Don Hellriegel

Susan E. Jackson
John W. Slocum, Jr.

MANAGING: A COMPETENCY
BASED APPROACH
11th Edition
Chapter 4—Assessing the
Environment
Prepared by
Argie Butler
Texas A&M University
 Learning Goals

1. Explain how economic, demographic, and

cultural factors affect organizations

2. State the five competitive forces in an industry

3. Describe the political and legal strategies

managers use to cope with changes in the
environment

4. Explain how technology changes the structure

of industries

Chapter 4: PowerPoint 4.1

 General Environment—sometimes called the
macroenvironment, includes the external
factors that usually affect all or
most organizations

Chapter 4: PowerPoint 4.2

 Macroenvironment

Technology
Demographics

Politics Competitors

Organization
Country
Cultural Economy
Values

Chapter 4: PowerPoint 4.3 (Adapted from Figure 4.1)

  Economics is the discipline that
focuses on understanding how
people or nations produce,
distribute, and consume
various goods and services

Chapter 4: PowerPoint 4.4

 The Economy (cont’d)
The New Age of Competition
Old New
Low-cost manufacturing Value-added services

Self-reliance Outsourcing

Made in U.S.A. Borderless competition

Local knowledge Customer convenience

Human capital, software,
Physical labor
knowledge management
Smoke-stack industries Environmental stewardship
Source: Adapted from Friedman, T.L. The World is Flat. New York: Farrar,
Straus & Giroux, 2005, 48-172.
Chapter 4: PowerPoint 4.5 (Adapted from Table 4.1)
 Snapshot

“Our assets leave on the elevator every night.

Organizations do not own human capital;
they can only rent them. In today’s world,
human capital will have greater power than
other resources because it is the people who
create knowledge.”

Andy Grove, Founder and CEO

Intel Corporation
Chapter 4: PowerPoint 4.6
 Impact of Changing Demographics
on Organizations
 Increasing diversity
 Women participation rate increasing
 Hispanic men rate increasing
 People of color rate increasing

 Managerial challenges
 Multicultural awareness programs
 Language offerings
 Career challenges
 Lifestyle issues
 Illegal immigration
Chapter 4: PowerPoint 4.7
  Culture: the dominant pattern of living, thinking,
and believing that is developed and transmitted
by people, consciously or unconsciously, to
subsequent generations

 Value: a basic belief about a condition that has

considerable importance and meaning to
individuals and is relatively stable over time
 Value system: comprises multiple beliefs that
are compatible and supportive of one another

Chapter 4: PowerPoint 4.8

 Why is Culture Important to Managers?
(cont’d)

Values can effect how a manager

Perceives Goes about
situations and solving problems
problems
Views other
people and
Determines groups Leads
what is and controls
and is not employees
ethical behavior

Chapter 4: PowerPoint 4.9

 Why is Culture Important to Management:
Overview of Cultural Factors
Power
Distance
Long-Term
Orientation
Uncertainty
Avoidance

Gender Role
Orientation Culture

Individualism

Chapter 4: PowerPoint 4.10 (Adapted from Figure 4.2)

 Why is Culture Important to Management:
Hofstede’s Framework
 Power Distance—the degree to which less powerful
members of society accept that influence is unequally
divided

 Uncertainty Avoidance—the extent to which members

of a culture feel threatened by risky or unknown
situations

 Individualism—a combination of the degree to which

society expects to take care of themselves and their
immediate family and the degree to which people
believe they are masters of their own destinies
Chapter 4: PowerPoint 4.11
 Why is Culture Important to Management:
Hofstede’s Framework (cont’d)
 The opposite of individualism is collectivism—a tight
social framework in which group (family, clan,
organization, and nation) members focus on the
common welfare and feel strongly toward one another

 Gender Role Orientation—refers to the extent to

which a society reinforces traditional norms of
masculinity versus femininity

 Long-Term Orientation—reflects the extent to which a

culture stresses that its members accept delayed
gratification of material, social, and emotional needs
Chapter 4: PowerPoint 4.12
 100

90
Importance of Cultural Orientation

80

70

60 Japan
USA
50
Canada
40
France
30

20

10

0
Power Distance Uncertainty Individualism Gender Role Short-term/
Avoidance Orientation Long-term
Orientation
Chapter 4: PowerPoint 4.13 Cultural Value Dimension
 Substitute
New
Suppliers goods and Customers Competitors
Entrants
services

Rivalry among
existing firms
in industry

Chapter 4: PowerPoint 4.14 (Adapted from Figure 4.4)

 Competitors

“For virtually all organizations,

the critical environment constraint is their actions
in relation to competitors. Therefore, any change in
the environment that affects any competitor will have
consequences that require some degree of adaptation.
This requires continual change and adaptation by all
competitors merely to maintain
relative position.”

Bruce D. Henderson, founder and chairman of the

Boston Consulting Group
Chapter 4: PowerPoint 4.15
  High versus low barriers to entry
 Economies of scale: achieved when increased volume
lowers the unit cost of a good or service produced by a
firm
 Product differentiation: the uniqueness in quality,
price, design, brand image, or customer service that
gives one firm’s product an edge over another firm’s
 Capital requirements: the dollars needed to finance
equipment, purchase supplies, purchase or lease land,
hire staff, and the like
 Government regulation: barrier to entry if it bars or
severely restricts potential new entrants to an industry
Chapter 4: PowerPoint 4.16
  In a general sense, all competitors produce
substitute goods or services, or goods or services
that can easily replace another’s goods or services

 Movie rental versus movie theatres

 Books versus TV versus newspapers

 Purchase versus rental

 Cell phone versus hard lines

Chapter 4: PowerPoint 4.17

  Customer bargaining power may be relatively
great when:
 Customer purchases a large volume relative
to the supplier’s total sales
 Product or service represents a significant
expenditure by the customer
 Large customers pose a threat of backward
integration
 Customers have readily available alternatives
for the same services or products

Chapter 4: PowerPoint 4.18

  Bargaining power of suppliers often
controls:

1. how much they can raise prices above

their costs or

2. reduce the quality of goods and services

they provide before losing customers

Chapter 4: PowerPoint 4.19

 Political-Legal Forces: Managerial
Political Strategies

Political Strategies Political-Legal Forces

 Negotiation  Political action

 Lobbying committees (PACs)
 Alliance  Laws
 Representation  Government
 Socialization  Labor unions
 Others

Chapter 4: PowerPoint 4.20 (Adapted from Figure 4.5)

 Technology

Workplace Strategy Manufacturing Distribution

Chapter 4: PowerPoint 4.21 (Adapted from Figure 4.6)

 Snapshot

“With 135 million users selling goods in

more than 45,000 categories in 27
international markets, eBay has left all
competitors in the dust. Technology has
really changed people’s lives for the
better.”

Meg Whitman, CEO, eBay

Chapter 4: PowerPoint 4.22
  Workers need greater problem-
solving skills

 Outsourcing routine tasks

 Virtual organizations

Chapter 4: PowerPoint 4.23

  Faster new product introductions to market
 Entrance of “electronic” competitors
 Formation of “electronic shopping malls”
 Wider choice of suppliers for company
 More substitute goods and services available
to company
 Product differentiation based on technological
sophistication
Chapter 4: PowerPoint 4.24
 Mass
Customization

Reduction in
Manufacturing time

Outsourcing of routine jobs

Chapter 4: PowerPoint 4.25

 Internet
access for
shopping

Telecommunication
devices

Information superhighway
for global competition

Chapter 4: PowerPoint 4.26