“Remember the difference between a boss & a leader a boss says GO!- a

leader says “Lets Go”

PART II

The Environment Of Management

Chapter 3

The Environment & Corporate Culture

Organizational Environment

Management

Employees Culture

Internal Environment

Suppliers

Com

petitors

Customers

Lab

or M

ark

et

Legal/PoliticalEco

nomic

Technological

SocioculturalIn

tern

atio

nal

General Environment

Task Environment

Organization Environment

• All elements existing outside the organizations boundaries that have the potential to affect the Organization

• Competitors

• Resources

• Technology

• Economic Conditions

The External Environment

• Further conceptualized having two layers

General Environment Task Environment

General Environment

• The layer of the external environment that affects the organization indirectly

These events do not directly change day-to-day

operations but they do affect all organizations eventually

International

Technological

Socio-Cultural

Economic

Legal-Political

Task Environment

• Closer to Organization & includes the sectors that

conduct day-to-day transactions with the

organization and directly influence its basic

operations & performance

Competitors

Suppliers

Customers

Internal Environment

Includes the elements within the Org boundaries.

Employees

Management

Corporate Culture

General EnvironmentInternational

• The International dimension of the external environment represents events originating in foreign countries as well as opportunities for American Companies in other countries

• The international environment provides new competitors, customers & suppliers as well as shapes social (bottled water growing consciousness for cleaner and healthier living, today's digital age of mobile phones and

the internet ), technological and economic trends

• Today, every company must think internationally• Managers who used to think only about the domestic

environment must learn new rules to cope with goods, services and ideas circulating around the globe

• Industries- including automobiles, entertainment, consumer electronics will have to compete on a global basis or disappear

• Examples: “Peace dividend: An amount of money taken from a defense budget and appropriated elsewhere in times of peace when less money is

required for defense than in times of hostility or war ” brought on by the end of the cold war; forcing large Co. to convert a significant portion of their operations into nonmilitary production

Technological Dimension

• The dimension of the general environment that includes scientific & technological advancements in the industry & society at large

• Striking advances have been in the computer industry

• Home video cameras got more processing power than the old IBM 360

• One can get real time information from their customers and then make faster, better informed operating decisions: Levis customized products

Socio-Cultural Dimension Continue

• Demography also shapes society’s norms & values.

• Examples: sociocultrual trends that affecting many companies include trend toward no smoking, greater purchasing power of young children, increased diversity of consumers, with specialized markets for groups such as Hispanics (Spanish-speaking Latin America) and women over age 30 (M&S)

• Launching a Spanish-language newspaper in order to respond to changes in the sociocultural environment; boosted earnings of ABC

Socio-Cultural Dimension• Important characteristics are geographical

and population density, age, and education levels.

• Key demographic trends in the United States:Hispanics will make up nearly a quarter of the

U.S. population by the year 2050.Population and the workforce continue to age

with the baby boomers.The single father is the fastest growing living

arrangement.The U.S. will continue to receive large

numbers of immigrants especially from Asia and Mexico.

Economic • Representing the overall economic health of the

country or region in which the Organization functions(Consumer purchasing power, Unemployment rate, interest rates, labor

market,) are all part of Org economic environment • One significant recent trend in the economic

environment is the frequency of mergers & acquisitions ( Disney & ABC Television)

• The impact on employees can be overwhelming creating uncertainty about the future….

HOW?• Employee anxiety & fear of losing their jobs?• Fear of becoming obsolete, might not be needed anymore

Legal-Political

• Includes federal, state, and local government regulations & political activities designed to control company behavior

• Federal Government influences organizations through the OSHA, EPA ( environmental Protection Agency), import & export restrictions etc.. (minimum wage legislation, trade regulations)

• Pressure groups that work within the legal-political framework to influence companies to behave in socially responsible ways

Examples : Greenpeace, make significant changes in the whaling, tuna fishing and seal fur industries

Political Factors.

• The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:

• 1.How stable is the political environment?

• 2.Will government policy influence laws that

regulate or tax your business?

Task Environment

The task environment includes those sectors that have direct working relationship with

the Organization, among them Customer, Competitors, Suppliers & the Labor market

Customers• Those people and the Organizations in the

environment who acquire goods or service from the organization are Customers

• Customers as are important because they determine the Org Success

• Patients are the Customers of Hospital

• Students the customers of Schools

• Travelers the Customers of Airlines

Customers…………….

• To survive in competition with mass merchandisers like Wal-Mart (World's largest grocery

retailer) , small retailers have been forced to come up with new ways to win & keep customers

• Companies such as AT&T, General Foods have all designed special programs & advertising campaigns to court their older customers, who are, with the aging of baby boomers

Competitors

• Other organizations in the same industry or type of business that provide goods or services to the same set of customers

• Each industry is characterized by specific competitive issues : Steel---Pharmaceutical Industry

• Nike is a very competitive organization. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.' Nike has a healthy dislike of is competitors :Reebok

• Companies in some industries despite the competitive wars worldwide, cooperate to achieve common goals

IBM, Apple Compaq joint venture: to break Microsoft domination

Suppliers • The raw materials the organization uses to

produce its output are provided by suppliers

• University – Utilize hundreds of suppliers for paper, pencils, cafeteria food, computers, trucks, fuel, electricity and textbooks

• Companies are now using fewer suppliers and trying to build good relationships with them so that will receive high-quality parts at low prices

• The power of suppliers tends to be a reversal of the power of buyers.

• Where the switching costs are high e.g. Switching from one software supplier to another.

• Power is high where the brand is powerful e.g. Cadillac, Pizza Hut, Microsoft.

• There is a possibility of the supplier integrating forward e.g. Brewers buying bars.

• Customers are fragmented (not in clusters) so that they have little bargaining power e.g. Gas/Petrol stations in remote places.

Labor Market

• The people in the environment who can be hired to work for the Organization

• Org needs a supply of trained, qualified personnel

• Unions, employee association can influence the Org Labor market

Northern Telecom---Complex environment Case Study

The Organization-Environment Relationship

• Why do Organization Care about factors in the external environment?

Reason is that the environment creates uncertainty for

organization managers, and they must respond by designing the

organization to adapt to the environment or to influence the

environment

External Environment and Uncertainty

Number of Factors in Organization Environment

Adapt toEnvironment

HighUncertainty

LowUncertainty

HighLow

Low

High

Rate ofChange inFactors in

Environment

Environmental Uncertainty

• Uncertainty means that managers do not have sufficient information about environmental factors to understand & predict environmental needs & changes

• When external factors change rapidly, the organization experiences very high uncertainty: electronic industry

• Two basic Strategies for coping with high environmental uncertainty

Adapting To The Environment

If the Org faces increased uncertainty with respect

to competitors, customers, suppliers or government regulations, managers can use several strategies to adapt to these changes

Boundary- Spanning Role

Forecast & Planning

Flexible Structure

Mergers & Joint Ventures

Influencing The Environment

The other major strategy for handling environmental

uncertainty is to reach out and change those elements causing problems: Techniques used for changing

environment includes:

Advertising & Public Relations

Political Activity

Trade Associations

Boundary-Spanning Roles

Departments & boundary-spanning roles link and coordinate the Org with key elements in the external environment.

Boundary spanners serves two purposesThey detect & process information about changes in the

environmentThey represent the Org interest to the environment

How………

Boundary Spanning Roles Continue

• People in dept’s such as marketing & purchasing span the boundary to work with customers & suppliers, both face-face & through market research

A Co. surveys customers twice a year about the desktop-publishing technology they use or planning to use within next 12 months/ blind survey to determine if the company should enter digital, short run printing which is expected to be a $15 billion industry in year2000

• Competitive Intelligence, also known as snooping & spying

• 80% of the Fortune 1000 Companies maintain in house snoops, also known as competitor intelligence professionals

• Co. hire private detectives to dig through competitors trash

• Most of their work is legal, relying on commercial database, news clippings & professional contacts

Forecasting & Planning

• Forecasting & planning for environmental changes are major activities in many corporations

• Planning departments often are created when uncertainty is high

• Forecasting is an effort to spot trends that enable managers to predict future events

Co. monitors 16000 newspaper & magazines and predicts future trends

• Companies devised specific management plans for handling crises like hostile takeover attempt or product tempering

Flexible Structure

• An Organization structure should enable it to effectively respond to shifts in the environment

• Loose flexible structure works best when Org experience uncertainty created by shifts in the external environment or by innovation within the Org

• Tight structure is most effective in a certain environment

Organic Structures• Org that is free flowing,

has few rules & regulations, encourages teamwork among employees & decentralize decision making to employees doing the job

• Works best when the environment changes rapidly

• Co. set up teams which includes members from multiple dept’s who can provide expertise in problems like plant explosion etc

Mechanistic Structures

• Characterized by rigidly defined task, many rules & regulations, little teamwork & centralization of decision making

• Works best when environment is stable

Mergers & Joint Ventures

Mergers

also a way to reduce uncertainty

Occurs when two or more Organization’s combine to become one

reducing uncertainty in the customer sector

Joint Ventures involves a strategic alliance by

two or more Org’s Occurs when the project is too

complex, expensive, or uncertain for one firm to do alone

Many small business are turning into joint ventures with large firms or with international partners

Small Canadian pharmaceuticals Co. has teamed up with two giant co. to promote new campaign.

Larger partner will provide sales staff, distribution channels, financial resources or research staff

Influencing the Environment

Advertising & Public Relations advertising is an important way to reduce

uncertainty about clients became a high successful way to manage

demand for a company’s productCompanies spend large amounts of

money to influence consumer tastesHospitals advertise on billboards-newspaper to

promote special services

Public Relations

Similar to advertising but except that its goal is to influence public opinion about the Co. itself

Co. do care about their public image

PR & good image are accomplished through advertising as well as speeches & press reports

Companies in the tobacco industry have launched an aggressive public relations campaign touting smokers rights & freedom of choice in an effort to survive in this antismoking era

Dow became infamous : attempts to change this view with an advertising campaign- “Dow Lets You Do Great Things”

Political Activity

Organizational attempts, such as lobbying, to influence government legislation & regulation

Many corporations pay lobbyists to express their views to federal & state legislators

Foreign companies becoming increasingly savvy in U.S political maneuvering

Example: GM enlisted political bigwigs in its successful effort to settle a battle with U.S Transportation Dept over the safety of certain of its pickup trucks…… Resulted in $1billion saving

Trade Associations

• An association made up of Organizations with similar interests for the purpose of influencing the environment

• National Association of Manufacturers

• National Rifle Association

• NTMA( National Tooling & Machining Association) functions primarily as a center of knowledge

The Internal EnvironmentCorporate Culture

• The internal environment within managers work includes corporate culture, production technology, Org Structure & physical facilities

• Of these, corporate culture has surfaced as extremely important to competitive advantage

• The internal culture must fit the needs of the external environment & company strategy

• When this fit occurs, highly committed employees create a high-performance org that is tough to beat

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

Culture

• The set of key values, beliefs, understandings, and norms that members of an Org share

• Culture is a pattern of shared values and assumptions about how things are done within the org

• Culture can be analyzed at three levels

Visible artifacts Dress, office layout, symbols

Slogans, ceremonies

InvisibleExpressed values & beliefs Which are not observable

Underlying assumptions&

Deep beliefs

• Visible artifacts are the things one can see, hear and observe by watching members of the Org

• At a deeper level are the expressed values & beliefs which are not observable but can be discerned from how people explain & justify what they do : values that members of the Org hold at conscious level

• Underlying assumptions and beliefs are the essence of Culture and subconsciously guide behavior & decisionsIn some Org basic assumption might be that people are essentially lazy & shirk their duties whenever possible: thus employees are closely supervised and given little freedom and colleagues are frequently suspicious of one another

• The key determining factor in successful companies to be a culture in which employees share such a strong vision that they know in their hearts what is right for the company ( HP, Walt Disney, Proctor & Gamble)

• Some companies put values in writing so they can be passed on to new generations of employees : HP created a list of cultural concepts called “ The HP Way”

Any Co. culture can be interpreted by observing these factors…….

Symbols• An object, act, or event that conveys meaning to

others• President of a Co. symbolizing his commitment to

a true open-door policy, ripped his office door from its hinges & suspended it from the lobby ceiling for all employees to see

• Another president wanted to break down the vertical walls that isolated departments & develop a team culture

STORIES

• Stories communicates Org culture• Such stories can reveal the kinds of behaviors

that are valued by the Org• Stories told to new employees to keep the

Organization’s primary values alive• McDonalds’s QSC&V• CEO, tells how he gave a woman a new washing

machine because she complained about needing a broken belt replace“story reinforces the store’s no-questions-asked return policy”

HEROES

• A figure who exemplifies the deeds, character, and attributes of a corporate culture

• Heroes are role models for employees to follow• The deeds of heroes are out of the ordinary but

not so far out as to be unattainable by other employees

• Heroes know how to do the right thing in the Org• VP fired earlier in his career for persisting with a

new product ……….• Lee proved the courage to work for $1 a year

when first came to Chrysler

SLOGANS

• Phrase or sentence that in brief expresses a key corporate value

• Pepsi- describe the value of turning a bright young people into strong managers is “ We take eagles and teach them to fly in formation”

• “ You do not have to please the boss; you have to please the customer” embroidered in Spanish on the pockets of workers jackets: Sequins Intel where 80 % of the employees are Hispanics

Ceremonies

• A planned activity that makes up a special event and is conducted for the benefit of an audience

• Ceremonies are special occasions that reinforce valued accomplishments, create a bond among people by allowing them to share an important event & celebrate heroes

• They setting is typically an auditorium, infront of a large, cheering audience, and everyone dresses in glamorous evening clothes

• The most successful consultants are introduced by film clips.

Summary

• Many managers help define important symbols, stories,

and heroes to shape the culture

Environment & Culture

• A big influence on internal corporate culture is the external environment.

• Strong corporate culture alone can not ensure business success unless the culture encouraged healthy adaptation to the external environment

• If the external environment requires extraordinary customer service, the culture should encourage good service; if it calls for careful technical decision making, cultural values should reinforce managerial decision making

Adaptive Cultures

Fortress Culture

Academy Culture

Club Culture

Baseball team Culture

Baseball team culture

• Emerges in an environmental situation with high-risk decision making & fast feedback from the environment

• Talent, innovation & performance are valued and rewarded

• Toper performers see themselves as “free agents• Performers with “low batting averages” are

quickly dropped from line up• BTC are found in fast-paced, high risk companies

involved in areas such as movie production, advertising, and software development where futures are bet on new product or project

Club Culture

• Characterized by loyalty, commitment and fitting into the group

• This stable, secure environment values age & experience and rewards seniority

• Individuals start young & stay( military)• promote from within & members are expected to

progress slowly, proving competence at each level

• Individuals tend to be generalists & may have vast experience in a number of Org Functions

• Reluctant to change

Academy culture

• Hires young recruits interested in long-term association & slow steady climb up the Org

• Unlike club culture, employees rarely cross one division to another

• Person enters a specific “track” and gains a high level of expertise in that area

• Technical mastery are the bases for reward and advancement ( coca-cola, Ford, GM)

• Limit interdepartmental collaboration but works very well in stable environment

Fortress Culture

• May emerge in an environmental survival situation

• Textile firms & savings & loan Org are examples of former dominant industries that are now retrenching for survival

• This culture offers little job security or opportunity for professional growth while companies restructure & downsize to fit the new environment

• Also offers tremendous turn around opportunities for managers with confidence and love of challenge

Shaping Corporate Culture For The Twenty-First Century

• Changing And Merging Corporate Cultures

• Symbolic Leadership

Changing And Merging Corporate Cultures

• A corporation’s culture may not always be alignment with its needs & environment

• The difference between desired culture norms and values and actual norms & values is called the Culture Gap

• Culture gaps can be immense, especially in mergers & acquisitions

HOW?

• 90% mergers never live up to expectations

• One reason is that managers are able to integrate the acquired firm’s financial systems & production technologies, they typically unable to integrate the unwritten norms and values that have an ever greater impact on a Co. success(global companies & cross-cultural mergers & acquisitions)

Pre-Press Graphics/ Harty Press

• Trying to put two cultures together can be a killer• At harty workers wear smudged aprons, have ink

under their fingernails and carry union cards- loose & flexible style

• At Pre-Press people in running shoes & jeans sit before computer screens- everything precisely measured, employees forbidden to make person phone calls, 30 minutes lunch break

• Two cultures clashed from the beginning, but the most damaging tensions were related to employee anxiety and fear of losing their jobs

• Pre-Press employees were reluctant to share knowledge for fear that once Harty employees learned new skills, they might no longer be needed

• Harty employees with conventional printing skills saw a digital future and worried that they were about to become obsolete

“Managers often forget that human systems of a company are what make

or break any change initiative”

Symbolic Leadership

• They way managers change norms and values toward what is adaptive to the external environment is through symbolic leadership

• Managers use Symbols, stories, slogans and ceremonies to change the corporate culture

• Mangers should over communicate to ensure that employees understand the new culture values, and they must signal these values in actions as well as words………………

Symbolic leader continues

• Symbolic leader influence culture in the following manner and to adapt it external environment:

• Use of artifacts such as public statements, ceremonies, stories, heroes, symbols and slogans

• Changing culture is not easy, but through their words-and particularly their actions symbolic leaders let employees know what really counts in the company

• Read Examples of symbolic leaders