PowerPoint Presentation by Charlie Cook The University of West Alabama © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Learning Objectives 1.Discuss the nature of the organizational environment and identify the environments of interest to most organizations. 2.Describe the components of the general and task environments and discuss their impact on organizations. 3.Identify the components of the internal environment and discuss their impact on organizations. 4.Discuss the importance and determinants of an organization’s culture and how the culture can be managed. 5.Identify and describe how the environment affects organizations and how organizations adapt to their environment. 6.Describe the basic models of organizational effectiveness and identify contemporary examples of highly effective firms. 3–2 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

The Organization’s Environments External EnvironmentExternal Environment  General environment  Everything outside an organization’s boundaries—economic, legal, political, socio-cultural, international, and technical forces.  Task environment  Specific groups and organizations that affect the firm. Internal EnvironmentInternal Environment  Conditions and forces present and at work within an organization. © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3–3

3–4 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3.1 The Organization and Its Environments

The External Environment The General EnvironmentThe General Environment  The set of broad dimensions and forces in an organization’s surroundings that create its overall context.  Economic dimension  Technological dimension  Sociocultural dimension  Political-legal dimension  International dimension © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3–5

3–6 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3.2 McDonald’s General Environment

The External Environment (cont’d) Dimensions of the Task EnvironmentDimensions of the Task Environment  Specific groups affecting the organization  Competitors  Customers  Suppliers  Regulators (agencies and interest groups)  Strategic partners (allies) © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3–7

3–8 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3.3 McDonald’s Task Environment McDonald’s Competitors Burger King Wendy’s Subway Dairy Queen Customers Individual consumers Institutional customers Suppliers Coca-Cola Wholesale food processors Packaging manufacturers Strategic Partners Wal-Mart Disney Foreign partners Regulators Food and Drug Administration Securities and Exchange Commission Environmental Protection Agency Internal environment Task environment

The Internal Environment Conditions and stakeholder forces within an organizationConditions and stakeholder forces within an organization  Owners.  Board of directors  Employees  Physical work environment  Culture 3–9 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

The Organization’s Culture Organization CultureOrganization Culture  Is the set of internal values, beliefs, behaviors, customs, and attitudes that determines the “feel” of the organization.  Is not necessarily the same throughout the entire organization.  Must be managed so that its strength benefits the firm’s overall effectiveness and long-term success.  Can be dysfunctional if it becomes strongly resistant to change. 3–10 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 3–11 Determinants of Organization Culture Shared experiences Organization successes Organization’s founder Organization Culture Symbols, stories, heroes, slogans, ceremonies

How Environments Affect Organizations Environmental Change and ComplexityEnvironmental Change and Complexity  Change occurs in two ways:  Degree to which change in environment is occurring  Degree of homogeneity or complexity of the environment  Uncertainty  A driving force that influences organizational decisions. Environmental TurbulenceEnvironmental Turbulence  Unexpected changes and upheavals in the environment of an organization. © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3–12

3–13 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3.4 Environmental Change, Complexity, and Uncertainty

Porter’s Five Competitive Forces Power of customers Power of suppliers Threat of substitute products Competitive rivalry Threat of new entrants © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3–14

Porter’s Five Competitive Forces Threat of new entrantsThreat of new entrants  Extent to and ease with which competitors can enter market. Competitive rivalryCompetitive rivalry  Competitive rivalry between firms in an industry. Threat of substitute productsThreat of substitute products  Extent to which alternative products/services may replace the need for existing products/services. Power of buyersPower of buyers  Extent to which buyers influence market rivals. Power of suppliersPower of suppliers  Extent to which suppliers influence market rivals. © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3–15

3–16 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3.5 How Organizations Adapt to Their Environments

How Organizations Respond to Their Environments Information Management in OrganizationsInformation Management in Organizations  Boundary spanners  Environmental scanning  Information systems Strategic ResponseStrategic Response  Maintaining the status quo, altering the current strategy, or adopting a new strategy. Mergers, Acquisitions, AlliancesMergers, Acquisitions, Alliances  Firms combine (merge), purchase (acquisition), or form new venture partnerships or alliances. 3–17 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

How Organizations Respond to Their Environments (cont’d) Organizational Design and FlexibilityOrganizational Design and Flexibility  Adapting by building flexibility into structural design.  Mechanistic firms operate best in stable environments.  Organic firms are best suited for dynamic environments. Direct Influence of the EnvironmentDirect Influence of the Environment  Attempting to change the nature of the competitive conditions in its environment to suit its needs.  Pursuing new or changed relationships with suppliers, customers, and regulators. © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3–18

The Environment and Organizational Effectiveness 3–19 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Systems resource approach Internal processes approach Goal approach Strategic constituencies approach Models of Organizational Effectiveness Combined approach

3–20 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3.6 A Model of Organizational Effectiveness

3–21 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3.1 Examples of Admired and High-Performing Firms Fortune’s Most Admired Companies (2011) Business Week’s Best-Performing Companies (2011) 1.Apple 2.Google 3.Berkshire Hathaway 4.Southwest Airlines 5.Procter & Gamble 6.Coca-Cola 7.Amazon 8.FedEx 9.Microsoft 10.McDonald’s 1.Priceline.com 2.Intuitive Surgical 3.Southwestern Energy 4.Apple 5.salesforce.com 6.Express Scripts 7.Flowserve 8.FMC Technologies 9.Cliff’s Natural Resources 10.Amazon.com

KEY TERMS internal environmentinternal environment external environmentexternal environment task environmenttask environment economic dimensioneconomic dimension technological dimensiontechnological dimension sociocultural dimensionsociocultural dimension political-legal dimensionpolitical-legal dimension international dimensioninternational dimension competitorcompetitor customercustomer suppliersupplier interest groupinterest group strategic partners (strategic allies)strategic partners (strategic allies) ownerowner board of directorsboard of directors organization cultureorganization culture uncertaintyuncertainty five competitive forcesfive competitive forces 3–22 © 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.