EXTERNAL ENVIRONMENT AND ORG CUKTURE.ppt

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©2013 John Wiley & Sons, Inc. All rights reserved. 4-1
1-1
©2013 John Wiley & Sons, Inc. All rights reserved.
JOHN R. SCHERMERHORN, JR.
MANAGEMENT
12th Edition
C h a p t e r 4
External Environment
and Organizational
Culture

Planning Ahead—Chapter 4 Study Questions
1. What is in the general or macro environment of
organizations?
2. What are key elements and issues in the specific or
task environment of organizations?
3. How do organizations accomplish innovation?
4. What are the emerging issues of sustainability and
the environment?

Chapter 4 Learning Dashboard
1. The General or Macro Environment
1. Economic conditions
2. Legal-political conditions
3. Sociocultural conditions
4. Technological conditions
5. Natural environment conditions
2. The Specific or Task Environment
1. Stakeholders and value creation
2. Competitive advantage
3. Uncertainty, complexity, and change

Chapter 4 Learning Dashboard
3. Environmental and Innovation
1. Types of innovations
2. The innovation process
3. Disruptive innovation and technology
4. Environment and Sustainability
1. Sustainable development
2. Sustainable business
3. Human sustainability

Takeaway 1: The General or Macro Environment
The general or macroenvironment — all of the background
conditions in the external environment of the organization
including:
Economic
health of the economy
Legal-political
philosophy/objectives of political party running the government
Socio-cultural
norms, customs, social values
Technological
development and availability of technology
Natural environment
nature and conditions of environment

Figure 4.1 Sample elements in the general
environments of organizations

• Economic conditions
– Things like the overall health of the economy in terms of financial
markets, inflation, income levels, and job outlook are always
important.
– All such economic conditions affect the prospects for
individual companies, the spending patterns and lifestyles
of consumers, and even a nation’s priorities.
– They must be assessed, forecasted, and considered when
executives make decisions about the strategies and
operations of their organizations.

• Economic conditions
– Offshoring – outsourcing of jobs to foreign locations
– Reshoring – return of jobs from foreign locations

• Legal-political conditions
– laws and regulations, government policies, and the
objectives of political parties
– vary from one country to the next
• Ex.Not all countries stand up for international copyright
and intellectual property
• protection.
– Internet censorship - deliberate blockage of public
access to information posted on the Internet

• Sociocultural conditions
– diversity issues relating to educational opportunity,
access to technology, housing/job options
– norms, customs, demographics, and societal values
– Generational cohorts -- people born within a few years
of one another and who experience somewhat similar
life events during their formative years

• Technological conditions
– social media, features and “apps” on smart phones
– brings both opportunities “ new product development
and advertising to employee networking and data sharing
to virtual meetings and always-available chats. Between
new applications and fast- developing mobile and smart
device technologies” and problems”many employees
spend a lot of time doing personal things online.
Some employers call this loss of productive time
“social notworking.”
– work-life balance ““never free from the job””

• Natural environment conditions
– nuclear plant failure, oil spill, hurricane
– “carbon neutral,” “green”, “sustainability”
– Sustainable business – meets both the needs of
customers and protects the natural environment

Takeaway 2: The Specific or Task Environment
The specific (task) environment - actual
organizations, groups, and persons with whom
an organization interacts and conducts business
• Includes important stakeholders such as:
Customers Suppliers Competitors Regulators Owners

• Stakeholders are the persons, groups, and
institutions directly affected by an organization.
– The important stakeholders for most organizations
include customers, suppliers, competitors, regulators,
advocacy groups, investors or owners, and employees.
“Society at large” and “future generations” are also part
of the stakeholder map; they introduce, in particular,
concerns for sustainability and the natural environment.
• Organizations should create value for and satisfy the
needs of their multiple stakeholders.

Multiple stakeholders in the environment of an organization

Takeaway 2: The Specific or Task Environment?
• Competitive advantage
– a core competency that clearly sets an
organization apart from competitors and gives it
an advantage over them in the marketplace
– Companies may achieve competitive advantage
in many ways, including:
• Costs,
• quality,
• delivery,
• flexibility

• costs—finding ways and using technology to operate with
lower costs than one’s competitors and thus earn profits with
prices that one’s competitors have difficulty matching.
• quality— finding ways and using technology to create products
and services that are of consistently higher quality for
customers than what is offered by one’s competitors.
• delivery— finding ways and using technology to outperform
competitors by delivering products and services to customers
faster and on time, and by developing timely new products.
• flexibility— finding ways and using technology to adjust and
tailor products and services to fit customer needs in ways that
are difficult for one’s competitor to match.

• Environmental uncertainty
– a lack of complete information regarding what
exists and what developments may occur in the
external environment
• The more uncertain the environment, the harder it is
to analyze environmental conditions and predict
future states of affairs.
• Two dimensions of environmental
uncertainty:
– Degree of complexity
– Rate of change

• Environmental uncertainty
– a lack of complete information regarding what exists and
what developments may occur in the external
environment
• The more uncertain the environment, the harder it is to analyze
environmental conditions and predict future states of affairs.
• Two dimensions of environmental uncertainty:
– Degree of complexity: or the number of different factors
in the environment. An environment is typically classified
as relatively simple or complex
– Rate of change: An environment is typically classified as
stable or dynamic

Figure 4.2 Dimensions of uncertainty

Takeaway 3: Environment and Innovation
• Innovation - process of putting new ideas into
practice
– Innovation is often a high priority when executives
and leaders try to steer organizations through
complex and uncertain environments
• Business innovations
• Product innovation: result in the creation of new or
improved goods and services
• Process innovation: result in better ways of doing things
• Business model innovation: result in new ways of
• making money for the firm.

Takeaway 3 : Environment and Innovation
• Social business innovations – find ways to
use business models to address important
social problems
– Ex. “microcredit”

The innovation process:
Step 1: Imagining
Step 2: Designing
Step 3: Experimenting
Step 4: Assessing
Step 5: Scaling
Reverse innovation – innovation can come from any
level in the organization or location

• Disruptive innovation – creates
products/services that become so widely
used that they largely replace prior practices
and competitors

Takeaway 4: Environment and Sustainability
• Sustainability – commitment to protect the
rights of present and future generations as
co-stakeholders of present-day natural
resources

• Sustainable development
– makes use of environmental resources to support
societal needs today while also preserving and
protecting them for future generations

• Environmental capital – natural resources
used to sustain life and produce goods and
services for society
– Land
– atmosphere
– Water
– Minerals

Triple Bottom Line: Three P’s of organizational
performance
Profit
People
Planet

• Sustainable business – operates in ways that
meets the needs of consumers while
protecting the environment
• Sustainable/green innovations – help reduce
an organization’s negative impact; enhance
positive impact

• Human sustainability – concern for the effect
of management practices on employee
physical and psychological well-being
– Health and wellness programs
– Stress management
– Minimizing work-family conflict
– Control over work
– Fair wages and opportunities

EXTERNAL ENVIRONMENT AND ORG CUKTURE.ppt

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