PowerPoint Presentation by Charlie Cook The University of West Alabama © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

3–2 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.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–3 3.1 The Organization and Its Environments

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–4 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

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–5 3.2 McDonald’s General Environment

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–6 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)

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–7 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

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–8 The Internal Environment Conditions and stakeholder forces within an organizationConditions and stakeholder forces within an organization  Owners.  Board of directors  Employees  Physical work environment

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–9 How Environments Affect Organizations Change and ComplexityChange and Complexity  Environmental 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.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–10 Porter’s Five Competitive Forces Power of customers Power of suppliers Threat of substitute products Competitive rivalry Threat of new entrants

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–11 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.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3– How Organizations Adapt to Their Environments

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–13 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.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–14 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.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3–15 The Environment and Organizational Effectiveness Systems resource approach Internal processes approach Goal approach Strategic constituencies approach Approaches to Organizational Effectiveness Combined approach

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3– A Model of Organizational Effectiveness

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.3– Examples of Admired and High-Performing Firms Fortune’s Most Admired Companies (2009) Business Week’s Best-Performing Companies (2009) 1. 1.Apple 2. 2.Berkshire Hathaway 3. 3.Google 4. 4.Johnson & Johnson 5. 5.Procter & Gamble 6. 6.FedEx (tie) 7. 7.Southwest Airlines (tie) 8. 8.General Electric 9. 9.Microsoft Wal-Mart Stores 1. 1.Gilead Sciences 2. 2.CF Industries Holdings 3. 3.Diamond Offshore 4. 4.Windstream 5. 5.Colgate-Palmolive 6. 6.C.H. Robinson Worldwide 7. 7.Exelon 8. 8.Microsoft 9. 9.Best Buy MasterCard