Chapter 3 The Environment and Corporate Culture

Presented by Group 2, EMBA 10

The Environment and Corporate Culture

Businesses are increasingly becoming dynamic Must be ready to react and respond to even subtle environmental shifts Need to adapt their companies to new competition, shifting consumer interests or new technologies Close System (focus on factors within organization, leading, motivating & controlling employees) Open System (monitor & respond to external environment) for more effective managers

External Organizational Environment

Includes all elements existing outside the boundary of the organization that have the potential to affect the organization Includes competitors, resources, technology and economic conditions that influence the organization

Two Layers of the External Environment

General environment
-

outer layer that is widely dispersed and affects organizations indirectly includes social, economic, legal/political, international, natural and technological factors that influence all organizations about equally These events do not directly change day-to-day operations, but they do affect all organizations eventually

Task environment
-

closer to the organization and includes the sectors that conduct day-to-day transactions with the organization and directly influence its basic operations and performance includes competitors, suppliers, customers and the labor market

Internal Environment
Includes the elements within the organization's boundaries Composed of
1. current employees 2. Management 3. especially corporate culture

Organizational Environment

General Environment
Technological

Task Environment
Customers Labor Market Internal Environment Employees Culture Competitors

Management

Suppliers

International Dimension
- Represents events originating in foreign countries - Provides new competitors, new customers and new suppliers - Shapes social trends, technological trends and economic trends - Compared to domestic, complex & ever-changing

Technological Dimension
Includes scientific and technological advancements in a specific industry as well as in society at large

Created massive changes for organizations in all industries in recent years Its advancement effects organizations and managers

Socio-Cultural Dimension
Represents demographic characteristics, norms, customs, and values of the population within which the organization operates
Important characteristics are geographical and population density, age, and education levels.

Economic Dimension
Represents the general economic health of the country or region in which the organization operates.
Consumer purchasing power Unemployment rate Interest rates

Legal-Political Dimension
Includes government regulations at the local, state and federal levels, as well as political activities designed to influence company behavior Managers must also recognize a variety of pressure groups that work within the legalpolitical framework to influence companies to behave in socially responsible ways

Natural Dimension
Includes all elements that occur naturally on earth, including plants, animals, rocks, and natural resources such as air, water, an climate. Concern about the environment has prompted companies to take these actions.
Eliminating non-biodegradable plastic bags from the environment Improving efficiency of plants and factories Investing in cleaner technology

Task Environment
Includes those sectors that have a direct working relationship with the organization Customers People and organizations in the environment that acquire goods or services from the organization Competitors Other organizations in the same industry or type of business that provide goods or services to the same set of customers Supplier People and organizations that provide the raw materials the organization uses to produce its output Labor Market the people available for hire by the organization

Labor Market Forces Affecting Organizations

1. 2. 3.

Every organization needs a supply of trained, qualified personnel.

Growing need for computer literate knowledge workers The necessity for continuous investment in human resources through recruitment, education and training to meet the competitive demands of the borderless world The effects of international trading blocs, automation, outsourcing, and shifting facility locations on labor dislocations, creating unused labor pools in same areas and labor shortages in others

Environmental Uncertainty
Uncertainty means that managers do not have sufficient information about environmental factors to understand and predict environmental needs and changes When external factors change rapidly, the organization experiences high uncertainty When an organization deals with only a few external factors, managers experience low uncertainty and can devote less attention to external issues

External Environment and Uncertainty

High High Uncertainty

Adapt to Environment

Rate of Change in Factors in Environment Low Uncertainty

Low Low High Number of factors in organization environment

Adapting to the Environment

Managers can use several strategies to adapt to the following changes
boundary-spanning roles inter-organizational partnerships mergers or joint ventures.

Boundary-spanning Role
Roles assumed by people and/or departments that link and coordinate the organization with key elements in the external environment
Detect and process information about changes in the environment Represent the organizations interest to the environment

Inter-organizational Partnership
Reduce boundaries and increase collaboration with other organizations
From Adversarial Orientation To Partnership Orientation

Suspicion, competition, arms length

Price, efficiency, own profits Information and feedback limited

Trust, value added to both sides

Equity, fair dealing, everyone profit E business links to share information and conduct digital transaction Close coordination, virtual teams and people onsite Involvement in partners product design and production

Lawsuits to resolve conflict Minimal involvement and up front investment

Short-term contract
Contracts limit the relationship

Long-term contract
Business assistance goes beyond the contract

Mergers and Joint Ventures

To reduce environmental uncertainty Mergers occurs when two or more organizations combine to become one A Joint Venture involves a strategic alliance or program by two or more organizations
Occurs when a project is too complex, expensive, or uncertain for one firm to handle alone

The Internal Environment: Corporate Culture

A pattern of shared values and assumptions about how things are done within the organization Includes corporate culture, production technology, organization structure, and physical facilities Internal culture must fit the needs of the external environment and company strategy Culture is defined as the set of key values, beliefs, understands, and norms shared by members of an organization Helps managers understand the hidden, complex aspects or organizational life

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 here care about one another like a family Deeper values and shared understandings held by organization members

Visible Manifestations
Symbol An object, act or event that conveys meaning to others Story A narrative based on true events and repeated frequently and shared among organizational employees Heroes A figure who exemplifies the deeds, character and attributes of a strong corporate culture Slogan A phrase or sentence that succinctly expresses a key corporate value Ceremony A planned activity at a special event that is conducted for the benefit of an audience

Corporate Cultures
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.

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.

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).

ADAPTIVE CULTURES
(how well they encourages adaptation to external environment)

Adaptive Corporate cultures have different values and behavior from Unadaptive Corporate cultures
Customers

Adaptive Corporate cultures

Internal people and process

Unadaptive Corporate cultures

themselves

Four Types of Corporate Culture

Needs of the Environment
Flexibility External

Stability

Adaptability Culture

Achievement Culture
Serve specific clients not needing rapid changes / result oriented

Strategic Focus

Require fast response & high risk decision / employee autonomy

Internal

Involvement Culture

Consistency Culture
Internal focus & consistency oriented / follow rules, methodical, orderly / few companies operates this way

Get participation of employees to rapidly adapt to changes / highly values & caring towards employees

Shaping Corporate Culture for Innovative Response

Corporate culture plays a key role in creating an organizational climate that enables learning and innovative responses to threats from the external environment challenging new opportunities, or organizational crises Companies that succeed in a turbulent world are those that pay careful attention to both cultural values and business performance

Combining Culture and Performance

High Attention to Performance Goods for short term - sustainable? Give results and inspiration sustainable success through high performance culture D Strong culture/good for morale can they afford without result B High Attention to Value

C May be going out of business Little result / value A Low

Low

Cultural Leadership
A cultural leader defines and uses signals and symbols to influence corporate culture Influence culture in two key roles
The cultural leader articulates a vision for the organizational culture that employees can believe in The cultural leader heeds the day-to-day activities that reinforce the cultural vision

THANK YOU !