Ch3 Organizational Environments & Cultures

External environments

All events outside a company that can influence or affect it

Basic characteristics:

-Environmental change

-Environmental complexity

-Resource scarcity

General Environment

Big Picture Forces, broad trends that affect most organizations

Ex. Economy, Technology, Demographics

Specific Environment

Direct Players, forces that directly impact your organization’s performance

Environmental Change

how fast these environments shift

stable: slow, predictable

dynamic: fast, unpredictable

Punctuated Equilibrium Theory

Stability (small improvements) →disruption (big shift) →new normal (new equilibrium)

Ex. Smartphones

Simple Environment

few external factors to monitor, easier to predict and manage

EX: Small local bakery

Complex Environment

many external factors to track, constant change creates uncertainty

EX: Airline industry

Resource scarcity

the abundance or shortage of critical organizational resources in an organization’s external environment

EX: Global Microchip Shortage (2020–2022)

Uncertainty

extent to which managers can understand or predict which environmental changes and trends will affect their businesses

EX: COVID-19 Pandemic

Economic Forces

The economy shapes how easy (or hard) it is for businesses to grow

Ex. Hiring, Pricing, Inventory, Expansion

Technological

External Impact (Customers/Market) Internal Impact (Operations/ Employees)

Sociocultural

Workforce & Staffing- demographics shift influence

Customer Demand- cultural trends influence

Political–legal forces

the laws, regulations, and court decisions that shape what businesses can and cannot do

they affect:

how the company operates

business costs

risk & reputation

strategic decisions

Customers

what people want, expect, and will pay for

Reactive (Respond After) | Fix issues after they happen

Proactive (Plan Before) | Anticipate needs before problems occur

Competitors

businesses in the same industry that offer similar products or services to the same customers

Competitive analysis

the process of tracking competitors to understand:

Who they are

What they’re doing

Where they’re strong/weak

What they might do next

Supplier

Supplier Dependence (Buyer depends on Supplier)- company relies heavily on supplier

Buyer Dependence (Supplier depends on Buyer)- supplier relies heavily on buyer

Industry regulation

regulations and rules that govern business practices and procedures of specific industries, businesses, and professions

Advocacy groups

concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions

3-Step Process to Making Sense of Changing Environments

Environmental Scanning - Actively monitor the environment for trends, events, and issues that could impact the organization

Interpretation - Make meaning of what’s happening

Action- Respond by making decisions and adjusting strategy

Scan → Interpret → Act

Three Levels of Organizational Culture

Seen (Surface Level)- This is the part of culture that’s easiest to observe

Heard (Expressed Values and Beliefs)- This level is about what people say and how decisions are justified

Believed (Unconscious Assumptions)- These are the deep, taken-for-granted beliefs that really drive behavior

SWOT Analysis

Strengths: These are the internal factors that give a business a competitive advantage or unique capabilities.

Weaknesses: These are internal factors that hinder a business's performance or put it at a disadvantage compared to competitors

Opportunities: These are external factors in the business environment that have the potential to benefit the organization

Threats: These are external factors that may pose challenges or risks to the business.