MANAGERIAL ENVIRONMENT I THE EXTERNAL ENVIRONMENT, CUSTOMERS, COMPETITORS, SUPPLIERS, HUMAN RESOURCES, DIRECT AND INDIRECT FORCES

MANAGERS AND THEIR ENVIRONMENTS Everything outside the organization All that influences the organization Determines a company s success or failure Environment refers to the set of forces and conditions that surround and permeate the organization The conditions and circumstances are changing The key element ideal alignment between the environment and the organization Working to achieve and maintain that alignment thoroughly understand the environments the manager must

International Dimension Competitors Technological Dimension MANAGERIAL ENVIRONMENT Politicallegal Dimension Regulators Strategic partners Owners Board of directors Physical environment Culture Suppliers Customers Economic Dimension Sociocultural Dimension Internal environment External environment: Task environment General environment

MANAGERS AND THEIR ENVIRONMENTS External environment Everything outside an organization's boundaries that might affect it The general environment The task environment Internal environment Conditions and forces within the organization Not all parts are equally important Organizations need to fully understand which forces are important and how the importance of others might increase

GENERAL ENVIRONMENT The set of broad dimensions and forces in its surroundings that create its overall context The general environment of most organizations has: economic technological sociocultural political-legal international dimensions

The Economic Dimension The overall health and vitality of the economic system in which the organization operates General economic growth Inflation Interest rates Unemployment Also important to nonbusiness organizations, for example during weak economic conditions: Funding for state universities may drop. Charitable organizations like the Salvation Army are asked to provide greater assistance at the same time that their own incoming contributions dwindle. Hospitals are affected by the availability of government grants and the number of low-income patients they must treat free of charge.

The Technological Dimension Methods available for converting resources into products or services Technology is applied within the organization Forms and availability come from the general environment Technology manufacturing service sector The rapid infusion of the internet a reflection of the technological dimension Integrated business software systems

The Sociocultural Dimension Include the customs, mores, values, and demographic characteristics of the society Sociocultural processes are important because they determine: Products Services Standards of conduct Influence on how workers in a society feel about their jobs and organizations Consumer tastes change from season to season Standards of business conduct vary across cultures The shape of the market, the ethics of political influence, and attitudes in the workforce a few of the many ways in which culture can affect an organization.

The Political-Legal Dimension The government regulation of business and the relationship between business and government The legal system partially defines what an organization can and cannot do Pro- or antibusiness sentiment in government influences business activity Political stability has ramifications for planning Similar issues are relevant to assessments of local and state governments

The International Dimension The extent to which an organization is involved in or affected by businesses in other countries Multinational firms dearly affect and are affected by international conditions and markets Firms that do business in only one country may face foreign competition at home, they may use materials or production equipment imported from abroad. The international dimension also has implications for not-for-profit organizations

THE TASK ENVIRONMENT The impact of the general environment is often vague, imprecise, and long term Organizations tend to focus their attention on their task environment: Competitors Customers Suppliers Strategic partners Regulators Quite complex The manager can identify environmental factors of specific interest to the organization

Competitors Competitors are other organizations that compete for resources (the most obvious are customer dollars) Same products Substitute products Different kinds of resources Competition not limited to business firms

Customers Customers whoever pays money to acquire an organization's products or services Individuals Organizations Dealing with customers has become complex More uncertainty, lower brand loyalty new products and services, new methods of marketing, more discriminating customers Critical differences among customers as they expand internationally

Suppliers Provide resources for other organizations Try to avoid depending exclusively on one particular suppliers One supplier problem if the supplier goes out of business More suppliers can help maintain a competitive relationship among suppliers, keeping costs down Japanese firms have a history of building major ties with only one or two major suppliers. This enables them to work together better for their mutual benefit and makes the supplier more responsive to the customer's needs.

Strategic Partners Two or more companies that work together in joint ventures or other partnerships Strategic partnerships help companies get from other companies the expertise they lack They help spread risk, open new market opportunities Most strategic partnerships are actually among international firms. For example, Ford has strategic partnerships with Volkswagen (sharing a distribution and service centre in South America) and Nissan (building minivans in the United States).

Regulators Have the potential to: Control Legislate Influence Kinds of regulators: Regulatory agencies, created by the government to protect the public from certain business practices or to protect organizations from one another Interest groups, are organized by their members to attempt to influence organizations Regulators play important roles in protecting the rights of individuals Many managers complain that there is too much government regulation

THE INTERNAL ENVIRONMENT Conditions and forces within the organization Not all parts are equally important for all organizations Owners Board of directors Physical environment Culture

Owners The people who have legal property rights to that business Owners can be: A single individual who establishes and runs a small business Partners who jointly own the business Individual investors who buy stock in a corporation Other organizations McDonald's has 853 million shares of stock, each of which represents one unit of ownership in the firm. McDonald's, in turn, owns other businesses Each of these is incorporated as a separate legal entity and managed as a wholly owned subsidiary by the parent company.

Board of Directors A governing body elected by the stockholders and charged with overseeing the general management of the firm To ensure that the firm is being run in a way that best serves the stockholders' interests Some boards are relatively passive General oversight function Seldom get actively involved in how the company is really being run This trend is changing More and more boards are carefully scrutinizing the firms they oversee Exerting more influence over how they are being managed. This trend has in part been spurred by numerous business scandals

Employees A major element of its internal environment Changing nature of the workforce It becomes increasingly more diverse in terms of gender, ethnicity, age, and other dimensions Workers calling for more job ownership Increased reliance on temporary workers-individuals hired for short periods of time with no expectation of permanent employment Provide greater flexibility, earn lower wages, and often do not participate in benefits programs A two-class workforce, no loyalty to the organization The permanent employees labour unions

Physical Work Environment The actual physical environment the work that people do Location city, suburbs, rural area Some facilities have long halls lined with traditional offices Others have modular cubicles with partial walls and no doors Newer facilities have open arrangement, where people work in large rooms, moving among different tables to interact with different people on different projects Freestanding computer workstations, a few small rooms might be off to the side for private business

Factory Workplace

Office Workplace

The Organization's Culture The set of values, beliefs, behaviours, customs, and attitudes Defies objective measurement or observation The foundation of the organization's internal environment Plays a major role in shaping managerial behaviour Develops and blossoms over a long period of time, its starting point is the organization's founder Manager must: Understand the current culture Decide if it should be maintained or changed Walk a fine line between maintaining a culture that still works effectively and changing a culture that has become dysfunctional Culture problems arise from: mergers or the growth of rival factions

HOW ENVIRONMENTS AFFECT ORGANIZATIONS? Uncertainty Is it relatively stable or relatively dynamic? Is it relatively simple or complex?

HOW ENVIRONMENTS AFFECT ORGANIZATIONS? Competitive forces The threat of new entrants Competitive rivalry The threat of substitute products The power of buyers The power of suppliers

HOW ENVIRONMENTS AFFECT ORGANIZATIONS? Environmental turbulence Organizations face the possibility of environmental change or turbulence, occasionally with no warning at all. The most common form of organizational turbulence is a crisis of some sort. The terrorist attacks on September 11, 2001 The crash of the space shuttle Columbia in 2003 The rapid spread of computer viruses, such as the so-called love bug that shut down businesses around the world in early 2000 Such crises affect organizations in different ways and many organizations have developed crisis plans and teams.

HOW ORGANIZATIONS ADAPT TO THEIR ENVIRONMENTS? Information Management Strategic Response Mergers, Acquisitions, and Alliances Organization Design and Flexibility Direct Influence

HOW ORGANIZATIONS ADAPT TO THEIR ENVIRONMENTS? Information Management Information systems to gather and organize relevant information for managers and to assist in summarizing that information in the form most pertinent to each manager's needs Strategic Response Options include maintaining the status quo (for example, if its management believes that it is doing very well with its current approach), altering strategy a bit, or adopting an entirely new strategy. If the market that a company currently serves is growing rapidly, the firm might decide to invest even more heavily in products and services for that market.

HOW ORGANIZATIONS ADAPT TO THEIR ENVIRONMENTS? Mergers, Acquisitions, and Alliances A merger two or more firms combine to form a new firm. For example, DaimlerChrysler was created as a result of a merger between Daimler-Benz. (a German firm) and Chrysler (a U.S. company). An acquisition one firm buys another, sometimes against its will (usually called a "hostile takeover"). The firm taken over may cease to exist and becomes part of the other company. For example, as part of its international expansion, Starbucks bought a British coffee shop chain called the Seattle Coffee Company. Starbucks then systematically changed each Seattle Coffee outlet into a Starbucks shop. In other cases, the acquired firm may continue to operate as a subsidiary of the acquiring company. Royal Caribbean Cruise Lines bought controlling interest in Celebrity Cruise Lines but maintains it as a separate cruise line. Partnership or alliance the firm undertakes a new venture with another firm. A company engages in these kinds of strategies for a variety of reasons, such as easing entry into new markets or expanding its-presence in a current market.

HOW ORGANIZATIONS ADAPT TO THEIR ENVIRONMENTS? Organization Design and Flexibility Incorporating flexibility in its structural design Number of standard operating procedures, allowing managers considerable discretion and flexibility with decisions, basic rules, regulations, and standard operating procedures

HOW ORGANIZATIONS ADAPT TO THEIR ENVIRONMENTS? Direct Influence Organizations are not helpless in the face of their environments For example: Firms can influence their suppliers by signing long-term contracts with fixed prices as a hedge against inflation. Or a firm might become its own supplier. Organizations also influence their customers by creating new uses for a product, finding entirely new customers, taking customers away from competitors, and convincing customers that they need something new. Automobile manufacturers use this last strategy in their advertising to convince people that they need a new car every two or three years. Organizations influence their regulators through lobbying and bargaining. Lobbying involves sending a company or industry representative to Washington in an effort to influence relevant agencies, groups, and committees.

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