Org Cultures and Contexts - pp03

Slide 3.
Part 2
THE ENVIRONMENT
OF MANAGEMENT
Chapter 3
ORGANISATION CULTURES
AND CONTEXTS
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition Pearson Education Limited 2014
Slide 3.2
Lesson Agenda
The environments of managing

Cultures and their components
Types of culture
Competitive environment Porters five forces
General environment PESTEL analysis
Stakeholders and corporate governance
Integrating themes
Cases and examples
Nokia, Bosch, Unilever, Iris
Slide 3.3
SYNOPSIS
Managers work within a context whose
dimensions can both constrain them and support
them.
The most immediate dimension is the culture of
the unit or organisation within which they work,
beyond which is their immediate competitive
environment, and beyond that the general
business environment.
This chapter introduces these dimensions and
shows how they both influence, and can be
influenced by, management action.
Slide 3.4
Constraints on Managerial Discretion

Reality suggests a blend. Managers are neither
helpless nor all powerful.
Instead, the more logical approach is to see the
managers as operating within constraints imposed
by the organisations culture and environment.
Slide 3.5
Constraints and Challenges:

The External Environment
External environment includes factors and forces
outside the organisation that affect its
performance.
Components of the External Environment
1. Micro/Competitive Environment: External forces that
have a direct and immediate impact on the
organisation
2. General/Macro environment: Broad economic, sociocultural, political/legal, demographic, technological and
global conditions that may affect the organisation
Slide 3.6
Environmental Influences
Figure 3.1
Environmental influences on the

Boddy, organisation
Management: An Introduction PowerPoints on the Web, 6
th
edition Pearson Education Limited 2014
Slide 3.7
Why study the environment

of managing?
Organisations depend on their environment for
inputs and to take outputs.
Managers act on assumptions about:
culture
competitive environment
general environment
stakeholders.
These assumptions affect what they do.
Are they valid, and how would alternative
views lead to different actions?
Slide 3.8
Organisational Cultures
The shared values, principles, traditions & ways
of doing things that influence the way
organizational members act. Belief that culture
affects performance.
Schein (2010): culture develops as people
work together, and develop shared beliefs
about what works, which is transmitted to
successive generations (Figure 3.2).
Beliefs relate to:
mission, goals, ways of achieving goals and
how to measure performance.
Slide 3.9
How Culture Develops?
Figure 3.2
The stages of cultural formation

Slide 3.10
Components of Culture
Artefacts
Surface level visible features: dress, layout.
Espoused beliefs and values

Beliefs members hold about their work and the
situations with which they deal.
Basic underlying assumptions

Deeply held ideas about the way people work
together, and the sources of their success.
Different types of culture

Power culture, Role culture, Task culture and
Person culture.
Slide 3.11
How Does Culture Affect Managers?

1. Which managerial actions the organisation
recognises as proper or improper on its behalf?
2. Which organisational activities the organisation
values and encourages
3. The overall strength or weakness of the

organisational culture has an impact on
managers
Slide 3.12
How Does Culture Affect Managers?
Slide 3.13
Types of culture (Quinn et al. 2003)
Figure 3.3
Types of organisational culture
Source: Based on Quinn et al. (2003).
Slide 3.14
External Forces in the Environment

1. Competitive environment
2. General environment
3. Stakeholders
Managers
interpret these forces (not objective
realities)
respond by changing internal environment
Slide 3.15
Porters Five Forces Model
Slide 3.16
Threat of New entrants

Fewer new entrants = more profit
Entry barriers include:
high costs of equipment and facilities;
lack of distribution facilities;
customers loyal to established brands;
small companies lack economies of scale;
subsidies/regulations favour existing firms.
Examples of products with entry barriers include
patent protection for drugs, software programmes.
Slide 3.17
Intensity of Rivalry amongst

Competitors
Greater rivalry = less profit
Rivalry increases when:
many firms, but none dominant;

market growing slowly, so firms fight for share;
high fixed costs encourage overproduction;
loyalties (family businesses or political support)
prolong overcapacity.
Examples include airline and newspaper

industries.
Slide 3.18
Power of Buyers (customers)

Greater power of buyers = less profit to seller
Power of buyer increases if:
buyer takes high percentage of suppliers sales;
many alternative products or suppliers available;
product is a high percentage of buyers costs,
creating incentive to seek alternatives;
cost of switching to other suppliers is low.
Examples include products sold online, and major

supermarkets like Walmart, Tesco.
Slide 3.19
Bargaining power of Suppliers

High power of supplier = less profit to buyer
Power of supplier is high if:
buyer takes small percentage of sales;
few alternative products or suppliers (distinctive
product keeps buyers loyal);
product a low percentage of buyers costs, little
incentive to seek alternatives;
cost of switching suppliers high.
Examples include luxury brands, business

software, B2B material supplies.
Slide 3.20
Threat of Substitutes
Easy to substitute = less profit to supplier
Substitution becomes easier if:
buyers willing to change buying habits;
technological developments enable new
products and services;
transport costs fall;
new suppliers enter the market.
For example, online media, new materials,

alternative energy sources.
Slide 3.21
Managing the Five Forces

Subjective interpretation as well as objective
realities
Forces contradict/balance each other
Managers can consciously try to shape them as
part of their strategy
Competitive forces affected by those in the general
environment.
Slide 3.22
General Environment
Figure 3.5
Identifying environmental influences PESTEL analysis

Slide 3.23
Political and Economic

Political
Governments shape what businesses can do
Taxation, pollution, regulation
Businesses lobby to influence government.
Economic
Wealth and stage of development
Wage levels, interest rates, consumer confidence,
GDP, unemployment levels, inflation, cost of living
Managers time investment to suit economic growth
prospects.
Slide 3.24
Social and Technological

Socio-cultural
Demographic trends, family structures consumer
tastes, Grown Up Digital.
Technological
Physical infrastructure, transportation,
communications technologies
For example, internet and online shopping, video
and voice technologies opening vast markets.
Slide 3.25
Environmental and Legal

Environmental (natural)
Natural resources, pollution and the effects of
climate change on business (threats and
opportunities).
Legal
The framework within which companies operate
Employment laws, health and safety laws,
financial or governance regulations.
Slide 3.26
Using PESTEL
As in five forces, subjective interpretation as
well as objective realities.
Forces in the general environment affect public
organisations as much as private.
The value is NOT a long list of factors, but
agreement on critical ones that stakeholders
may use to stimulate internal change.
Slide 3.27
Stakeholders
People or groups with expectations of the
organisation:
Customers, communities, government
How to manage their conflicting interests and

powers?
Companies seek to influence stakeholders.
Similarly, managerial decisions are influenced by
these stakeholders
Slide 3.28
Examples of Organisational
Stakeholders
ORGANISATION
Slide 3.29
Managing Stakeholder Relationships

1. Identify the organisations external/internal
stakeholders.
2. Determine the particular power/interests of
external/internal stakeholders.
3. Decide how critical each external/internal
stakeholder is to the organisation.
4. Determine how to manage each individual
external/internal stakeholder relationship.
Slide 3.30
Differing Stakeholder Expectations

Each stakeholder can have different
expectations based on their power & interest.
For example:
1. Shareholders and senior managers want big profits
2. Employees want more pay and job security
3. Customers want affordable products
4. National Government wants taxes
5. Pressure groups want green improvements
6. Production team want investment in new
technology
Slide 3.31
Assessing Stakeholders
Power and Interest
For each stakeholder, managers
assess:
how great is their interest within the
organization?
how strong is their power over the
organization?
which stakeholders are more important?
And finally, Identify and meet stakeholder
expectations by devising a strategy.
Slide 3.32
Stakeholders Power and Interest Matrix
32
Slide 3.33
Examples of different ways in which

Stakeholders can behave:
1. A bank customer who is very unhappy on extra
waiting time.
2. A teenager who is very happy with the clothes
she has bought from New Look.
3. A finance director who believes that Managing
Director is making poor and risky decisions.
4. An environmental agency finds that you focus
on clean environment and improved methods
of production, causing less harm to
environment.
Slide 3.34
Corporate Governance
Governance refers to rules and processes intended to
ensure transparency and accountability of those in
charge.
Corporate governance frameworks are intended to
monitor and control the performance of managers
to ensure that they act in the interests of
organisational stakeholders and not just of the
managers themselves.
Substance includes:
internal controls
mechanisms to limit power of individuals
process to manage relationships between groups.
Slide 3.35
Summary
The assumptions managers make about their
environment affects what they do.
The cultures, five forces, PESTEL and stakeholder
models help managers to analyse their contexts.
The models enable you to question
The assumptions that guide action

Whether they accurately reflect the context
Possible alternative views
The limitations of any one view.
Slide 3.36
Key Concepts
1. Quinn et al. (2003) use the competing values framework
to distinguish open systems, rational goal, internal
process and human relations cultures. Handy (1993)
analyses culture in terms of power, role, task or person.
2. The immediate competitive and the wider general
environments, through the actions of an organisations
stakeholders, have a major impact on managers. They
affect many decisions on matters as diverse as strategy,
production, distribution, marketing and organisation.
3. Porters five forces model of the competitive environment
identifies the degree of competitive rivalry, customers,
competitors, suppliers and potential substitute goods and
services.
Slide 3.37
Key Concepts
4. The PESTEL model of the wider external
environment identifies political, economic, social,
technological, environmental and legal forces.
5. Environments can be evaluated in terms of their rate
of change (stable/dynamic) and complexity (low/high).
6. Corporate governance frameworks are intended to

monitor and control the performance of managers to
ensure that they act in the interests of organisational
stakeholders, and not just of the managers themselves.
Slide 3.38
Integrating themes
Entrepreneurship
Seeing external opportunities is a key skill,
supported by experience, networks and creativity.
Sustainability
Climate change leading managers to seek ways to
run organisations more sustainably.
Internationalisation
International organisation can benefit from the many
cultural perspectives of employees.
Governance
Some cultures encourage excessive risks, which
governance systems can discourage.

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Slide 3.

The environments of managing

Constraints on Managerial Discretion

Constraints and Challenges:

Environmental influences on the

edition Pearson Education Limited 2014

Why study the environment

How Culture Develops?

The stages of cultural formation

Espoused beliefs and values

Basic underlying assumptions

Different types of culture

How Does Culture Affect Managers?

3. The overall strength or weakness of the

How Does Culture Affect Managers?

Types of culture (Quinn et al. 2003)

Types of organisational culture

Source: Based on Quinn et al. (2003).

External Forces in the Environment

Porters Five Forces Model

Threat of New entrants

Intensity of Rivalry amongst

many firms, but none dominant;

Examples include airline and newspaper

Power of Buyers (customers)

Examples include products sold online, and major

Bargaining power of Suppliers

Examples include luxury brands, business

For example, online media, new materials,

Managing the Five Forces

Identifying environmental influences PESTEL analysis

Political and Economic

Businesses lobby to influence government.

Social and Technological

Environmental and Legal

How to manage their conflicting interests and

Managing Stakeholder Relationships

Differing Stakeholder Expectations

Stakeholders Power and Interest Matrix

Examples of different ways in which

The assumptions that guide action

6. Corporate governance frameworks are intended to

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