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CHAPTER 2

THE MANAGEMENT ENVIRONMENT


WHAT IS EXTERNAL ENVIRONMENT?
• External environment
– Refers to factors, forces, situations, and events
outside the organization that affect its
performance.
EXTERNAL ENVIRONMENT
• Economic
– Interest rates, inflation, changes in disposable income,
stock market fluctuations and business cycle stages.
• Demographic
– Trends in population characteristics such as age, race,
gender, education level, geographic location, income
and family composition.
• Technological
– Concerns with specific or industrial innovations.
EXTERNAL ENVIRONMENT (cont…)
• Sociocultural
– Societal and cultural factors such as values,
attitudes, trends, traditions, lifestyles, beliefs,
tastes and patterns of behavior.
• Political/Legal
– Looks like federal, state and local laws as well as
laws of other countries and global laws.
• Global
– Associated with globalization and world economy.
WHY EXTERNAL ENVIRONMENT IS
IMPORTANT?
• Because it poses constraints and challenges to
managers that they need to overcome in
order to be successful.
HOW DOES EXTERNAL
ENVIRONMENTS AFFECT MANAGERS?
1. Jobs and employment
2. Assessing environmental uncertainty
3. Managing stakeholders relationships
JOBS AND EMPLOYMENT
• One of the most powerful constraints managers
face is the impact of changes due to certain
conditions, example, world recession.
• The challenge: balance work demands and having
enough people with the right skills to do the
organization’s work.
• Affect the types of jobs that are available, they
also affect how those jobs are created and
managed.
• Affect the way you plan, organize, lead and
control.
ENVIRONMENTAL UNCERTAINTY
• Refers to the degree of change and complexity
in an organization’s environment.
• 2 dimensions of uncertainty
– Degree of unpredictable change
– Degree of environmental complexity
• Look at the numbers of components in an
organization’s environment and the extent of the
knowledge that the organization has about the
components.
MANAGING STAKEHOLDER
RELATIONSHIPS
• Stakeholders
– Any constituencies in an organization’s
environment that are affected by that
organization’s decisions and actions.
WHY MANAGERS SHOULD MANAGE
RELATIONSHIP WITH STAKEHOLDERS?
• Lead to desirable organizational outcomes
– Improved predictability of environmental changes,
more successful innovations, greater degree of
trust with stakeholders, and greater flexibility to
reduce the impact of change.
• It’s the right thing to do
– Depends on external groups for inputs (resources)
and outlet for outputs (goods and services)
WHAT IS ORGANIZATIONAL CULTURE?
• Organizational culture
– The shared values, principles, traditions, and ways
of doing things that influence the way
organizational members act.
• Definition of culture implies three (3) things:
– Perception: they way they experienced it in the
organization
– Descriptive: how they describe it
– Everyone say the same similar terms
WHERE DOES ORGANIZATION
CULTURE COMES FROM?
1. The founder’s biases and assumptions
2. What the first employees learned from their
first experiences.
HOW DOES EMPLOYEE LEARN
CULTURE?
• Stories
– Narrative of significant events or people such as
Nike’s CEO telling employees the history of the
company and its heritage.
• Rituals
– Repetitive sequences of activities that express and
reinforce the importance of values and goals of
the organization. For example, “Passing of the
Pillars” from the Boston Scientific.
HOW DOES EMPLOYEE LEARN
CULTURE? (cont…)
• Material symbols
– Material symbols or artifacts in creating an
organization’s personality such as layout of
organization’s facilities, how employees dress,
type of automobiles provided to top executives,
availability of corporate aircraft, size of the offices,
elegance of office, executive perks, employee
fitness centers, on site dining facilities, or reserve
parking spaces.
HOW DOES EMPLOYEE LEARN
CULTURE? (cont…)
• Language
– A way to identify and unite members of a culture.
For example, at Cranium a Seattle board game
company use the word “Chiff” to remind everyone
to be innovative. “Chiff” stands for clever, high
quality, innovative, friendly and fun.
HOW DOES ORGANIZATIONAL
CULTURE AFFECT MANAGERS?
• Through its effect on what employees do and
how they behave.
• Through its effect on what managers do as
they plan, organize, lead and control.