1. The Organizational Environment

2. Overview
Organizations do not exist in a vacuum. They are constantly being affected by external forces which determine an organization’s effectiveness and performance. Therefore, it is imperative for the management of any organization to examine components of their firm’s external and internal environments to understand the dynamic and far-reaching changes that are occurring. This presentation focuses on the environmental factors that companies need to analyze for developing strategic options.

3. The External Environment
(Macro environment)

4. General Environment Task Environment
Political / legal
Economic
Socio-cultural
Technological
General Environment
Task Environment
Customers
Labour
Competition
Suppliers
Internal Environment
Employees
Management
Culture

5. Organizational environment
We can conceptualize the organization as having two layers:
The general environment
The task environment

6. The general environment
The general environment or macro-environment is all those forces affecting the organization indirectly. These external forces are:
Political / legal
Economic
Technological
Socio-cultural

7. Political / legal environment
The general environment is inclusive of government regulations, laws, policies and activities designed to influence organizational performance in an indirect way.

8. Technological forces
Technological environment includes changes in technology that affect the way organizations operate and service they provide.

9. Economic dimensions:
These forces are most likely to affect an organization’s production of goods and services and results in the general state of both domestic and world economy. The components are:
Interest rates and inflation
Consumer price index
Monetary and fiscal policy
taxes
Unemployment rates
Wage rates
GDP

10. Socio cultural
The importance socio cultural factors that companies should analyze are:
Age
Population density
Educational levels
Geographical distribution
Culture
Lifestyles

11. Task environment
The task environment is inclusive of those sectors that have a direct working relationship with the organization. Critical variables in the tasks environment are:
Customers
Suppliers
Labour
competition

12. Labour Labour markets include the people available for hire.
Every organization needs well-trained and qualified workers.
Research shows the workers with high level of competencies, knowledge, and training increases the overall performance of the organization.

13. Customers Customers are the final purchasers of a good or service.
A study of customers will help managers determine what are the customers’ needs and wants to be satisfied.
Analysis of customer profiles allows the organization to develop it organizational strategy and structure in order to deliver a particular good or service that best suits the needs of the customer.

14. Suppliers
Suppliers are peoples and organizations who provide raw materials the organization uses to produce its output.
A supplier’s pricing strategy does affect the organization’s level of revenue earned.

15. Competition
Competitors are other organizations in the same industry or type of business providing goods and services to the same set of customers.

16. Internal environment
The internal environment consists of employees, management and the shared organizational culture.
Analysis of the internal environment allows top management to assess the strengths and weakness of the organization.
This assessment has implications for human resource management policy, procedure, employee training and development.

19. Importance of the organizational environment
The unpredictability of the external environment can render an organization ineffective and consequent demise. Careful environmental scanning by management is significant and has implications for planning. It is at this point that managers are able to set goals and design strategy and justify their decisions for taking what ever they see necessary. Not one can be certain; but it is better to be safe than sorry.

20. What forces in an organizational environment do you see influencing the hotel industry in your country?

21. Adapting to the Environment
Boundary Spanning Roles. Roles assumed by people and/or departments that link and coordinate the organization with key elements in the external world.
Forecasting & Planning.

22. Adapting to the Environment Flexible Structure
Organic Structure
Mechanistic Structure
Free Flowing; has fewer rules and regulations.
Encourages team work
Decentralizes decision making to employees dong the work.
Rigidly defined tasks; many rules and regulations.
Little team work.
Centralized decision making.

23. Adapting to the Environment
Merger & Joint Venture
Merger. A combination of two or more organizations into one.
Joint Venture. A strategic alliance or program by two or more organizations.

24. Influencing the Environment
Advertising and Public Relations
Political Activity
Trade Association

25. Managing in a Global Environment

27. A Borderless World Domestic Stage International Stage
Multinational Stage
The Global Stage

28. The International Business Environment

29. Economic Environment International Financial Crisis Chinese century
Rise of BRICS
Consumption Patterns
Exchange Rates
Global Warming Loses

30. Legal-Political Political Risks Clash of the Civilizations GATT – WTO
New Economic Blocks EU
BRICS
Shanghai Five
ASEAN

31. The Socio-cultural Environment
Hofstede’s Research
Power Distance
Uncertainty avoidance
Individualism and Collectivism
Masculinity/femininity
Future orientation

32. Getting Started Internationally
Outsourcing
Exporting
Licensing
Franchising
Direct Investment

33. Multinational Corporation
Advantages
Can sell more globally
Can avoid transport costs
Can take advantage of different wage levels
Can achieve great economies of scale
Have less chance of going bankrupt
Can carry out a lot of R & D

34. Multinational Corporation
Disadvantages
MNCs move their factories to wherever it is profitable
MNCs may switch their profits between countries
They may force competing firms out of business
Some MNCs may exploit workers
Some MNCs may interfere in the government of a country