Chap2 Environment
- 1. Lecture 2 Understanding Competitive Environment and Organisational Culture Prepared by: ANS First Prepared on: 13-12-05 Last Modified on: xx-xx-xx Quality checked by: HKP Copyright 2004 Asia Pacific Institute of Information Technology Introduction to Management BM007-3-1-IMT
- 2. At the end of this topic, YOU should be able to: Explain the concept of mega-environment and outline its major elements Distinguishing between the concepts of task environment and mega-environment and describe the major elements of the task environment. Explain how environmental uncertainty and munificence impact organisation Describe the major methods that organisations use to manage their environments Learning Outcomes
- 3. Definitions External Environment The major forces outside the organisation that have the potential to significantly influence the likely success of products and services. Internal Environment The general condition that exit within an organisation.
- 4. Environment MEGA-ENVIRONMENT Labour Government Agencies Customers & Clients Supplier Competitors TASK ENVIRONMENT Technological Element Economic Element Legal-political Element Sociocultural Element International Element
- 5. Mega-Environment The general environment which reflects the broad conditions and trends in the societies within which an organisation operates. It consists of FIVE major elements: Technological Economic Legal-political Sociocultural International
- 6. UNDERSTANDING THE MACRO ENVIRONMENT USING A PESTEL ANALYSIS How stable is the political environment? Tax policies Etc. Projected interest rates? Inflation? Etc. Lifestyle trends? Demographic changes? Etc. Level of government research funding? How mature is technology? Etc. Political Economic Socio-cultural Technological Is intellectual property protected? Relevant consumer laws? Etc. Legal
- 7. Technological Element The current state of knowledge regarding the production of products and services. Most organisations can be greatly effected, either positively or negatively by technological progress. In order to remain competitive, organisations must stay abreast of current technological developments that may affect their ability to offer desirable products and services.
- 8. Economic Element The systems of producing, distributing, and consuming wealth Capitalist economy – Activity is governed by market forces and the means of production are privately owned by individuals, either directly or through corporations Socialist economy – The means of production are owned by the state ad economic activity is coordinated by plan Due to these differences, organisations that do business in a variety of countries typically confront strikingly diverse sets of economic ground rules within which they must operate.
- 9. Legal-Political Element The legal and political systems within which an organisation must function. Trends in legislation, court decisions, politics and government regulation are particularly important. Variety of laws that specifically address the manner which they must function e.g. OSHA
- 10. Sociocultural Element The attitudes, norms, beliefs, behaviours and associated demographic trends that are characteristic of a given demographic area. The elements is subject to change, it is important for managers to monitor trends that might offer new opportunities or pose significant threats. E.g. Mc Donald’s modifies menus all over the world.
- 11. International Element The development of countries outside an organisation’s home country than have potential to influence the organisation. International development can greatly affect the ability of an organisation to conduct business abroad. E.g. NAFTA – North American Free Trade Agreement involving Canada, Mexico and US, offer big opportunities for market growth, they allow goods, services and funds to move more easily between the countries involved. This factor is beyond the manipulation of a particular organisation.
- 12. The Macro Environment (pest) Political-legal Supports and controls Pending legislation Economic Governmental stability Inflation and unemployment Productivity and growth Socio-cultural Geographic location of population Customs and values Demographics Technological New knowledge and discoveries New products, processes, and services
- 13. Political: Government type and stability Freedom of the press, rule of law and levels of bureaucracy and corruption Regulation and de-regulation trends Social and employment legislation Tax policy, and trade and tariff controls Environmental and consumer-protection legislation Likely changes in the political environment Economic: Stage of a business cycle Current and projected economic growth, inflation and interest rates Unemployment and supply of labor Labor costs Levels of disposable income and income distribution Impact of globalization Likely impact of technological or other changes on the economy Likely changes in the economic environment PESTLE
- 14. Sociological: Cultural aspects, health consciousness, population growth rate, age distribution, Organizational culture, attitudes to work, management style, staff attitudes Education, occupations, earning capacity, living standards Ethical issues, diversity, immigration/emigration, ethnic/religious factors Media views, law changes affecting social factors, trends, advertisements, publicity Demographics: age, gender, race, family size Technological: Maturity of technology, competing technological developments, research funding, technology legislation, new discoveries Information technology, internet, global and local communications Technology access, licensing, patents, potential innovation, replacement technology/solutions, inventions, research, intellectual property issues, advances in manufacturing Transportation, energy uses/sources/fuels, associated/dependent technologies, rates of obsolescence, waste removal/recycling PESTLE
- 15. Legal: current home market legislation, future legislation European/international legislation regulatory bodies and processes environmental regulations, employment law, consumer protection industry-specific regulations, competitive regulations Environmental: Ecological environmental issues, environmental regulations customer values, market values, stakeholder/ investor values management style, staff attitudes, organizational culture, staff engagement PESTLE
- 16. Task Environment The specific external elements with which an organisation interfaces in the course of conducting its business It depends largely on the precise products and services that the organisation decides to offer and on the locations where it chooses to conduct its business An organisation can influence the elements in this environment. The elements comprises of; Customers and clients Competitors Suppliers Labour supply Government agencies
- 17. Customers and Clients Individuals or organisations that purchase products and / or services. Orgsanisation today build customer relationship and ensure customer satisfaction so that they stay close to a customer to build rapport and receive continuous buying. IKEA provides baby sitting, children playground and cafeteria to make customers feel at home and want ot stay and shop.
- 18. Competitors Other organisations that either offer or have a high potential of offering rival products or services. Organisations need to keep abreast of what their competitors are doing. Suppliers Are those organisations and individuals that supply the resources (raw material, products services) the organisation needs to carry on operations.
- 19. Competitive Factors Competitive factors are the business strategies and actions of one’s competitors. The competition may have designed a better product or service . Examples: Sony vs. Microsoft Videogame Nokia vs. Motorola Cellular Verizon vs. AT&T Telephony
- 20. Labour Supply Consists of those individuals who are potentially employable by the organisation. Labour supply varies from unskilled, semi-skilled and to professional. Government Agencies Agencies that provide services and monitor compliance with laws and regulations at local state or regional and national levels
- 21. The Task Environment Entities that directly impact the organization Competitors that seek the same customers or resources as the organization. Customers who acquire and use an organization’s products or resources. Suppliers that provide resources to the organization. Regulators (government agencies, interest groups, unions, and communities) that control, legislate, or influence the organization’s policies and practices. Strategic partners (allies) who are in joint ventures or partnerships with the organization.
- 23. Managing Environmental Elements Adaptation Buffering Smoothing Forecasting Rationing Favourable Influence Advertising and Public Relations Boundary Spanning Recruiting Negotiating contracts Co-Opting Strategic alliances Trade Associations Political Activity
- 24. The Internal Environment : Organisational Culture Organisational Culture – A system of shared values assumptions, beliefs and norms that unite the members of an organisation. “ The way things are done in an organisation”. It is important in an organisation because as individuals act on shared values and other aspects of organisational culture, their behaviours can have significant impact on organisational effectiveness. Cultures that develop reflect the drive and imagination of the individuals involved. E.g. Mc Donald’s – “Quality service, cleanliness and value. Culture can have a positive or negative impact.
- 25. Manifestation of Organisational Culture Symbols – an object, act, event, or quality that serves as a vehicle for conveying meaning. Stories – narrative based on true events, which sometimes may be embellished to highlight the intended value. Rites and Ceremonials – a relatively elaborate, dramatic, planned set of activities intended to convey cultural values to participants.
- 26. Types of Cultures There are many classification systems, including those based on: Risk Tolerance Communication Patterns Types of Control Coordination Techniques Reward Systems Open-Systems Focus
- 27. Visible Artifacts such as dress, office layout, symbols, slogans, ceremonies Invisible Expressed values such as “The Penney Idea,” “The H-P Way” Underlying assumptions and deep beliefs such as “people are lazy and can’t be trusted” Culture that can be seen at the surface level Deeper values and shared understandings held by organization members.
- 28. Corporate Culture What corporate culture do you think the following businesses have managed to develop? Virgin Group Copyright: Joshua2150, http://www.sxc.hu The Body Shop Copyright: fadaquiqa, http://www.sxc.hu McDonalds Copyright: alexallied http://www.sxc.hu Nike Copyright: alexbol http://www/sxc.hu
- 29. Levels of organizational culture—observable culture and core culture.
- 30. The Cultural Environment Language In Japanese the word “hai” can mean either “yes” or “I understand.” General Motors’ brand name “Nova” pronounced as “no va” in Spanish means “doesn’t go.” The Meaning of Colors Green is popular in Muslim countries, yet it signifies death in other countries. Pink is associated with feminine characteristics in the U.S.; yellow is the most feminine color in other countries.
- 31. Environmental Challenges of International Management International Management Functions Political/Legal Environment Government stability Incentives for international trade Controls on international trade Economic communities Economic Environment Economic system Natural resources Infrastructure Cultural Environment Values, symbols, beliefs, and language Individual differences across cultures
- 32. QUESTIONS Slide of 18
- 33. Review Questions Outline the major elements that make up the mega-environment. How would they influence the decisions which are made in an organisation? Explain how environmental uncertainties effect the organisation. How can an organisations adapt and cope with the ever so changing environment. How does a manager help cultivate a positive organisation culure?
- 34. Follow up Assignment Read; Chapter 3 of Management by Kathryn M. Bartol and D. Martin. Chapter 2 of Management by Bateman Snell.
- 35. Topic and Structure of next session: - Chapter 3 – Organisational Structure Next Session