©2008 by Nelson, a division of Thomson Canada Limited 1 Management Second Canadian Edition Chuck Williams Alex Z. Kondra Conor Vibert Slides Prepared by: Kerry Rempel, Okanagan College

©2007 by Nelson, a division of Thomson Canada Limited 2 Chapter 2 Organizational Environments and Cultures

©2008 by Nelson, a division of Thomson Canada Limited 3 What Would You Do? Tim Hortons is an icon of Canadian fast food Public focus on the problem of obesity, healthy eating, and carb-reduced diets Increase in competition from the south with Krispy Kreme entering the market What Would You Do?

©2008 by Nelson, a division of Thomson Canada Limited 4 Learning Objectives: External Environments After reading the next four sections, you should be able to: 1.discuss how changing environments affect organizations 2.describe the four components of the general environment 3.explain the five components of the specific environment 4.describe the process that companies use to make sense of their changing environments

©2008 by Nelson, a division of Thomson Canada Limited 5 Changing Environments Environmental complexity and munificence Environmental change Uncertainty

©2008 by Nelson, a division of Thomson Canada Limited 6 Environmental Change The rate at which a company’s general and specific environments change stable environments dynamic environments Punctuated equilibrium theory Companies cycle through stable and dynamic environments

©2008 by Nelson, a division of Thomson Canada Limited 7 Environmental Complexity and Munificence Environmental complexity The number of external factors in the environment that affect organizations Simple environments have few environmental factors Complex environments have many environmental factors

©2008 by Nelson, a division of Thomson Canada Limited 8 Environmental Munificence The degree to which an organization’s environment has an abundance or scarcity of critical organizational resources

©2008 by Nelson, a division of Thomson Canada Limited 9 Environmental Change, Complexity, and Munificence Exhibit 2.1

©2008 by Nelson, a division of Thomson Canada Limited 10 Uncertainty How well managers can understand or predict the external changes and trends affecting their businesses

©2008 by Nelson, a division of Thomson Canada Limited 11 General Environment Economy Technological Component Sociocultural Component Political/Legal Component

©2008 by Nelson, a division of Thomson Canada Limited 12 General and Specific Environments Exhibit 2.2

©2008 by Nelson, a division of Thomson Canada Limited 13 Economy Growing versus shrinking economies Future economic activity is difficult to predict Business confidence indices managers’ confidence in the growth of the economy

©2008 by Nelson, a division of Thomson Canada Limited 14 Technological Component Technology is the knowledge, tools, and techniques used to transform inputs (raw materials, information, etc.) into outputs (products and services) Technological changes can benefit or threaten businesses

©2008 by Nelson, a division of Thomson Canada Limited 15 Sociocultural Component Refers to the demographic characteristics and general behaviour, attitudes and beliefs of people in a particular society Two important components Demographic changes Changes in behaviour, attitudes, and beliefs

©2008 by Nelson, a division of Thomson Canada Limited 16 Political/Legal Component Includes the legislation, regulation, and court decisions that govern and regulate business behaviour Managers must be aware of relevant laws and regulations Education is a key component

©2008 by Nelson, a division of Thomson Canada Limited 17 Specific Environment Customer Component Competitor Component Supplier Component Industry Regulation Component Advocacy Groups

©2008 by Nelson, a division of Thomson Canada Limited 18 Customer Component Companies cannot exist without customers Managers must monitor customer wants and needs reactive responding after the fact proactive anticipating problems

©2008 by Nelson, a division of Thomson Canada Limited 19 Competitor Component Companies in the same industry that sell similar products or services to customers Competitive analysis deciding who your competitors are anticipating competitors’ moves determining competitors’ strengths and weaknesses

©2008 by Nelson, a division of Thomson Canada Limited 20 Supplier Component Companies that provide material, human, financial, and informational resources to other companies Supplier & buyer dependence Opportunistic vs. relationship behaviour

©2008 by Nelson, a division of Thomson Canada Limited 21 Industry Regulation Component Consists of regulations and rules that govern the business practices and procedures of specific industries, businesses, and professions

©2008 by Nelson, a division of Thomson Canada Limited 22 Advocacy Groups Groups of concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions. Influence techniques: public communications media advocacy product boycott

©2008 by Nelson, a division of Thomson Canada Limited 23 Making Sense of Changing Environments Environmental scanning Interpreting environmental factors Acting on threats and opportunities

©2008 by Nelson, a division of Thomson Canada Limited 24 Environmental Scanning Searching the environment for important events or issues that might affect an organization. Scanning: Stay up to date on important factors in their industry reduces uncertainty alters organizational strategies contributes to organizational performance

©2008 by Nelson, a division of Thomson Canada Limited 25 Interpreting Environmental Factors Managers determine what environmental events and issues mean to the organization Opportunities versus threats

©2008 by Nelson, a division of Thomson Canada Limited 26 Acting on Threats and Opportunities Managers have to decide how to respond to these environmental factors Cognitive maps simplified models of external environments depicts how managers believe environmental factors relate to possible organizational actions

©2008 by Nelson, a division of Thomson Canada Limited 27 Cognitive Maps Exhibit 2.4

©2008 by Nelson, a division of Thomson Canada Limited 28 Learning Objectives: Internal Environments After reading the next section, you should be able to: 5.explain how organizational cultures are created and how they can help companies be successful

©2008 by Nelson, a division of Thomson Canada Limited 29 Organizational Cultures: Creation, Success, and Change Creation and maintenance of organizational cultures Successful organizational cultures Changing organizational cultures

©2008 by Nelson, a division of Thomson Canada Limited 30 Creation and Maintenance of Organizational Cultures Visible artifacts Company founders help create culture Cultures are maintained through: stories organizational heroes rituals, ceremonies, and symbols

©2008 by Nelson, a division of Thomson Canada Limited 31 Successful Organizational Cultures Exhibit 2.5

©2008 by Nelson, a division of Thomson Canada Limited 32 Changing Organizational Cultures Behavioural addition is the process of having managers and employees perform a new behaviour Behavioural substitution is having managers and employees perform a new behaviour in place of another behaviour Change visible artifacts Such as the office design and layout, company dress codes, etc.

©2008 by Nelson, a division of Thomson Canada Limited 33 What Really Happened? Tim Hortons has gradually made changes to its menu and advertising. Krispy Kreme was unable to successfully penetrate the Canadian market and has not evolved into a significant threat. Tim Hortons has begun its expansion into the US market.