1. Fundamentals of Core Concepts & Applications Griffin Griffin Third Edition MANAGEMENT PowerPoint Presentation by Charlie Cook Copyright © 2003 Houghton Mifflin Company. All rights reserved. Chapter 2 The Environment of Organizations and Managers

2. Copyright © by Houghton Mifflin Company. All rights reserved. 2–22–2 Chapter Outline The Organization’s Environments –The General Environment –The Task Environment –The Internal Environment The Ethical and Social Environment of Management –Individual Ethics in Organizations –Social Responsibility and Organizations –Managing Social Responsibility

3. Copyright © by Houghton Mifflin Company. All rights reserved. 2–32–3 Chapter Outline (cont’d) The International Environment of Management –Trends in International Business –Managing the Process of Internationalization –Levels of International Business Activity –The Context of International Business The Organization’s Culture –The Importance of Organization Culture –Determinants of Organization Culture –Managing Organization Culture

4. Copyright © by Houghton Mifflin Company. All rights reserved. 2–42–4 Learning Objectives After studying this chapter, you should be able to: –Discuss the nature of the organizational environment and identify the components of the general, task, and internal environments. –Describe the ethical and social environment of management. –Discuss the international environment of management. –Describe the importance and determinants of an organization’s culture.

5. Copyright © by Houghton Mifflin Company. All rights reserved. 2–52–5 The Organization’s Environment External Environment –General environment is everything outside an organization’s boundaries—economic, legal, political, socio-cultural, international, and technical forces. –Task environment is composed of specific groups and organizations that effect the firm. Internal Environment –Conditions and forces within an organization.

6. Copyright © by Houghton Mifflin Company. All rights reserved. 2–62–6 The Organization and Its Environments Owners Employees Physical environment Board of directors Culture Competitors International dimension Political- legal dimension Technological dimension Sociocultural dimension Economic dimension RegulatorsCustomers Strategic partners Suppliers Internal environment Task environment External environment General environment

7. Copyright © by Houghton Mifflin Company. All rights reserved. 2–72–7 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 is the overall health and vitality of the economic system in which the organization operates. –Technological dimension refers to the methods available for converting resources into products or services.

8. Copyright © by Houghton Mifflin Company. All rights reserved. 2–82–8 The External Environment (cont’d) The General Environment (cont’d) –Sociocultural dimension includes the customs, mores, values, and demographic characteristics of the society in which the organization functions. –Political-legal dimension is the extent of government regulation of business and the general relationship between business and government. –International dimension is the extent to which the organization is affected by business in other countries.

9. Copyright © by Houghton Mifflin Company. All rights reserved. 2–92–9 The External Environment (cont’d) The Task Environment –Specific groups affecting the organization Competitors seeking the same resources as the organization. Customers who acquire an organization’s products or resources. Suppliers that provide resources for the organization. Regulators (agencies and interest groups) that control, legislate, or influence the organization’s policies and practices. Strategic partners (allies) who are in a joint venture or partnership with the organization.

10. Copyright © by Houghton Mifflin Company. All rights reserved. 2–10 McDonald’s Task Environment Figure 2.1 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

11. Copyright © by Houghton Mifflin Company. All rights reserved. 2–11 How Organizations and Environments Interact

12. Copyright © by Houghton Mifflin Company. All rights reserved. 2–12 How Business and Government Influence Each Other The Government Business The government influences business through direct and indirect regulation: Environmental protection legislation Consumer protection legislation Employee protection legislation Securities legislation The tax codes Business influences the government through: Personal contacts and networks Lobbying Political action committees (PACs) Favors and other influence tactics

13. Copyright © by Houghton Mifflin Company. All rights reserved. 2–13 Five-Forces Analysis (Porter)

14. Copyright © by Houghton Mifflin Company. All rights reserved. 2–14 The Internal Environment Conditions and stakeholder forces within an organization –Owners with legal property rights to a business. –Board of directors elected by the stockholders to oversee the general management of the firm to best serve the stockholders’ interest. –Employees who work for the firm and have a vested interest in its continued operation and existence. –Physical work environment of the organization and the work that people do.

15. Copyright © by Houghton Mifflin Company. All rights reserved. 2–15 Individual Ethics In Organizations Ethics –An individual’s personal beliefs regarding what is right and wrong or good and bad. Ethical Behavior –This behavior is in the eye of the beholder. However, it also refers to behavior that conforms to generally accepted social norms. Examples of Unethical Behavior –“Borrowing” office supplies for personal use. –“Surfing the Net” on company time.

16. Copyright © by Houghton Mifflin Company. All rights reserved. 2–16 Determinants of Individual Ethics

17. Copyright © by Houghton Mifflin Company. All rights reserved. 2–17 Managerial Ethics EmployeesOrganization Conflicts of interest Secrecy and confidentiality Honesty Hiring and firing Wages and working conditions Privacy and respect Subject to ethical ambiguities Advertising and promotions Ordering and purchasing Bargaining and negotiation Financial disclosure Shipping and solicitation Other business relationships Economic Agents Customers Competitors Stockholders Suppliers Dealers Unions Three areas of concern for managerial ethics The relationships of the firm to the employee. The employee to the firm. The firm to other economic agents.

18. Copyright © by Houghton Mifflin Company. All rights reserved. 2–18 Ethics in Organizations Managing Ethical Behavior –Begins with top management which establishes the organization’s culture and defines what will and will not be acceptable behavior. –Includes training on how to handle different ethical dilemmas. –Developing a code of ethics. Written statement of the values and ethical standards that guide the firm’s actions.

19. Copyright © by Houghton Mifflin Company. All rights reserved. 2–19 Social Responsibility and Organizations Social Responsibility –The set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions. Areas of Social Responsibility –Stakeholders: customers, employees, and investors. –The natural environment: environmentally sensitive products, recycling, and public safety. –The general social welfare: charitable contributions, and support for social issues such as child labor and human rights.

20. Copyright © by Houghton Mifflin Company. All rights reserved. 2–20 Arguments For and Against Social Responsibility 1.Business creates problems and should therefore help solve them. 2.Corporations are citizens in our society. 3.Business often has the resources necessary to solve problems. 4.Business is a partner in our society, along with the govern- ment and the general population. Social Responsibility 4.The purpose of business in U.S. society is to generate profit for owners. 2.Involvement in social programs gives business too much power. 3.There is potential for conflicts of interest. 1.Business lacks the expertise to manage social programs. Arguments For Social ResponsibilityArguments Against Social Responsibility Figure 2.2

21. Copyright © by Houghton Mifflin Company. All rights reserved. 2–21 Arguments For and Against Social Responsibility

22. Copyright © by Houghton Mifflin Company. All rights reserved. 2–22 Approaches to Social Responsibility Source: Barney, Jay B. and Ricky W. Griffin, The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.

23. Copyright © by Houghton Mifflin Company. All rights reserved. 2–23 Managing Social Responsibility: Formal Organizational Dimensions Legal Compliance –Extent to which the organization conforms to local, state, federal, and international laws. Ethical Compliance –Extent to which members of the organization follow basic ethical/legal standards of behavior. Philanthropic Giving –Awarding of funds or gifts to charities and other social programs.

24. Copyright © by Houghton Mifflin Company. All rights reserved. 2–24 Managing Social Responsibility: Informal Organizational Dimensions Organizational Leadership and Culture –Leadership practices and the culture of the organization can help define the social responsibility stance an organization and its members will adopt. Whistle Blowing –The organizational response to the disclosure by an employee of illegal or unethical conduct on the part of others within the organization is indicative of the organization’s stance on social responsibility.

25. Copyright © by Houghton Mifflin Company. All rights reserved. 2–25 Trends in International Business Economic Recovery –Industrialized nations in Europe and Asia have rebuilt their economic systems that were devastated in WWII. Decreasing Isolation from Foreign Competition –U.S. consumer goods markets are open to overseas competitors. Increasing Globalization of World Markets –Volume of international trade has increased more than 3,000% from 1960 to 2000.

26. Copyright © by Houghton Mifflin Company. All rights reserved. 2–26 Managing The Process of Globalization Exporting –Making a product in the firm’s domestic market and selling it in another country. Importing –Bringing a good, service, or capital into a home country from abroad. Licensing –An arrangement whereby a firm allows a foreign company to manufacture or market the products and uses its brand name, trademark, technology, patent, copyright, or other assets.

27. Copyright © by Houghton Mifflin Company. All rights reserved. 2–27 Managing The Process of Globalization (cont’d) Strategic Alliance and Joint Ventures –Two or more firms jointly cooperate for mutual gain, by sharing business costs and/or sharing ownership of a new enterprise. Direct Investment –Occurs when a firm headquartered in one country builds or purchases operating facilities or subsidiaries in a foreign country. Maquiladoras are light-assembly plants built in northern Mexico close to the U.S. border which are given special tax breaks by the Mexican government.

28. Copyright © by Houghton Mifflin Company. All rights reserved. 2–28 Managing The Process of Globalization (cont’d)

29. Copyright © by Houghton Mifflin Company. All rights reserved. 2–29 Environmental Challenges of International Management

30. Copyright © by Houghton Mifflin Company. All rights reserved. 2–30 Advantages and Disadvantages of Various Approaches to Internationalization Table 2.1

31. Copyright © by Houghton Mifflin Company. All rights reserved. 2–31 Controls on International Trade Key Concepts –Tariffs are collected on goods shipped across national boundaries. –Quotas are limits placed on the number or value of goods that can be traded as exports or imports. –Export restraint agreements are voluntary limits on the volume or value of goods exported to, or imported from, another country.

32. Copyright © by Houghton Mifflin Company. All rights reserved. 2–32 The Structure of the Global Economy Economic Communities –Sets of countries that engage in high levels of trade with each other through the elimination of trade barriers such as quotas and tariffs. European Union (EU) North American Free Trade Agreement (NAFTA) Latin American Integration Association Caribbean Common Market

33. Copyright © by Houghton Mifflin Company. All rights reserved. 2–33 European Union (EU) Member Nations Figure 2.3 Source: Lucas, George H., Robert P. Bush, and Larry R. Gresham, Retailing. Copyright © 1994 by Houghton Mifflin Company. Used with permissions.

34. Copyright © by Houghton Mifflin Company. All rights reserved. 2–34 The Cultural Environment Language –In Japanese the word “hai” can mean either “yes” or “I understand.” –General Motors’ brand name “Nova” pronounced as “no va” in Spanish means “doesn’t go.” The Meaning of Colors –Green is popular in Muslim countries, yet it signifies death in other countries. –Pink is associated with feminine characteristics in the U.S.; yellow is the most feminine color in other countries.

35. Copyright © by Houghton Mifflin Company. All rights reserved. 2–35 The Organization and Culture Organization Culture –The collection of values, beliefs, behaviors, customs, and attitudes that characterize a community of people. The Importance of Organization Culture –Culture determines the overall “feel” of the organization, although it may vary across different segments of the organization. –Culture is a powerful force that can shape the firm’s overall effectiveness and long-term success.

36. Copyright © by Houghton Mifflin Company. All rights reserved. 2–36 The Organization’s Culture Determinants of Organization Culture –Organization’s founder (personal values and beliefs). –Symbols, stories, heroes, slogans, and ceremonies that embody and personify the spirit of the organization. –Corporate success that strengthens the culture. –Shared experiences that bond organizational members together.

37. Copyright © by Houghton Mifflin Company. All rights reserved. 2–37 Organization Culture (cont’d) Managing Organization Culture –Understand the current culture to understand whether to maintain or change it. –Articulate the culture through slogans, ceremonies, and shared experiences. –Reward and promote people whose behaviors are consistent with desired cultural values.

38. Copyright © by Houghton Mifflin Company. All rights reserved. 2–38 Organization Culture Changing Organization Culture –Develop a clear idea of what kind of culture you want to create. –Bring in outsiders to important managerial positions. –Adopt new slogans, stories, ceremonies, and purposely break with tradition.