Chapter 3

The Environment and

Corporate Culture

Organizational Environment

All elements existing outside the

boundary of the organization that have
the potential to affect the organization

Managers Challenge: IBM, p. 77

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External Environment

General environment affects indirectly

Task environment
-

Affects directly
Influences operations and performances

Internal environment elements within the

organizations boundaries

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Technological

Organizational Environments
General
Environment

Technological

Management

Competitors

Labor Market

Customers

Suppliers

Suppliers

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Task
Environment

Internal
Environment

International Dimension

Provides New

Customers
Competitors
Suppliers

Shapes:

Social trends
Technological trends
Economic trends

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Technological Dimension

Scientific and technological advances

Specific industries
Society at large

Impact

Competition
Relationship with Customers
Medical advances
Nanotechnology advances

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Socio-Cultural Dimension

Dimension of the general

environment

Demographic characteristics
Norms
Customs
Values

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Key Demographic Trends in U.S.

By 2050 non-Hispanic whites will make up only about half of

the population, down from 74% in 1995; and 69% in 2004
Baby boomer generation is aging and losing interest in highcost goods. Generation Y, rival them in size, will soon rival
them in buying power.
The single father household is the fastest growing living
arrangement, which rose 62% in 10 years. Two-parent and
single-mother households are still much more numerous
Unprecedented demographic shift = married couple households
slipped from 80% in 1950s to just over 50% in 2003. Couples
with kids= 25%, with projection 20% by 2010 and 30% of
homes inhabited by someone who lives alone.
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Economic Dimension

General economic health

Consumer purchasing power

Unemployment rate
Interest rates

Recent Trends

Frequency of mergers and acquisitions

Small business sector vitality

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Task Environment
Sectors that have a direct working relationship
with the organization

Customers
Competitors
Suppliers
Labor Market

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Labor Market Forces

Labor Market Forces Affecting Organizations
today

Growing need for computer literate information

technology workers

Necessity for ongoing investment in human

resources recruitment, education, training

Effects of international trading blocks, automation,

outsourcing, shifting facility locations upon labor
dislocations

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Adopting to the Environment

Boundary-spanning
Inter-organizational partnerships
Mergers or joint ventures

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External Environment and Uncertainty

High

High
Uncertainty

Rate of
Change in
Factors in
Environment

Low
Uncertainty
Low
Low

High

Number of Factors in Organization Environment

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Adapt to
Environment

Competitive Intelligence - CI

What - Activities to get as much information as

possible about ones rivals

Where - Web sites, commercial databases,

financial reports, market activities, news clippings,
trade publications, personal contacts

Why Spot potential threats or opportunities

Ethical Dilemma: Competitive Intelligence Predicament, P. 105

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Interorganizational Partnerships
Shift in paradigm

Trust, value added to both sides

Equity, fair dealing, everyone profits
E-business links to share information and conduct
digital transactions
Close coordination; virtual teams and people on site
Involvement in partners product design and production
Long-term contracts
Business assistance goes beyond the contract

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Levels of Corporate Culture

Culture
that can
be seen at
the
surface
level

Visible
1. Artifacts, such as dress, office
layout, symbols, slogans,
ceremonies

Invisible
2. Expressed values, such as The
Penney Idea, The HP Way
3. Underlying assumptions and deep
beliefs, such as people are lazy
and cant be trusted

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Deeper values
and shared
understandings
held by
organization
members

Visible Manifestations
Symbols
Stories
Heroes
Slogans
Ceremonies

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Environment and Culture

A big influence on internal corporate culture

is the external environment

Cultures can vary widely across

organizations

Organizations within same industry reveal

similar cultural characteristics
Experiential Exercise: Working in an Adaptive Culture, p. 104

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Corporate Culture Adaptability

Adaptive Culture
Visible Behavior

Managers pay close attention to

all their constituencies, especially
customers, and initiate change
when needed to serve their
legitimate interests, even if it
entails taking some risks.

Expressed Values

Managers care deeply about

customers, stockholders, and
employees. They strongly value
people and processes that can
create useful change (e.g.,
leadership initiatives up and down
the management hierarchy).

Unadaptive Culture
Managers tend to behave
somewhat insularly, politically, and
bureaucratically. As a result, they
do not change their strategies
quickly to adjust to or take
advantage of changes in their
business environments.
Managers care mainly about
themselves, their immediate work
group, or some product (or
technology) associated with that
work group. They value the orderly
and risk-reducing management
process much more highly than
leadership initiatives.

Source: John P. Kotter and Jmaes L. Heskett, Corporate Culture and Performance (New York, The Free Press, 1992), 51.

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Four Types of Corporate Cultures

Needs of the Environment
Flexibility

Strategic Focus

External

Internal

Adaptability
Culture

Involvement
Culture

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Stability

Achievement
Culture

Consistency
Culture

Cultural Leadership

Articulates a vision that employees can

believe in

Defines and communicates central values that employees

believe in
Values are tied to a clear and compelling mission, or core
purpose

Heeds the day-to-day activities that reinforce

the cultural vision work procedures and reward
systems match and reinforce the values

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High-Performance Culture
Creating and maintaining a high-performance culture in
todays turbulent environment and changing
workplace is not easy.

Managers widely communicate their cultural values through

their words and particularly their actions

Value statements that are not reinforced by management

behavior are meaningless or even harmful for employees
and the organization

Cultural leaders uphold their commitment to values during

difficult times or crises.

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