The Environmental Context of Management

Part TWO

The Environment and Culture of Organization

Chapter 03

City University of Science and Information Technology

Faisal Ghani

The Nature of Organizational Environment

External Environment is everything outside an organizations boundaries that might affect it. e.g. competitors, customers, suppliers, strategic partners, regulators and economic, technological, international, political-legal and socioculture dimensions. Internal Environment consists of the conditions and forces within the organization. e.g. owners, board of directors, employees, physical environment and culture.

Chapter 03

The Environment and Culture of Organization

City University of Science and Information Technology

Faisal Ghani

External Environment
Organizations External Environment consists of two parts: General Environment is the set of broad dimensions and forces in an organizations surroundings that create its overall context. e.g. economic, technological, international, political-legal and socioculture dimensions. Task Environment is specific organizations or groups that influence an organization. e.g. competitors, customers, suppliers, strategic partners, regulators
Chapter 03 The Environment and Culture of Organization 4

City University of Science and Information Technology

Faisal Ghani

The Organization and its Environment

Internal Environment Task Environment General Environment
International Competitors Regulators Customers Technological

Politicallegal

Owners Employees Board of directors Physical environment Culture Strategic Suppliers Partners Economic

Sociocultural

Chapter 03

The Environment and Culture of Organization

City University of Science and Information Technology

Faisal Ghani

External Environment
General Environment

Economic Dimension - The overall health of the economic system in which the organization operates. Technological Dimension The method available for converting resources into product or services. Sociocultural Dimension The customs, values and demographic characteristics of the society in which the organization functions.

Chapter 03

The Environment and Culture of Organization

City University of Science and Information Technology

Faisal Ghani

External Environment
General Environment

Political-legal Dimension The government regulation of businesses and the relationship of businesses and government. International Dimension The extent to which an organization is involved in or affected by businesses in other countries.

Chapter 03

The Environment and Culture of Organization

City University of Science and Information Technology

Faisal Ghani

External Environment
Task Environment

Competitor An organization that competes with other organizations for resources. Customer Whoever pays money to acquire the organizations products or services. Supplier Organization that provides resources to other organizations.

Chapter 03

The Environment and Culture of Organization

City University of Science and Information Technology

Faisal Ghani

External Environment
Task Environment

Strategic Partners (Strategic Allies) An organization working together with one or more other organizations in a joint venture or similar arrangements. Regulator A unit that has the potential to control, legislate or otherwise influence the organizations policies and practices.

Regulatory agency Interest group

Chapter 03

The Environment and Culture of Organization

City University of Science and Information Technology

Faisal Ghani

Internal Environment
Owners Whoever can claim property rights to an organization. Board of Directors Governing body elected by a corporations stockholders and charged with overseeing the general management of the firm to ensure that it is being run in a way that best serves the stock holders interests. Employees Physical Environment Culture

Chapter 03 The Environment and Culture of Organization 10

City University of Science and Information Technology

Faisal Ghani

The Organizations Culture

Organization Culture The set of values, beliefs, customs, and attitudes that helps the members of the organization understand what it stands for, how it does things, and what it considers important.

Chapter 03

The Environment and Culture of Organization

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City University of Science and Information Technology

Faisal Ghani

The Organizations Culture

The Importance of Organization Culture Determents of Organization Culture

Owners Employees Stories etc. Managers must know what they want to create Hiring managers (CEO etc.)

Managing Organization Culture

Chapter 03

The Environment and Culture of Organization

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City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships

How Environments Affect Organizations Environmental Change and Complexity Competitive Forces Environmental Turbulence

Chapter 03

The Environment and Culture of Organization

13

City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships

How Environments Affect Organizations Environmental Change and Complexity Degree of change
Stable Dynamic
Degree

of homogeneity

Simple Complex

Uncertainty Unpredictability created by environmental change and complexity.

Chapter 03 The Environment and Culture of Organization 14

City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships
Environmental change, complexity and uncertainty
Simple
Least Uncertainty Moderate Uncertainty

Degree of Homogeneity
Moderate Uncertainty Complex Stable
Chapter 03

Most Uncertainty

Dynamic Degree of Change

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The Environment and Culture of Organization

City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships

How Environments Affect Organizations Porter Competitive Forces

1. 2.

3.

Threat of New Entrants is the extent to which new competitors can easily enter a market or market segment. Competitive Rivalry (Jockeying Among Contestants) is the nature of competitive relationship between dominant firms in the industry. (Pepsi-Coke) Threat of Substitute Products is the extent to which alternative products or services may diminish the need for existing products or services. (Typewriter-Computer)

Chapter 03

The Environment and Culture of Organization

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City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships

How Environments Affect Organizations Porter Competitive Forces

4.

5.

Power of Buyers is the extent to which buyer of the products or services in an industry have the ability to influence the suppliers. Power of Suppliers is the extent to which the suppliers have the ability to influence potential buyers.

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The Environment and Culture of Organization

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City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships

How Environments Affect Organizations Environmental Turbulence Terrorist attacks Strikes Computer viruses and worms Rumors

Chapter 03

The Environment and Culture of Organization

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City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships

How Organizations Adapt to Their Environment Information management

Boundary Spanner is an employee who spends most of his time in contact with other organizations. Environmental Scanning the process of actively monitoring the environment through activities such as observation and reading. Information system gather and organize relevant information for managers and to assist summarizing that information.

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The Environment and Culture of Organization

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City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships

How Organizations Adapt to Their Environment Strategic response

Maintaining status quo Altering strategy a bit or Adopting an entirely new strategy

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The Environment and Culture of Organization

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City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships

How Organizations Adapt to Their Environment Mergers, Acquisitions, and Alliances

Merger occurs when two or more firms combine to form a new firm. (Time-Warner) Acquisition says that acquired firm often continues to operate as a subsidiary of the acquiring company. (hostile takeover) Alliance is when one firm undertakes a new venture with another firm.

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The Environment and Culture of Organization

21

City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships

How Organizations Adapt to Their Environment Organization Design and Flexibility

Organization Design is a overall pattern of structural components and arrangements used to manage the total organization. Signing long term agreements Lobbying and bargaining

Direct Influence

Social Responsibility
The Environment and Culture of Organization 22

Chapter 03

City University of Science and Information Technology

Faisal Ghani

Organization-Environment Relationships
General Environment Task Environment Information Management

Social Responsibility The Organization

Direct Influence

Strategic Response

Organization Design and Flexibility

Mergers, Acquisitions and Alliances

Chapter 03

The Environment and Culture of Organization

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City University of Science and Information Technology

Faisal Ghani

Environment and Organization Effectiveness

Model of Organizational Effectiveness
Acquiring the resources needed from the environment (System Resource Approach) and combining them in an efficient and productive manner (Internal Processes Approach) Transformation Inputs Organizational System Feedback making in easier to acquire future resources. (Combined Approach)
Chapter 03

facilitates the attainment of organizational goals (Goal Approach)

Outputs

and satisfy the strategic constituents in the environment (Strategic Constituencies Approach)
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The Environment and Culture of Organization