Presentation on theme: "The environments of managing Cultures and their components"— Presentation transcript:
1 Part 2 THE ENVIRONMENT OF MANAGEMENT Chapter 3 ORGANISATION CULTURES AND CONTEXTS
2 The environments of managing Cultures and their components Types of cultureCompetitive environment – Porter’s five forcesGeneral environment – PESTEL analysisStakeholders and corporate governanceIntegrating themesCases and examplesNokia, Bosch, Unilever, Iris
3 Environmental influences Figure 3.1 Environmental influences on the organisation
4 Why study the environment of managing? Organisations depend on their environment for inputs and to take outputs.Managers act on assumptions about:culturecompetitive environmentgeneral environmentstakeholders.These assumptions affect what they do.Are they valid, and how would alternative views lead to different actions?
5 Organisational cultures Belief that culture affects performance.Schein (2010): culture develops as people work together, and develop shared beliefs about what works, which is transmitted to successive generations (Figure 3.2).Beliefs relate to:mission, goals, ways of achieving goals and how to measure performance.
6 How culture developsFigure 3.2 The stages of cultural formation
7 Components of culture Artefacts Espoused beliefs and values Surface level – visible features: dress, layout.Espoused beliefs and valuesBeliefs members hold about their work and the situations with which they deal.Basic underlying assumptionsDeeply held ideas about the way people work together, and the sources of their success.
8 Types of culture (Quinn et al. 2003) Figure 3.3 Types of organisational culture Source: Based on Quinn et al. (2003).
9 Multiple culturesMartin (2002) challenged the view that culture takes a unified form. Suggested three perspectives:Integration: members have consistent beliefs and valuesDifferentiation: conflicting beliefs, by function or levelFragmentation: fluid, transient views about events, not related to functions or levelsShown empirically by Ogbonna and Harris (1998, 2002), (see Table 3.1).
10 External forces Competitive environment General environment StakeholdersManagersinterpret these forces (not objective realities)respond by changing internal environmentForces in Figure 3.4 affect industry profitability.
11 Fewer new entrants = more profit Threat of new entrantsFewer new entrants = more profitEntry barriers include:high costs of equipment and facilities;lack of distribution facilities;customers loyal to established brands;small companies lack economies of scale;subsidies/regulations favour existing firms.Examples of products with entry barriers include patent protection for drugs, presentation software (Powerpoint).rpoint0
12 Intensity of rivalry amongst competitors Greater rivalry = less profitRivalry increases when:many firms, but none dominant;market growing slowly, so firms fight for share;high fixed costs encourage overproduction;loyalties (family businesses or political support) prolong overcapacity.Examples include airline and newspaper industries.Mobile ries
13 Power of buyers (customers) Greater power of buyers = less profit to sellerPower of buyer increases if:buyer takes high percentage of supplier’s sales;many alternative products or suppliers available;product is a high percentage of buyer’s costs, creating incentive to seek alternatives;cost of switching to other suppliers is low.Examples include products sold online, and major supermarkets like Wamart, Tesco.
14 Bargaining power of suppliers High power of supplier = less profit to buyerPower of supplier is high if:buyer takes small percentage of sales;few alternative products or suppliers (distinctive product keeps buyers loyal);product a low percentage of buyer’s costs, little incentive to seek alternatives;cost of switching suppliers high.Examples include luxury brands, business software.
15 Easy to substitute = less profit to supplier Threat of substitutesEasy to substitute = less profit to supplierSubstitution becomes easier if:buyers willing to change buying habits;technological developments enable new products and services;transport costs fall;new suppliers enter the market.For example, online media, new materials.
16 Managing the five forces Subjective interpretation as well as objective realitiesForces contradict/balance each otherManagers can consciously try to shape them as part of their strategyCompetitive forces affected by those in the general environment.
17 General environmentFigure 3.5 Identifying environmental influences – PESTEL analysis
18 Political and economic Governments shape what businesses can doTaxation, pollution, regulationBusinesses lobby to influence government.EconomicWealth and stage of developmentWage levels, interest rates, consumer confidenceManagers time investment to suit economic growth prospects.
19 Social and technological Socio-culturalDemographic trends, family structures consumer tastes, ‘Grown Up Digital’.TechnologicalPhysical infrastructure, transportation, communications technologiesFor example, convergence of data, video and voice technologies opening vast markets – Table 3.2.Able 3.2
20 Environmental and legal Environmental (natural)Natural resources, pollution and the effects of climate change on business (threats and opportunities).LegalThe framework within which companies operate– employment, financial or governance regulations.
21 Using PESTELAs in five forces, subjective interpretation as well as objective realities.Forces in the general environment affect public organisations as much as private.The value is NOT a long list of factors, but agreement on critical ones that stakeholders may use to stimulate internal change.
22 Change and complexityFigure 3.6 Types of environment
23 Stakeholders People or groups with expectations of the organisation Customers, communities, governmentHow to manage their conflicting interestsIllustrated in Figure 3.7Companies seek to influence stakeholders.
24 Corporate governanceInterests of professional managers often diverge from those of owners and/or citizens who use and pay for public services.Governance refers to rules and processes intended to ensure transparency and accountability of those in charge.Substance includes:internal controlsmechanisms to limit power of individualsprocess to manage relationships between groups.
25 Integrating themes Entrepreneurship Seeing external opportunities is a key skill, supported by experience, networks and creativity.SustainabilityClimate change leading managers to seek ways to run organisations more sustainably.InternationalisationInternational organisation can benefit from the many cultural perspectives of employees.GovernanceSome cultures encourage excessive risks, which governance systems can discourage.
26 SummaryThe assumptions managers make about their environment affects what they do.The cultures, five forces, PESTEL and stakeholder models help managers to analyse their contexts.The models enable you to questionThe assumptions that guide actionWhether they accurately reflect the contextPossible alternative viewsThe limitations of any one view.