Chapter 2

Partridge and Ivancevich

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The Environments of
Business

❚ Environment
❙ factors that affect an organization, and the
situations within which the organization
functions
❚ External Environment
❙ all factors such as laws, competition,
technology, social-cultural norms and trends,
and ecology, that are outside the organization
and that may affect it
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The Internal
Environment

❚ factors within an enterprise, such as

employees, structure, policies and
practices, and system of rewards that
influence how work is done, and how
goals are accomplished
❚ the idea of “culture” as a guideline for
what is appropriate and acceptable
behaviour
❙ can be positive or negative
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❚ Culture
❙ an organization’s way of life
❘ the meanings and practices shared by members of
the organization
• common ways of thinking, traditions, customs, manners,
and ways of dealing with each other and outsiders
• transmitted to new members by example or directives

❚ Multiple Cultures
❙ Dominant culture
❘ an organization’s core values that are shared by a
majority of its members 4
 ❘ Subcultures
• may develop because of common problems or situations
• likely to occur in separate units, groups or departments
❘ Strong and weak dominant cultures
• depends on the organization

❚ External Perceptions of Culture

❙ some aspects are readily apparent to
outsiders, and may signify unseen portions

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❚ Building Culture
❙ requires selecting, motivating, rewarding and
retaining high-performance employees
❙ Commitment, Competence, and Consistency
❙ Organizational Socialization
❘ transform a newcomer into an accepted member
of the team
❘ mostly occurs inadvertently

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❚ Values as a Source of Organizational
Culture
❙ Values
❘ convictions about what is good or desirable
❘ beliefs that a specific mode of conduct is
personally or socially preferable to other modes of
conduct
❘ can be common or individual
• fundamental to personality, lifestyle, and reactions to a
situation

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❙ Beliefs
❘ conscious or subconscious convictions or
expectations that something is true
❙ Attitudes
❘ a manner of thinking, feeling, or holding an
opinion
❘ shape behaviour
❙ Values - Beliefs - Attitudes - Behaviour

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❚ Emphases in Values
❙ values established early in life
❘ by parents, teachers, relatives, friends, and other
peers
❙ national, cultural, economic, and religious
backgrounds shape values
❙ managers must look at values as a whole, but
treat employees individually based on
individual values
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The External Environment

❚ Input and Output

❙ purpose of organization is to receive and
transform inputs to produce an output
❙ the output goes back into the external
environment (as a product or service)
❙ the output is used and evaluated
❚ Environmental Analysis and Diagnosis
❙ applying rationality to understand the sources and possible
effects of environmental factors and determine the
organization’s opportunities and threats
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The Social-Cultural
Environment

❚ Workforce Diversity
❙ Canadian workforce structure and
composition changing
❘ more women, aging, increased education levels,
wider range of cultures
❘ managers must adapt to diversity
❚ Family Responsibilities of Employees
❙ maternity and paternity leaves, day care,
flexible scheduling, and job sharing
❘ assisted by computers (telecommuting) 11
❚ The Nature of Work
❙ employers want workers with:
❘ solid basic education
❘ skills in human relationships and self-management
❚ Employees’ Health
❙ Canada an increasingly sedentary society
❘ organizations have responded with in-house
fitness facilities, quit smoking campaigns, etc
❙ attention to employee safety
❘ design accident prevention plans 12
❚ Government Intervention
❙ taxes
❙ organization must be willing to be socially
responsible and comply with laws and
regulations

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The Economic
Environment

❚ Productivity
❙ decreasing productivity worsens inflation
❙ an estimate of output per hour of labour
worked, or per unit of cost applied
❙ if productivity is flat, wage gains have to be
reflected in price increases
❘ this may spark a downward spiral
❙ may be split between blue and white collar

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❚ The Global Economy
❙ other countries influence domestic businesses
❙ three main economic regions
❘ the European Union
❘ North America
❘ Southeast and East Asia (including Japan)

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The Technological
Environment

❙ The most visible of all environmental changes

❚ Technology
❙ the aggregate competence to produce goods
and services
❚ Technological Innovation
❙ the translation of technical knowledge into
physical reality that can be used to achieve a
purpose
❙ basic research - testing - production -
marketing 16
❙ takes time and money
❙ a major force in competitiveness

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The Political-Legal
Environment

❙ Government rules and regulations that apply

to organizations
❙ some rules and regulations are needed to
organize and monitor the external
environment, and to protect consumers and
companies from possible predatory action by
others
❘ Support
• direct subsidies, indirect subsidies ( tax relief), publicity
and promotion, granting of contracts, or support of
research and development
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❚ Government Control
❙ Investigation and Publicity
❘ e.g. findings on health effects of products
❙ Legislation
❘ e.g. anti-competition, advertising laws
❙ Regulatory Enactments and Rulings
❘ may be federal, provincial, municipal
❘ e.g. transportation of materials, zoning

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The Ecological
Environment

❙ consists of our natural surroundings

❙ production of goods and services creates
waste problems
❘ energy shortages, pollution, poor planning
• a result of uncontrolled economic growth, affluent
lifestyles, urbanization and technological development
with little concern for ecological consequences
❘ current problems: deforestation, species loss, soil
erosion, and water and air pollution

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❚ Ecological Dilemmas
❙ protective equipment and measures are
expensive in money and time
❙ even solutions may pose problems
❘ e.g. DDT
❙ no easy solutions

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Social Responsibility

❚ Social Responsibility as Social Obligation

❙ the practices of a company for which it is
accountable, in relation to other parties such
as customers, competitors, governments,
employees, suppliers, creditors , and the
general public
❙ doing more than the law requires
❘ legal behaviour in pursuit of profit is “socially
responsible”

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❙ A view espoused by economist Milton
Friedman
❘ businesses are first accountable to shareholders,
and owners
• must make a profit
❘ government is best equipped to determine the
nature of social improvements and to realize those
improvements in society
• businesses contribute by paying taxes
❘ if management allocates profits to social
improvements, it is an abuse of authority
• there is no return in social improvements 23
 ❘ These actions by management may hurt society
• spending on social improvements will lead to higher
prices

❚ Social Responsibility as Social Reaction

❙ assumes that society is entitled to more from
a business than the mere provision of goods
and services
❘ must be accountable for ecological, environmental
and social costs incurred by its actions
❘ must react and contribute to solving society’s
problems 24
 ❙ separate actions required by economic or
legal imperatives from voluntary, altruistic
motives
❚ Social Responsibility as Social
Responsiveness
❙ socially responsible behaviours are
anticipatory and preventative, rather than
just reactive and restorative

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❙ Social responsiveness
❘ actions that exceed social obligation and social
reaction
• taking stands on issues, accounting for actions,
anticipating society’s future needs and moving towards
satisfying them, and communicating with governments
about existing and potential legislation that is desirable
❘ actively seeks solutions to social problems
❘ importance of social responsibility has increased
attention paid to ethics and ethical dilemmas

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Ethics

❚ Standards of conduct that are reflected in

behaviour that is fair and just, including
but also extending over and above what is
required by laws and regulations
❚ Jeremy Bentham and John Stuart Mill
❙ the greatest good for the greatest number
❘ too simplistic!

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❚ Modern versions
❙ justice and fairness, non-discrimination,
utmost honesty and integrity, an ability to
keep confidences, respect and caring for
others, the courage to pursue the right path
❙ how we are viewed - our character and
reputation
❙ some responses to situations may be more
ethical than others
❘ in the eye of the beholder 28
❙ for many companies, ethical issues are not a
top priority
❘ others develop codes of conduct and ethics
• but few have training programs in ethical behaviour or a
hotline to report unethical behaviour
❙ Code of ethics
❘ specific direction in dealing with ethical dilemmas
❘ clarify the organization’s position regarding areas
of ethical uncertainty
❘ help achieve and maintain ongoing conduct that
the organization views as ethical and proper
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❙ Codes are often ineffective because
management doesn’t follow through and
proactively implement them
❘ written codes become little more than public
relations tools
❙ for successful implementation:
❘ involve people at several levels in discussing and
formulating values and ethical standards
❘ translate the values and beliefs into specific ethical
standards of behaviour
• both in general and specific terms
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❘ offer all members of the organization the
opportunity to comment on the draft policy
❘ distribute throughout the company
• hold seminars to discuss how the principles embodied
are to be applied in day-to-day activities
❘ make provisions for periodic review and possible
amendments
❘ the final test is whether everyone in the company,
from top down, accepts and lives by the code

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❚ Reporting Unethical Behaviour
❙ General reluctance to report
❘ many feel that little, if anything is done
❘ fear retribution
❘ confidentiality issues
❙ Common cases: lying to supervisors,
falsifying reports, sexual harassment

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❚ Application of Ethical Standards
❙ uncertainty, ambiguity, and anxiety
❙ managers must be clear about their stance,
and follow up
❘ set an example
❙ “The Newspaper Test”
❘ if my actions were published on the front page of
tomorrow’s newspaper, would I be comfortable
dealing with friends, family, and spouse?
❙ have a plan for dealing with ethical questions
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The Workplace of
Tomorrow

❙ External environment will become a greater

consideration
❙ Media inquiry, government regulation, and
public expectations become more important
❘ organizational behaviour under closer scrutiny
than ever before
❘ minor decisions may build or destroy reputation
❙ As companies expand globally, ethics are
tested by local environments

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