MGT 101 | Ch. 3

Organization Environment

It is the traditional view that focuses on factors within the organization.

Closed-systems view

What does the closed-systems view focus on?

leading, motivating, and controlling employees within the organization

What schools of management are associated with the closed-systems view?

classical, behavioral, management science

What is the limitation of the closed-systems view?

Accurate but incomplete because it largely ignores the external environment

It is the view that managers must monitor and respond to the environment to be effective.

open-systems view

It is the totality of all elements and forces in a firm’s immediate and remote surroundings that impact its ability to achieve its objectives.

Environment

What are the components of the environment?

External

• General (Macroenvironment)

• Task/Industry (Microenvironment)

Internal

What does the Internal Environment involve?

POLC

It is composed of all outside factors or influences that impact the operation of business and can create threats or opportunities for the organization.

external environment

It is also known as the macroenvironment and represents the outer layer of the environment, influencing the organization over time but often is not involved in day-to-day transactions with it.

general environment

How does the general environment affect an organization?

It influences the org over time but is often not involved in day-to-day transactions with it.

What are the 6 dimensions of the general environment or macroenvironment?

1. political/legal

2. economic

3. sociocultural

4. technological

5. environmental/natural

6. global

(PESTEG)

What does the political/legal dimension of general environment (macroenvironment) include?

policies, rules, and regulations imposed by law that may negatively or positively affect the organization’s operations by presenting strategic constrains and opportunities

What are examples of the political/legal dimension of general environment (macroenvironment)?

• stability of the political climate

• business registrations

• environment protection

• standards for occupational safety

• consumer protection

• ownership of business

What does the economic dimension of general environment include?

General economic environment that describes the general economic health of the country, serving as basis for forecasts.

Examples of the economic dimension of general environment (macroenvironment)

• consumer purchasing power

• interest rate

• unemployment rate

• income levels

• exchange rate for importers and exporters

What does the sociocultural dimension of the general environment (macroenvironment) include?

attitudes, values, norms, beliefs, behaviors, religious trends, cultural diversity, demographics

What are factors to consider under demographics for the sociocultural dimension of the general environment of the organization?

• population density

• geographical distribution

• educational attainment

• economic class

• age

• gender

What does the technical dimension of the general environment (macroenvironment) include?

new technologies that create new products and better ways of managing and communicating

T or F: Developments in technology can rapidly change an industry, thus leaders must be quick in innovating and adopting technologies.

True

What does the environmental or natural dimension of the general environment (macroenvironment) include?

all elements that occur naturally on earth

Examples of the environmental or natural dimension of the general environment (macroenvironment)

• depletion of the natural physical environment

• concerns for climate change and global warming

• sustainable business processes and development

What does the global dimension of the general environment (macroenvironment) include?

factors that affect a business outside its home country

Examples of global dimension of the general environment or macroenvironment.

• developments outside the home country

• crude oil price increase

• globalization of value chains of agricultural commodities

• supply and demand in competing countries

• Regional Economic Agreements

It is also known as the microenvironment and includes the environmental forces closer to the organization, directly influencing the organization’s basic operations and performance by being involved in day-to-day transactions with it.

Task/Industry

What are the 4 dimensions of the task/industry environment?

1. customers

2. competitors

3. suppliers

4. labor market

It represents the people and organizations in the environment that acquire goods and services from the organization.

Customers

T or F: Customers determine the success of an organization.

True

What are the important considerations in the customer dimension of the task/industry environment?

• customer wants and needs

• changing consumer trends and buying behavior

• most effective channel in marketing the org’s goods and services

They are the players in the industry that produce similar goods and services and target the same market segments.

competitors

They provide the raw materials and services an organization use to produce its output.

Suppliers

What is the focus of an organization in terms of suppliers?

Build good relationships with suppliers.

It represents the people in the environment who can be hired to work for the organization.

labor market

These are organizations that may put pressure influence and affect the organization.

pressure groups

Examples of pressure groups.

• Labor Unions

• Allies

• Activities

Tool used to analyze the intensity of the forces emanating from the customers, competitors, and suppliers, and how these forces affect competition.

Porter’s Five Forces

What are the Porter’s Five Forces?

1. Industry rivalry

2. Bargaining power of suppliers

3. Bargaining power of consumers

4. Threats of new entrants

5. Threats of substitutes

Explain the industry rivalry of Porter’s Five Forces.

• How many rivals are out there and how hard they fight

• More rivals = lower profit

Explain the bargaining power of suppliers of Porter’s Five Forces.

• How much control suppliers have over prices

• Few suppliers = higher prices and lower profits

Explain the bargaining power of consumers of Porter’s Five Forces.

• How much power buyers have to force prices down

• Many choices for buyers = less profit for sellers

Explain the threat of new entrants of Porter’s Five Forces.

• How easy it is for new competitors to join the market

• Easy entry = lower market share

Explain the threat of substitute of Porter’s Five Forces.

• The risk that customers can find alternative products or services to satisfy their need/want

• Easy substitutes limit what you can charge

The internal environment of the organization is also known as the __.

Organizational culture

It refers to the factors inside the organization that affect its operations and performance, creating strengths or weaknesses for the organization.

internal environment (organizational culture)

It is a system of shared meaning held by members that distinguises the organization from others.

organizational culture

What is a strong organizational culture?

values and beliefs are widely shared among employees

What is a weak organizational culture?

values and beliefs are limitedly shared among employees

When can organizational culture have a positive impact?

• supports organizational goals

• widely shared

• deeply internalized by employees

What are the 3 levels at which organizational culture can be analyzed?

1. artifacts

2. espoused values

3. underlying assumptions

The visible and observable aspects of organizational culture, such as behaviors, symbols, structures, and physical environment.

artifacts

Examples of artifacts.

• dress

• office layouts

• symbols

• slogans

• ceremonies

The stated values, principles, and beliefs that an organization claims to uphold.

espoused values

Examples of espoused values

• The Penney Idea

• The HP Way

Deeply held, often unconscious beliefs that guide how members think and behave.

Underlying assumptions

What are the visible manifestations in an organizational culture?

1. symbols

2. stories

3. slogans

4. heroes

5. ceremonies

An object, act, or event that conveys meaning to others.

Symbol

Narratives repeated frequently and shared among employees.

Stories

Role models for employees to follow.

Heroes

Phrase that expresses a key corporate culture

Slogans

Events conducted for the benefit of an audience

Ceremonies

7 primary characteristics of an organizational culture (internal environment)

1. innovation and risk-taking

2. attention to detail

3. outcome orientation

4. people orientation

5. team orientation

6. aggressiveness

7. stability

A characteristic of an organizational culture that refers to the organizational decisions and actions that emphasize maintaining the status quo.

stability