MANAGEMENT AND SOCIETY CHAPTER-Three(3) MANAGEMENT AND SOCIETY

Physical Environment Organizations are the products of physical environment in the main. The physical environment of business consists of two component- internal environment and external environment.

The Organization and Its Environments Owners Employees Physical environment Board of directors Culture Competitors International dimension Political- legal Technological Sociocultural Economic Regulators Customers Strategic partners Suppliers Internal environment Task environment External environment General environment

The Organization’s Environments Internal environment: The internal environment consists mainly of the organization’s owner, board of directors, employee and culture. Internal environment are the conditions and forces within an organization. The controllable environment. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 4

The Internal Environment Owner: someone who has legal property rights to a business. Board of directors: governing body elected by a corporation’s stockholders and charged with overseeing the general management of the firm. Employees: those employed by the organization. Physical work environment: the firm’s facilities. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 5

External environment External environment: everything outside an organization’s boundaries that might affect it. The uncontrollable environment. General environment is a set of broad dimensions and forces in an organization’s surroundings that determine its overall context Task environment is composed of specific groups and organizations that affect the firm.

The General Environment Economic dimensions: The economic dimension of the general environment depends on the economic system of the country in which the organization functions. The important economic factors for business are inflation, interest rates and unemployment-all of which affect demand for different products. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 7

Technical dimensions: It refers to the methods available for converting resources into products or services. Socio-cultural dimensions: The socio-cultural dimension of the general environment is made up of the customs, mores, values, and demographics of the society in which the organization functions.

The General Environment Political-Legal dimension: The political-legal dimension of the general environment refers to the government regulation of business and the general relationship between business and government. International dimension: Virtually every organization is affected by the international dimension. It refers to the extent to which an organization is involved in or affected by business in other countries. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 9

Figure: McDonald’s General Environment Copyright © Houghton Mifflin Company. All rights reserved. 3 - 10

The Task Environment Competitors: an organization that competes with other organizations. Customers: whoever pays money to acquire an organization’s products or services. Suppliers: an organization that provides resources for other organizations. Regulators: a unit that has the potential to control, legislate, or influence an organization’s policies and practices. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 11

Task Environments Interest group: a group organized by its members to attempt to influence organizations. Strategic allies/ partner: an organization working together with one or more organizations in a joint venture or other partnership. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 12

Figure: McDonald’s Task Environment

Organizational Culture The set of values, beliefs, behaviors, customs, and attitudes that helps the members of the organization understand what it stands for, how it does things, and what it considers important. Organizational culture is important for it determines the “feel” of the organization. Its starting point is often the founder. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 14

Managing Organizational Culture The manager must understand the current culture and then decide if it should be maintained or changed. Managers must walk a fine line between maintaining a culture that still works effectively versus changing a culture that has become dysfunctional. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 15

Organizational Environment Relationships Uncertainty: a driving force that influences many organizational decisions. Competitive forces: Threat of new competitive entrants. Competitive rivalry. Threat of substitute products. The power of buyers. The power of suppliers. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 16

How Organizations Adapt to Their Environments? Each organization must asses its own unique situation then adapt according to the wisdom of senior management, for example: Information systems. Strategic responses. Mergers ,takeovers, acquisitions, and alliances. Organizational design and flexibility. Direct influence on the environment. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 17

How Organizations Respond to Their Environments? Information management General environment Task environment Mergers, takeovers acquisitions, alliances The Organization Social responsibility Direct influence Strategic responses Organization design and flexibility Copyright © Houghton Mifflin Company. All rights reserved. 3 - 18

Managing Social Responsibility: Formal Organizational Dimensions Legal Compliance Extent to which the organization conforms to local, state, federal, and international laws. Ethical Compliance Extent to which members of the organization follow basic ethical/legal standards of behavior. Philanthropic Giving Awarding of funds or gifts to charities or other social programs.

Managing Social Responsibility: Informal Organizational Dimensions Organizational Leadership and Culture Leadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt. Whistle Blowing The organizational response to the disclosure by an employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.

How environment affects organizations? a) Environmental change and complexity b) Competitive forces The threat of new entrants Competitive rivelry The threat of substitute products The power of suppliers c) Environmental turbulence

Environmental Turbulence Terrorist attacks. Workplace violence. Computer viruses. Such crises affect organizations in different ways. Copyright © Houghton Mifflin Company. All rights reserved. 3 - 22

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