1. Chapter 2 The Environment and Culture of Organizations
General
Task
Internal
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2. The Organization’s Environment
3 Environments of an organization:
Internal, Task, General
Environmental Factors play a major role in determining an organization’s success or failure
Managers should strive to maintain the proper alignment between their organization and its environments.
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3. The Organization and its Environments

4. The External Environment
The General Environment
The set of broad dimensions and forces in an organization’s surroundings that create its overall context.
Economic dimension
General economic growth, inflation, interest rates, unemployment
Technological dimension
Methods available for converting resources into products
Sociocultural dimension
Customs, values, demographic characteristics of society
Political-legal dimension
Government regulation of business
International dimension
Extent an organization is involved/affected by business in other countries
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5. McDonald’s General Environment
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6. The External Environment
The Task Environment
Competitors
Organizations that compete with it for resources
Customers
Whoever pays money to acquire an organization’s products/services
Suppliers
Organizations that provide resources for other organizations
Strategic Partners
Companies that work together in joint ventures/partnerships
Regulators
Have potential to control, legislate, or otherwise influence and organization’s policies/practices
Regulatory agencies – EPA, SEC, FDA, EEOC
Interest Groups – PETA, MADD, NRA
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7. 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
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8. The Internal Environment
Conditions and stakeholder forces within an organization
Owners
Board of directors (elected by stockholders, act in best interests of stockholders)
Employees
Physical work environment
Culture
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9. How Environments Affect Organizations
Change and Complexity
Environment can be described as being:
Relatively stable or relatively dynamic and
Relatively simple or relatively complex
Uncertainty
Unpredictability created by environmental change and complexity
Stable/Simple – Least Uncertainty
Dynamic/Complex – Most Uncertainty
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10. Environmental Change, Complexity, and Uncertainty
Source: From J.D. Thompson, Organizations in Action, Copyright © 1967 The McGraw-Hill Companies, Inc. Reprinted with permission.
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11. Porter’s Five Competitive Forces
Threat of new entrants
Extent to and ease with which competitors can enter market.
Competitive rivalry
Competitive rivalry between firms in an industry.
Threat of substitute products
Extent to which alternative products/services may replace the need for existing products/services.
Power of buyers
Extent to which buyers influence market rivals.
Power of suppliers
Extent to which suppliers influence market rivals.
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12. How Organizations Adapt to Their Environments
Information Management in Organizations
Boundary spanners
Environmental scanning
Information systems
Strategic Response
Maintaining the status quo, altering the current strategy, or adopting a new strategy.
Mergers, Acquisitions, Alliances
Firms combine (merge), purchase (acquisition), or form new venture partnerships or alliances with another firm.
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13. How Organizations Respond to Their Environments (cont’d)
Organizational Design and Flexibility
Adapting to environmental conditions by incorporating flexibility in its structural design.
Mechanistic firms operate best in stable environments.
Organic firms are best suited for dynamic environments.
Direct 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.
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