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Chapter 3
The Environment andCorporate Culture
Presented byGroup 2, EMBA 10
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The Environment and Corporate Culture
Businesses are increasingly becoming dynamic
Must be ready to react and respond to evensubtle environmental shifts
Need to adapt their companies to newcompetition, shifting consumer interests or newtechnologies
Close System (focus on factors within
organization, leading, motivating & controllingemployees)
Open System (monitor & respond to externalenvironment) for more effective managers
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Includes all elements existing outside the
boundary of the organization that have the
potential to affect the organization
Includes competitors, resources, technology
and economic conditions that influence the
organization
External Organizational Environment
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Two Layers of
the External Environment
General environment- outer layer that is widely dispersed and affects
organizations indirectly
- includes social, economic, legal/political, international,
natural and technological factors that influence allorganizations about equally
- These events do not directly change day-to-day operations,but they do affect all organizations eventually
Task environment- closer to the organization and includes the sectors that
conduct day-to-day transactions with the organization anddirectly influence its basic operations and performance
- includes competitors, suppliers, customers and the labor
market
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Internal Environment
Includes the elements within the
organization's boundaries
Composed of
1. current employees
2. Management
3. especially corporate culture
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Organizational
Environment
Management
Employees Culture
Internal
Environment
Suppliers
Co
mpetitors
Customers
LaborM
arket
Technological
General Environment
Task Environment
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International Dimension
- Represents events originating in foreign countries
- Provides new competitors, new customers and
new suppliers
- Shapes social trends, technological trends and
economic trends
- Compared to domestic, complex & ever-changing
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Technological Dimension
Includes scientific and technologicaladvancements in a specific industry as well asin society at large
Created massive changes for organizations inall industries in recent years
Its advancement effects organizations andmanagers
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Socio-Cultural Dimension
Represents demographic characteristics,norms, customs, and values of the population
within which the organization operates
Important characteristics are geographical andpopulation density, age, and education levels.
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Economic Dimension
Represents the general economic health of
the country or region in which the
organization operates.
Consumer purchasing power
Unemployment rate
Interest rates
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Legal-Political Dimension
Includes government regulations at the local,state and federal levels, as well as politicalactivities designed to influence company
behavior
Managers must also recognize a variety of
pressure groups that work within the legal-political framework to influence companies tobehave in socially responsible ways
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Natural Dimension
Includes all elements that occur naturally on
earth, including plants, animals, rocks, and
natural resources such as air, water, an climate.
Concern about the environment has promptedcompanies to take these actions.
Eliminating non-biodegradable plastic bags from the
environment Improving efficiency of plants and factories
Investing in cleaner technology
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Task Environment
Includes those sectors that have a direct workingrelationship with the organization
Customers People and organizations in the environmentthat acquire goods or services from the organization
Competitors Other organizations in the same industry ortype of business that provide goods or services to the sameset of customers
Supplier People and organizations that provide the rawmaterials the organization uses to produce its output
Labor Market the people available for hire by theorganization
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Labor Market Forces Affecting
Organizations
Every organization needs a supply of trained,qualified personnel.
1. Growing need for computer literate knowledge workers
2. The necessity for continuous investment in humanresources through recruitment, education and training tomeet the competitive demands of the borderless world
3. The effects of international trading blocs, automation,outsourcing, and shifting facility locations on labor
dislocations, creating unused labor pools in same areasand labor shortages in others
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Environmental Uncertainty
Uncertainty means that managers do not havesufficient information about environmentalfactors to understand and predict environmentalneeds and changes
When external factors change rapidly, theorganization experiences high uncertainty
When an organization deals with only a fewexternal factors, managers experience lowuncertainty and can devote less attention toexternal issues
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External Environment and Uncertainty
High
Adapt to
Environment
High
Uncertainty
Low
Uncertainty
HighLowLow
Rate of
Change in
Factors in
Environment
Number of factors in organization environment
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Adapting to the Environment
Managers can use several strategies to adapt
to the following changes
boundary-spanning roles
inter-organizational partnerships
mergers or joint ventures.
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Boundary-spanning Role
Roles assumed by people and/or departments
that link and coordinate the organization with
key elements in the external environment
Detect and process information about changes in
the environment
Represent the organizations interest to the
environment
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Inter-organizational Partnership Reduce boundaries and increase collaboration with other
organizationsFrom Adversarial Orientation To Partnership Orientation
Suspicion, competition, arms length Trust, value added to both sides
Price, efficiency, own profits Equity, fair dealing, everyone profit
Information and feedback limited E business links to share
information and conduct digitaltransaction
Lawsuits to resolve conflict Close coordination, virtual teams
and people onsite
Minimal involvement and up front investment Involvement in partners product
design and productionShort-term contract Long-term contract
Contracts limit the relationship Business assistance goes beyond
the contract
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Mergers and Joint Ventures
To reduce environmental uncertainty
Mergers occurs when two or more
organizations combine to become one
A Joint Venture involves a strategic alliance or
program by two or more organizations
Occurs when a project is too complex, expensive,
or uncertain for one firm to handle alone
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The Internal Environment:
Corporate Culture
A pattern of shared values and assumptions about howthings are done within the organization
Includes corporate culture, production technology,organization structure, and physical facilities
Internal culture must fit the needs of the externalenvironment and company strategy
Culture is defined as the set of key values, beliefs,understands, and norms shared by members of anorganization
Helps managers understand the hidden, complexaspects or organizational life
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Levels of Corporate Culture
Visible
1. Artifacts, such as dress, office
layout, symbols, slogans,
ceremonies
2. Expressed values, such as The
Penney Idea, The HP Way
3. Underlying assumptions and deep
beliefs, such as people here care
about one another like a family
Invisible
Culture that can be
seen at the surface
level
Deeper values and shared
understandings held by
organization members
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Visible Manifestations
Symbol
An object, act or event that conveys meaning to others
Story
A narrative based on true events and repeated frequentlyand shared among organizational employees
Heroes
A figure who exemplifies the deeds, character and attributesof a strong corporate culture
Slogan
A phrase or sentence that succinctly expresses a key
corporate value Ceremony
A planned activity at a special event that is conducted forthe benefit of an audience
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Corporate Cultures
Adaptive Culture Unadaptive Culture
Visible Behavior
Expressed Values
Managers pay close attention to
all their constituencies, especially
customers, and initiate change
when needed to serve their
legitimate interests, even if itentails taking some risks.
Managers tend to behave
somewhat insularly, politically, and
bureaucratically. As a result, they
do not change their strategies
quickly to adjust to or takeadvantage of changes in their
business environments.
Managers care deeply about
customers, stockholders, and
employees. They strongly value
people and processes that can
create useful change (e.g.,
leadership initiatives up and down
the management hierarchy).
Managers care mainly about
themselves, their immediate work
group, or some product (or
technology) associated with that
work group. They value the orderly
and risk-reducing management
process much more highly than
leadership initiatives.
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ADAPTIVE CULTURES(how well they encourages adaptation to external environment)
Adaptive Corporate cultures have different
values and behavior from Unadaptive
Corporate cultures
Customers
Adaptive Corporate culturesInternal people and process
Unadaptive Corporate cultures themselves
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Four Types of Corporate Culture
Needs of the Environment
Adaptability
Culture
Achievement
Culture
Consistency
Culture
Involvement
Culture
External
Internal
Serve specific clients not needing
rapid changes / result oriented
Stability
S
trategicFocus
Require fast response & high risk
decision / employee autonomy
Flexibility
Get participation of employees to
rapidly adapt to changes / highly values
& caring towards employees
Internal focus & consistency oriented /
follow rules, methodical, orderly / few
companies operates this way
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Shaping Corporate Culture for
Innovative Response
Corporate culture plays a key role in creatingan organizational climate that enableslearning and innovative responses to threats
from the external environment challengingnew opportunities, or organizational crises
Companies that succeed in a turbulent worldare those that pay careful attention to bothcultural values and business performance
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Combining Culture and Performance
High
AttentiontoPerformance Goods for short term - sustainable?
C
Give results and inspiration
sustainable success through high
performance culture
D
May be going out of business
Little result / value
A
Strong culture/good for morale
can they afford without result
B
Low Low HighAttention to Value
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Cultural Leadership
A cultural leader defines and uses signals andsymbols to influence corporate culture
Influence culture in two key roles The cultural leader articulates a vision for the
organizational culture that employees can believein
The cultural leader heeds the day-to-day activitiesthat reinforce the cultural vision
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THANK YOU !