1. MANAGING: A COMPETENCY BASED APPROACH
Don Hellriegel
Susan E. Jackson
John W. Slocum, Jr.
MANAGING: A COMPETENCY BASED APPROACH
11th Edition
Chapter 4—Assessing the Environment
Prepared by
Argie Butler
Texas A&M University

2. Learning Goals
1. Explain how economic, demographic, and cultural factors affect organizations
2. State the five competitive forces in an industry
3. Describe the political and legal strategies managers use to cope with changes in the environment
4. Explain how technology changes the structure of industries
Chapter 4: PowerPoint 4.1

3. The Environment: General
General Environment—sometimes called the macroenvironment, includes the external factors that usually affect all or
most organizations
Chapter 4: PowerPoint 4.2

4. How the Economy Changes Country Cultural Values
Macroenvironment
Technology
Demographics
Politics
Competitors
Organization
Country Cultural Values
Economy
Chapter 4: PowerPoint 4.3 (Adapted from Figure 4.1)

5. The Economy
Economics is the discipline that focuses on understanding how people or nations produce, distribute, and consume various goods and services
Chapter 4: PowerPoint 4.4

6. The Economy (cont’d) Old New The New Age of Competition
Low-cost manufacturing
Value-added services
Self-reliance
Outsourcing
Made in U.S.A.
Borderless competition
Local knowledge
Customer convenience
Physical labor
Human capital, software,
knowledge management
Smoke-stack industries
Environmental stewardship
Source: Adapted from Friedman, T.L. The World is Flat. New York: Farrar, Straus & Giroux, 2005,
Chapter 4: PowerPoint 4.5 (Adapted from Table 4.1)

7. Snapshot
“Our assets leave on the elevator every night. Organizations do not own human capital; they can only rent them. In today’s world, human capital will have greater power than other resources because it is the people who create knowledge.”
Andy Grove, Founder and CEO
Intel Corporation
Chapter 4: PowerPoint 4.6

8. Impact of Changing Demographics on Organizations
Increasing diversity
Women participation rate increasing
Hispanic men rate increasing
People of color rate increasing
Managerial challenges
Multicultural awareness programs
Language offerings
Career challenges
Lifestyle issues
Illegal immigration
Chapter 4: PowerPoint 4.7

9. Why is Culture Important to Managers?
Culture: the dominant pattern of living, thinking, and believing that is developed and transmitted by people, consciously or unconsciously, to subsequent generations
Value: a basic belief about a condition that has considerable importance and meaning to individuals and is relatively stable over time
Value system: comprises multiple beliefs that are compatible and supportive of one another
Chapter 4: PowerPoint 4.8

10. Why is Culture Important to Managers? Views other people and groups
(cont’d)
Values can effect how a manager
Perceives situations and problems
Goes about solving problems
Views other people and groups
Determines what is and is not ethical behavior
Leads
and controls
employees
Chapter 4: PowerPoint 4.9

11. Why is Culture Important to Management: Overview of Cultural Factors
Power
Distance
Long-Term Orientation
Uncertainty Avoidance
Gender Role Orientation
Culture
Individualism
Chapter 4: PowerPoint 4.10 (Adapted from Figure 4.2)

12. Why is Culture Important to Management:
Hofstede’s Framework
Power Distance—the degree to which less powerful members of society accept that influence is unequally divided
Uncertainty Avoidance—the extent to which members of a culture feel threatened by risky or unknown situations
Individualism—a combination of the degree to which society expects to take care of themselves and their immediate family and the degree to which people believe they are masters of their own destinies
Chapter 4: PowerPoint 4.11

13. Why is Culture Important to Management: Hofstede’s Framework (cont’d)
The opposite of individualism is collectivism—a tight social framework in which group (family, clan, organization, and nation) members focus on the common welfare and feel strongly toward one another
Gender Role Orientation—refers to the extent to which a society reinforces traditional norms of masculinity versus femininity
Long-Term Orientation—reflects the extent to which a culture stresses that its members accept delayed gratification of material, social, and emotional needs
Chapter 4: PowerPoint 4.12

14. Why is Culture Important to Management? Cultural Values Rankings
Chapter 4: PowerPoint 4.13

15. Competitive Forces in an Industry Environment
Substitute goods and services
New Entrants
Suppliers
Customers
Competitors
Rivalry among existing firms in industry
Chapter 4: PowerPoint 4.14 (Adapted from Figure 4.4)

16. Competitors
“For virtually all organizations, the critical environment constraint is their actions in relation to competitors. Therefore, any change in the environment that affects any competitor will have consequences that require some degree of adaptation. This requires continual change and adaptation by all competitors merely to maintain relative position.”
Bruce D. Henderson, founder and chairman of the Boston Consulting Group
Chapter 4: PowerPoint 4.15

17. Key Influences on New Entrants
High versus low barriers to entry
Economies of scale: achieved when increased volume lowers the unit cost of a good or service produced by a firm
Product differentiation: the uniqueness in quality, price, design, brand image, or customer service that gives one firm’s product an edge over another firm’s
Capital requirements: the dollars needed to finance equipment, purchase supplies, purchase or lease land, hire staff, and the like
Government regulation: barrier to entry if it bars or severely restricts potential new entrants to an industry
Chapter 4: PowerPoint 4.16

18. Substitute Goods and Services
In a general sense, all competitors produce substitute goods or services, or goods or services that can easily replace another’s goods or services
Movie rental versus movie theatres
Books versus TV versus newspapers
Purchase versus rental
Cell phone versus hard lines
Chapter 4: PowerPoint 4.17

19. Customers Customer bargaining power may be relatively great when:
Customer purchases a large volume relative to the supplier’s total sales
Product or service represents a significant expenditure by the customer
Large customers pose a threat of backward integration
Customers have readily available alternatives for the same services or products
Chapter 4: PowerPoint 4.18

20. Suppliers Bargaining power of suppliers often controls:
1. how much they can raise prices above their costs or
2. reduce the quality of goods and services they provide before losing customers
Chapter 4: PowerPoint 4.19

21. Political-Legal Forces: Managerial Political-Legal Forces
Political Strategies
Political Strategies
Political-Legal Forces
Political action committees (PACs)
Laws
Government
Labor unions
Others
Negotiation
Lobbying
Alliance
Representation
Socialization
Chapter 4: PowerPoint 4.20 (Adapted from Figure 4.5)

22. Technology Forces: Technology Impacts on Organizations
Workplace
Strategy
Manufacturing
Distribution
Chapter 4: PowerPoint 4.21 (Adapted from Figure 4.6)

23. Technology Impacts on Organizations
Snapshot
“With 135 million users selling goods in more than 45,000 categories in 27 international markets, eBay has left all competitors in the dust. Technology has really changed people’s lives for the better.”
Meg Whitman, CEO, eBay
Chapter 4: PowerPoint 4.22

24. Technology's Impact in the Workplace
Workers need greater problem- solving skills
Outsourcing routine tasks
Virtual organizations
Chapter 4: PowerPoint 4.23

25. Technology's Impact on Strategy
Faster new product introductions to market
Entrance of “electronic” competitors
Formation of “electronic shopping malls”
Wider choice of suppliers for company
More substitute goods and services available to company
Product differentiation based on technological sophistication
Chapter 4: PowerPoint 4.24

26. Technology's Impact on Manufacturing
Mass Customization
Reduction in Manufacturing time
Outsourcing of routine jobs
Chapter 4: PowerPoint 4.25

27. Technology's Impact on Distribution
Internet access for shopping
Telecommunication devices
Information superhighway for global competition
Chapter 4: PowerPoint 4.26