Introduction to Management – the External Environment
The External Environment The external organizational environment includes all elements existing outside the boundary of the organization that have the potential to affect the organization. This environment includes competitors, resources, technology, and economic conditions that influence the organization. The organization external environments are having 2 layers: • General environment: The outer layer that is widely dispersed and affects organization indirectly. It includes social, demographic, and economic factors that influence all organizations about equally. Task environment: the layer that influences the organization’s performance and operations directly. It generally includes competitors, suppliers and customers. The organization also has an internal environment, which includes the elements within the organization boundaries. The internal environment is composed of current employees, management, and especially corporate culture, which define employee behavior and how the organization will adapt to external environment. General Environment • International
The international dimension of the external environment represents events originating in foreign countries as well as opportunities for American companies in other countries. The international environment provides new competitors, customers, and suppliers and etc. The global environment represents an ever changing and uneven playing field compared with the domestic environment. Changes in the international domain can abruptly turn the domestic environment upside down. Managers who are used to thinking only about the domestic nvironment must learn new rules to cope with goods, services, and ideas circulating around the globe. • Technological The technological dimension includes scientific and technological advancements in a specific industry as well as in society at large. In recent year, this dimension has created massive and far-reaching changes for all in industries. For example, fifteen years ago a lot of organization did not use desktop PC. Now, almost entire organization uses it for many purposes. • Sociocultural
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The socio culture dimensions of the general environment represents the demographic characteristics as well as the norms, customs and values of the general population. Important socio cultural characteristic are geographical distribution and population density age and education levels. Today’s demographic profiles are the foundation of tomorrow’s workforce and consumer. Forecasters see increased globalization of both consumer markets and the labor supply with increasing diversity both within organizations and consumer markets. • Economic
The dimension of the general environment representing the overall economic health of the country or region in which the organization operates. The economic dimension represents the general economic health of the country or region in which the organization operates. Consumer purchasing power, the unemployment rate, and interest rates are part of an organization’s economic environment. Because organizations today are operating in a global environment the economic dimension has become exceedingly complex and creates enormous uncertainty for managers.
The economies of countries are more closely tied together now. One significant recent trend in the economic environment is the frequency of mergers and acquisitions. For example, Citibank and Travelers merged to form Citigroup. IBM purchased Price Water House Coopers Consulting and Cingular is acquiring AT&T Wireless. In the toy industry the three largest toy makers – Hasbro, Mattel and Tyco – gobbled up at least a dozen smaller competitors within a few years. At the same time however, there is a tremendous vitality in the small business sector of the economy.
Labor market is the people available for hire by the organization. The labor market represents people in the environment who can be hired to work for the organization. Labor market forces affecting organizations right now include : 1. The growing need for the computer-literate information technology workers 2. The necessity for continuous investment in human resources through recruitment, education, and training to meet the competitive demand. 3. The effects of international trading blocs.
To adapting to the environment about the changes inside the organizations, manager can use several strategies such as: a. Boundary-Spanning Roles Roles assumed by people and/or departments that link and coordinate the organization with the key elements in the external environment. There are two purposes served by the boundary spanners which are to detect and process information about changes in the environment and they also represent the organization’s interest to the environment. b.
Inter-organizational Partnership This strategy concern on increasing collaboration with other organizations. To joining together become more effective and to share scarce resources. c. Mergers or joint ventures Merger means the combining of two or more organizations into one, and joint venture means a strategic alliance or program by two or more organizations. This kind of strategic is a step beyond the strategic partnership is for companies to involved in mergers and reduce environmental uncertainty.
The Internal Environment: Corporate Culture Symbols are object, act, or event that conveys meaning to other. Stories are narrative based on true events that is repeated frequently and shared by organizational employees. Heroes are figure who exemplified the deeds, character, and attributes of a strong corporate culture. Slogan is a phrase or sentence that succinctly express a key corporate value. Ceremonies are a planned activity that makes up a special event and is conducted for the benefit of an audience.
Adaptive corporate cultures which have a visible behavior that manager should pay close attention to all their constituencies, especially customers, and initiate change when needed to serve their legitimate interests, even if it entails taking some risks, but unadaptive corporate cultures has its visible that managers tend to behave somewhat insularly and politically and as a result, they do not change their strategies quickly to adjust to or take advantage of changes in their business environmental. On other hand, these two types of cultures have the expressed values.
Expressed value on adaptive corporate culture is manager care deeply about customs, stockholders and employees. But the expressed value on unadaptive corporate culture that manager’s care mainly about themselves, their immediate work group, or some product or technology. Cultural Leader is a manager who uses signals and symbols to influence corporate culture. Culture leaders influence culture in two key areas: 1. The cultural leaders articulates a vision for the organizational culture that employees can believe in and that general excitement. 2. The culture leader heeds the day-to-day activities that reinforce the cultural vision.