the same goods andproviding the same services◦ Companies should track down competitor moves

and map out competitive strategies

Suppliers – organizations that provide rawmaterials and supplies for the operations of

the organization



Forces affecting industry competition◦ New entrants increase industry capacity and

intensifies competition◦ Rivalry among existing firms is brought about by the

number of players and their scale of operations◦ Suppliers provide raw materials and may exert power

by forcing the industry to buy at a higher price◦ Buyers absorb industry products and may exert power

by forcing the industry to sell at a lower price◦ Substitutes intensify competition and put a ceiling to

the prices that the current players may charge



Culture – set of key values, benefits, understandingand norms shared by organization members.

Corporate culture determines the organizationspersonality and its capability to adapt to the everchanging external environment



This could be understood through visiblemanifestations:

Symbols – object, act, event that conveymeanings to others



Visible manifestations…

◦ Story – narrative based on true events that arerepeated over and over

◦ Hero – figure who exemplifies the deeds,character and attributes of a strong culture

◦ Slogan – phrase or sentence that expresses a keycorporate culture



“ i bingo ka sa sarap ”

“ Sarap to the bones!”

“We find ways.”

“It’s time every Juan flies!” ari ng padala ”

“May liwanag ang buhay .”



“You’re in good hands ”

“Iba ang sarap pag my Voice.”

“Never had it this good!” “Always tama and timpl ”

“Ito na ang break mo.”



◦ Culture can have positive impacts if it: Supports organizational goals

Is widely shared

Is deeply internalized by organizational members



Culture and the Environment◦ External Environment affects corporate culture

◦ Organizations should have a corporate culturewhich is consistent with what it takes to success

in the environment.◦ Entrepreneurial organizations are more likely to

succeed in complex, dynamic environmentbecause of their strategic orientation,

commitment to growth and willingness to change



Environment uncertainty – future environmentalcircumstances are difficult to predict because ofinsufficient information and the“uncontrollability” of many environmental forces

Environmental complexity – there are manydifferent elements affecting organization’soperations

Dynamism – the rate of environmental changes



Organizations should do be able to scan theenvironment to gather information about theintensity of competition and opportunities andthreats presented by the external environment.

Given the results of the environmental scanningprocess, organizations then may build scenarios (optimistic & pessimistic) and do forecasting to beable to manage future events

Organizations may also do benchmarking to

identify best practices in the industry and make useof these as basis for organization improvement.



Organizations may change internal operations tomake it more compatible with the environment(adaptation approach)◦ Examples are: buffering, smoothing, forecasting,

rationing

Organizations may affect the environment to makeit more compatible with their operations(favorability influence approach)◦ Examples are: advertising and public relations,

boundary spanning, negotiating contracts,strategic alliances

Organizations may also select a new environment(domain shift)



Proactive responses aimed at changingthe environment

◦ Independent Action – strategies used by

an organization to change some aspectsin the environment

◦ Cooperative Action – strategies used bytwo or more organizations to influence

the environment



This is referred to as strategic maneuvering◦ An organization’s conscious efforts to change he

boundaries of its task environment

There are several strategic maneuvers to choose from◦ Domain selection – entrance by a company into

another suitable market or industry

◦ Other options include diversification,merger/acquisition, and divestiture



◦ Robbins, Stephen & Mary Coulter. Introduction to

Management. 9th ed. Prentice Hall. 2007.

◦ Bateman. Thomas & Scott A. Snell. Management: Leading andCollaborating in a Competitive World. 7th edition. 2007.

McGraw Hill.

◦ Daft, Richard L. Management. 6th edition. 2003. ThomsonLearning.

◦ Bartol, Kathryn M. & David C. Martin. Management. 3rd edition.1999. McGraw Hill.

Lecture 3. Organization Environment

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