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Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–1
CHAPTER 3
UNDERSTANDING INTERNAL AND EXTERNAL ENVIRONMENTS
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–2
LECTURE OUTLINE• Types of external environment• Analysing environmental conditions• Managing environmental elements• The internal environment:
Organisational Culture(Nature, manifestations, types, culture and
innovation, cultural change)
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–3
EXTERNAL ENVIRONMENT
Major forces outside the organisation with potential to influence significantly the likely success of a product or service.
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–4
EXTERNAL ENVIRONMENT
External environment is made up of:• The mega-environment
The broad conditions and trends in societies in which an organisation operates.
• The task environmentSpecific outside elements with which an organisation interfaces in the course of conducting its business.
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–5
THE MEGA-ENVIRONMENT
The organisation
Sociocultural element
Legal-political element
International element
Technological element
Economic element
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–6
THE MEGA-ENVIRONMENT
Five major elements:• Technological element
Current state of knowledge regarding production of products & services
• Economic elementSystems of producing, distributing and consuming wealth
• Legal-political elementLegal and governmental systems within which an organisation must function
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
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THE MEGA-ENVIRONMENT
• Sociocultural elementAttitudes, values, norms, beliefs, behaviours and associated demographic trends characteristic of a given geographic area
• International elementDevelopments in countries outside of an organisation’s home country with potential to influence the organisation
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–8
THE TASK ENVIRONMENT
Five elements:• Customers and clients
Individuals and organisations purchasing products/services
• CompetitorsOther organisations offering (or with a high potential to offer) rival products/services
• SuppliersOrganisations and individuals supplying resources an organisation needs to conduct its operations
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
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THE TASK ENVIRONMENT
• Labour supplyIndividuals potentially employable by an organisation (diversity and characteristics of the labour market)
• Government agenciesAgencies providing services and monitoring compliance with laws and regulations at local, state or regional and national levels
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–10
THE TASK ENVIRONMENTKEEPING TABS ON COMPETITORS• Commercial databases• Specialty trade publications• Local newspaper clippings• Advertised vacancies• Published market research• Trade shows and product literature• Personal contacts
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–11
ANALYSING ENVIRONMENTAL CONDITIONSViews on the organisation-
environment interface:• Population ecology model
Argues that environmental factors cause organisations to survive or fail
• Resource dependence modelHighlights the dependence of organisations on environment but argues they attempt to manipulate the environment to reduce this dependence
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–12
CHARACTERISTICS OF THE ENVIRONMENTUncertainty
Condition in which future environmental circumstances affecting an organisation cannot be accurately assessed and predicted
ComplexityNumber of elements in an organisation’s environment and their degree of similarity
DynamismRate and predictability of change in the elements of an organisation’s environment
BountyExtent to which the environment can support sustained growth and stability
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–13
MANAGING ENVIRONMENTAL ELEMENTS Three approaches to managing the environment:• Adaptation
Involves changing internal operations and activities to make the organisation and its environment more compatible
• Favourability influenceInvolves trying to alter environmental elements to make them more compatible with the organisation’s needs
• Domain shiftingChanging product/service mix to create favourable interface
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–14
ADAPTATION• Buffering
Stockpiling either inputs into, or outputs from, a production or service process to cope with environmental fluctuations
• SmoothingTaking actions aimed at reducing the impact of fluctuations, given the market
• ForecastingPredicting changing conditions and future events that significantly affect an organisation’s business
• RationingProviding limited access to a product or service in high demand
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–15
FAVOURABILITY INFLUENCE• Advertising and public relations• Boundary spanning• Recruiting• Negotiating contracts• Co-opting• Strategic alliances• Trade associations• Political activity
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–16
DOMAIN SHIFTS
• Move out of a current product, service or geographic area into a more favourable domain
• Expand current domains through diversification or expansion of products/services offered
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–17
INTERNAL ENVIRONMENT: ORGANSATIONAL CULTURENature of organisational culture:• ‘A system of shared values, assumptions, beliefs
and norms uniting organisational members’ (Smircich 1983; Kilmann 1985).
• ‘The way we do things around here.’• The ‘glue’ binding the disparate parts (or the oil
that keeps them moving).• The interpretive part of organisational behaviour:
it explains, gives direction, sustains energy, commitment, and cohesion.
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–18
MANIFESTATIONS OF CULTURE• Symbols
Objects, acts, events or qualities serving as a vehicle for conveying meaning (logos, office decoration and layout)
• StoriesNarratives based on true events, which may be embellished to highlight intended value
• RitesRelatively elaborate, dramatic, planned sets of activities intended to convey cultural values to participants and, usually, an audience
• RitualsStandard behaviours, like staff meetings, company awards, weekly after-works drinks or socialising
• CeremonialsSystems of rites performed in conjunction with a single occasion or event
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
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CULTURAL TYPESStrong: clear, explicit principles, widely shared
Often spring from beliefs of a founder or strong leaderGenuine concern for customers, employees and shareholders
Weak: lack widely shared valuesLittle top management commitmentLead to development of sub-culturesHard to implement management strategy
Unhealthy cultures: internal politics, hostile to change, arrogant
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–20
OPERATOR, ENGINEERING AND EXECUTIVE CULTURE (SCHEIN 1996)• Operator culture:
assumes organisation’s actions are actions of people - focus on knowledge, skills, commitment
• Engineering culture: prefers linear thinking, quantitative methods, “people-free” solutions
• Executive culture:focus on need to maintain organisation’s financial health - preoccupied with markets, boards, investors
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–21
CHARACTERISTICS OF ENTREPRENEURIAL CULTURE• Strategic
Focused on identifying opportunities
• Committed to seizing opportunitiesWilling to make major, fast changes
• Commitment of resourcesMany stages with risk assessed for each stage
• Control of resourcesRental or outsourcing of resources for flexibility
• Management structureFew levels, with informal communication
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–22
CHANGING ORGANISATIONAL CULTUREBecause they involve fairly stable values,
beliefs and assumptions, organisations can be difficult to change.
An approach to changing culture:• Surfacing actual norms• Articulating new directions• Establishing new norms• Identifying culture gaps• Closing culture gaps
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–23
HOW LEADERS INFLUENCE CULTURAL CHANGE• Crisis identification
• Communication of a new vision
• Motivation of key staff (to lead cultural change by implementing the new vision and its corresponding strategy)
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
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LECTURE SUMMARYExternal environment:• Types of external environment
Mega-environment, task environment(Each with five elements)
• Analysing the environmentModels: ecology and resource dependenceEnvironmental uncertainty and bountyComplexity and dynamism
• Managing the environmentAdaptation, favourability influence and domain shifts
Copyright 2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, SharmaSlides prepared by Rob Lawrence, Victoria University (Australia)
3–25
LECTURE SUMMARYInternal environment (culture):
System of shared values, assumption, beliefs and norms uniting organisational members
Manifestations of cultureSymbols, stories, rites, rituals and ceremonies
Promoting innovationEntrepreneurial cultures encourage innovation
Changing culture can be hardA multi-step process