Organization culture:

An especially important part of the internal environment of an organization is its

culture. Organization culture is the set of values, beliefs, behaviors, customs, and attitudes that
helps the members of the organization understand what it stands for, how it does things, and
what it considers important.  Culture is an amorphous concept that defers objective measurement
or observation.

Managing Organization Culture

How can managers deal with culture, given its clear importance but intangible nature?
Essentially, the manager must understand the current culture and then decide whether it should
be maintained or changed.  But managers must walk a fine line between maintaining a culture
that still works effectively and changing a culture that has become dysfunctional. For example,
many of the firms already noted, as well as numerous others, take pride in perpetuating their
culture. Shell Oil, for example, has an elaborate display in the lobby of its Houston headquarters
that tells the story of the firm’s past. But other companies may face situations in which their
culture is no longer a strength. For example, some critics feel that General Motors’ culture places
too much emphasis on product development and internal competition among divisions, and not
enough on marketing and competition with other firms. 

Culture problems sometimes arise from mergers or the growth of rival factions within an
organization. For example, Continental and United recently merged to form one of the world’s
largest airlines. Delta recently merged with Northwest Airlines. Combining the two companies
led to numerous cases of conflict and operational difficulties because the cultures of the merging
firms were so different.  

Source: Principles and Practices by Ricky W. Griffin, published by South Western. 11th

edition. 

Why understanding culture is difficult?

Understanding culture can be a difficult, if we can visualize it as synonymous to an iceberg (As

perpetuated by Edgar Schein), a large part of it is invisible. Hence, if one wants to change the
visible part of the culture, one must have to figure out the invisible part of the culture. An
organization will fail to create a strong culture, if what is being told and the actual way of doing
things are not synonymous.

Determinants of Organization culture:

Where does an organization’s culture come from? Typically, it develops and blossoms over a
long period of time.  Its starting point is often the organization’s founder. For example, James
Cash Penney believed in treating employees and customers with respect and dignity. Employees
at J. C. Penney are still called “associates” rather than “employees”. As an organization grows,
its culture is modified, shaped, and refined by symbols, stories, heroes, slogans, and ceremonies.
For example, an important value at Hewlett-Packard is the avoidance of bank debt. A popular
story still told at the company involves a new project that was being considered for several years.
All objective criteria indicated that HP should borrow money from a bank to finance it, yet Bill
Hewlett and David Packard rejected it out of hand simply because “HP avoids bank debt.”

Corporate success and shared experiences also shape culture. For example, Hallmark Cards has a
strong culture derived from its years of success in the greeting card industry.

How environment affects organizations:

James D. Thompson was one of the first people to recognize the importance of the organization’s
environment.27 Thompson suggested that the environment can be described along two
dimensions: its degree of change and its degree of homogeneity.  The degree of change is the
extent to which the environment is relatively stable or relatively dynamic.  (i.e: How rapidly the
environment changes.)

The degree of homogeneity is the extent to which the environment is relatively simple (few
elements, little segmentation) or relatively complex (many elements, much segmentation).

These two dimensions interact to determine the level of uncertainty faced by the
organization. Uncertainty, in turn, is a driving force that influences many organizational
decisions.

Based on these factors, different industries can be segmented into four different types, that has
been explained in the video.

Environmental turbulence:

Environmental turbulence define the environmental phenomenon that are unforeseen in nature.
However, emergence of which can significantly change the way we do things. For instance, due
to the emergence of COVID-19, work from home has become a quite common issue, which was
unforeseen and were many organizations around the world. And eventually be a part of, what
people are calling the "new normal".

Michael E. Porter, a Harvard professor and expert in strategic management, has proposed a more
refined way to assess environments. In particular, he suggests that managers view the
environments of their organization in terms of five competitive forces:

The threat of new entrants is the extent to which new competitors can easily enter a market or
market segment. It takes a relatively small amount of capital to open a dry-cleaning service or a
pizza parlor, but it takes a tremendous investment in plant, equipment, and distribution systems
to enter the automobile business. Thus the threat of new entrants is fairly high for a local sub
shop or pizzeria but fairly low for Ford and Toyota.

Competitive rivalry is the nature of the competitive relationship between dominant firms in the
industry. In the soft-drink industry, Coca-Cola and PepsiCo often engage in intense price wars,
comparative advertising, and new-product introductions. 

The threat of substitute products is the extent to which alternative products or services may
supplant or diminish the need for existing products or services. The electronic calculator
eliminated the need for slide rules. The advent of personal computers, in turn, reduced the
demand for calculators as well as for typewriters and large mainframe computers.  Threat of
substitutes can exist among the existing competitors as well. For instance, soft drink's market
shares can be eaten away by the manufacturers of fruit juices.

The power of buyers is the extent to which buyers of the products or services in an industry
have the ability to influence the suppliers. For example, a Boeing 777 has relatively few potential
buyers.  Hence, they have more power.

The power of suppliers is the extent to which suppliers have the ability to influence potential
buyers.  even though Boeing has few potential customers, those same customers have only two
suppliers that can sell them a 300-passenger jet (Boeing and Airbus, a European firm). So
Boeing and Airbus, too, have power. 

How Organizations adapt to their environments

Organizations attempt to adapt to their environments. the most common methods are information
management; strategic response; mergers, acquisitions, and alliances; organization design and
flexibility; direct influence; and social responsibility.

Information Management One way organizations adapt to their environments is through

information management.  One technique for managing information is relying on boundary
spanners. A boundary spanner is an employee, such as a sales representative or a purchasing
agent, who spends much of his or her time in contact with others outside the organization. Such
people are in a good position to learn what other organizations are doing.  The second way to do
this is via environmental scanning, the process of actively monitoring the environments through
activities such as observation and reading.  Within the organization, most firms have also
established computer-based information systems to gather and organize relevant information for
managers and to assist in summarizing that information in the form most pertinent to each
manager’s needs.

Strategic Response Another way that an organization adapts to its environments is through a

strategic response. Options include maintaining the status quo, altering strategy a bit, or adopting
an entirely new strategy. 

Mergers, Acquisitions, and Alliances A related strategic approach that some organizations use
to adapt to their environments involves mergers, acquisitions, and alliances. A merger occurs
when two or more firms combine to form a new firm. An acquisition occurs when one firm buys
another, sometimes against its will (usually called a “hostile takeover”). The firm taken over may
cease to exist and becomes part of the other company. in a partnership or alliance the firm
undertakes a new venture with another firm. A company engages in these kinds of strategies for
a variety of reasons, such as easing entry into new markets or expanding its presence in a current
market

Organization Design and Flexibility An organization may also adapt to environmental

conditions by incorporating flexibility in its structural design. a firm that operates in an
environment with relatively low levels of uncertainty might choose to use a design with many
basic rules, regulations, and standard operating procedures. Alternatively, a firm that faces a
great deal of uncertainty might choose a design with relatively few standard
operating procedures, instead allowing managers considerable discretion and flexibility with
decisions.

Direct Influence Organizations are not necessarily helpless in the face of their environments.

Indeed, many organizations are able to directly influence their environments in many different
ways. For example, firms can influence their suppliers by signing long-term contracts with fixed
prices as a hedge against inflation. Or a firm might become its own supplier.  Organizations
influence their regulators through lobbying and bargaining as well.