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MGMT
Chuck Williams
External Environments
After reading the next four sections, you should be able to:
1. discuss how changing environments affect organizations. 2. describe the four components of the general environment. 3. explain the five components of the specific environment 4. describe the process that companies use to make sense of their changing environments.
2
Changing Environments
Characteristics of Changing External Environments
1
3
The auto industry is rapidly changing as consumers become more concerned with the environment, traditional markets slow down, and new markets develop in countries like China and India. Nissan CEO Carlos Ghosn responds with focus on tech research for environmentally sustainable models and low-priced models for developing markets. Ghosn plans to develop a Nissan hybrid by 2010, release an all-electric car in Japan by 2011, and make a $3000 model to compete with Tata in India.
Source: A. Taylor III, Nissans Radical Chic, Fortune, 29 October 2007, 127-134.
Environmental Change
Environmental Change is the rate at which a companys environments change
Environmental Complexity
Environmental Complexity: the number of external factors in the environment that affect organizations
Simple environments
Complex environments
1.2
6
Resource Scarcity
Resource Scarcity The degree to which an organizations external environment has an abundance or scarcity of critical organizational resources
1.3
7
Natural Resources
The scarcity of natural resources is a general concern. Companies like Weyerhauser work extra hard to correct the misperception that they are using up valuable resources. In fact, through careful planning and good management, Weyerhauser is able to both guarantee its lumber resources and be a good environmental steward.
Uncertainty
1.4
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External Environment
2
10
2
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Economy
Growing vs. shrinking economies Predicting future economic activity Business confidence indices
2.1
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Technological Component
Technology
Input
Raw Materials
Output
Products
Information
Services
2.2
13
Impact of Technology
Technology can be a great benefit or a daunting threat. MP3 players have created a tremendous new business opportunity for some, like Apple, Creative, and other manufacturers. But record labels have suffered from the rapid acceptance of digital music and persistent file swapping.
2.2
14
Sociocultural Component
Demographic changes Changes in behavior, attitudes, and beliefs
2.3
15
Demographics Example
2.3
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2.4
Web Link
http://www.eeoc.gov/abouteeo/overview_laws.html http://www.dol.gov/esa/whd/fmla/
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Specific Environment
Customer Competitor Supplier
Industry Regulation
Advocacy Group
3
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Customer Component
Monitoring customer wants and needs is critical for business success
Reactive customer monitoring responding to problems, trends, and events Proactive customer monitoring anticipating problems, trends, and events
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3.1
Competitor Component
Competitive Analysis Deciding who your competitors are Anticipating competitors moves Determining competitors strengths and weaknesses
3.2
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Supplier Component
Buyer Dependence
Suppliers
Supplier Dependence
Opportunistic Behavior
Relationship Behavior
3.3
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Companies like General Electric and Barnes Group, Inc. supply engine and other airplane parts to Boeing. A Fall 2008 machinists strike at Boeing meant the company produced 23% fewer planes. Fewer planes means need for fewer engine parts, and Boeing instructed suppliers to delay shipments. Suppliers like Spirit AeroSystems, Inc. instituted shorter work weeks to avoid layoffs.
Source: F. Haflich, Boeing Strikes Impact Spreading to Suppliers, American Metal Market , 6 October 2008, 1-2.
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Steelmakers like ArcelorMittal face decreased demand in steel for products like cars and buildings. Price of iron ore on the spot market dropped from $180 to $70 per metric ton. But steelmakers are locked into contracts with suppliers like BHP Billiton for $90 per metric ton, contracts made when the price was high. Buyers pressure suppliers to renegotiate contracts or default on them. Suppliers meet with U.S. Commerce Department to protect and enforce contracts.
Source: R. G. Matthews, Steelmakers Squeeze Suppliers, The Wall Street Journal, 18 November 2008.
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3.4
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http://www.cpsc.gov
http://www.dol.gov http://www.epa.gov http://www.eeoc.gov
http://www.fcc.gov
http://www.federalreserve.gov http://www.ftc.gov http://www.fda.gov http://www. nlrb.gov http://www.osha.gov http://www.sec.gov
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3.4
Cost of Compliance
Researchers studied U.S. manufacturers and the costs they incur complying with the 25 major federal regulations. They found: There are about 300,000 manufacturing companies in the U.S. Each company spends roughly $2.2 million
$660 billion
And thats just for manufacturing.
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Advocacy Groups
Advocacy Groups
Advocacy Groups
PETA is a well-known advocacy group that attempts to influence consumers and companies to pursue animal-friendly practices.
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4
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Environmental Scanning
Searching the environment for events or issues that might affect an organization keeps companies current on industry factors reduces uncertainty alters organizational strategies contributes to organizational performance
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4.1
Opportunities?
Threats?
4.2
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4.3
32
Cognitive Maps
4.3
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Internal Environments
After reading this section, you should be able to:
5. explain how organizational cultures are created and how they can help companies be successful.
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Internal Environments
Internal Environment
The trends and events within an organization that affect the management, employees, and organizational culture important because it affects what people think, feel, and do at work organizational culture is the set of key values, beliefs, and attitudes shared by organizational members
5
35
Company Founder
Organizational Stories
Organizational Heroes
5.1
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Clear Vision
5.2
Source: D.R. Denison and A.K. Mishra, Organization Science 6 (1995): 204-223
HEARD
BELIEVED
5.3
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