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CHAP 03
T H E E N V I R O N M E N T O F O R G A N I Z AT I O N S A N D M A N A G E R S
SPRING 2017
The Business Environment
External Environment
General environment is everything outside an
organizations boundarieseconomic, legal,
political, socio-cultural, international, and
technical forces.
Task environment is composed of specific
groups and organizations that affect the firm.
Internal Environment
Conditions and forces present and at work
within an organization
The Organization and Its Environments
International Technological
dimension dimension
Competitors
Sociocultural
Internal environment dimension
Task environment
External environment
General environment
The General Environment
Economic dimension
- Overall health and vitality of the economic system in which the
organization operates
- General economic growth, inflation, interest rates and
unemployment
Technological dimension
- Methods available for converting resources into products and
services
- The forms and availability of that technology come from the
general environment
- Technology is not associated only with manufacturing of product
but also with service sector
34
The General Environment
Sociocultural dimension
- Includes customs, morals, values and demographic
characteristics of the society
- Important because they determine the products, services
and standards of conduct that the society is likely to value
- Influence how workers in a society feel about their jobs and
organizations
- Appropriate standards of business conduct also vary across
culture
2013 Cengage Learning. All rights reserved. May not be copied, scanned, or 35
duplicated, in whole or in part, except for use as permitted in a license distributed
The General Environment
Political-legal dimension
- Government regulation of business and relationship
between business and government
- Three reason behind the importance of this dimension
1) Legal system partially defines what an organization can
and cannot do
2) Pro or anti-business sentiment in government influences
business activity.
3) Political stability has ramifications for planning
2013 Cengage Learning. All rights reserved. May not be copied, scanned, or 36
duplicated, in whole or in part, except for use as permitted in a license distributed
The General Environment
International dimension
- Extent to which an organization is involved in or affected by
business in other countries
- Firms may face foreign competition at home
- Also applicable for not-profit organizations
- Virtually every organization is affected by the international
dimension of its general environment
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McDonalds General Environment
Technological
International Dimension Dimension
Restaurants in 115 Improved information
countries technology
About two-thirds of More efficient
sales from outside operating systems
the United
States
Political-Legal
Dimension McDonalds Economic
Government Dimension
food standards Strong economic
Local zoning growth
climate Low unemploy-
General posture ment
toward business Low inflation
regulation
Sociocultural Dimension
Demographic shifts in
number of single adults
Internal environment and dual-income families
Growing concerns about
Task environment health and nutrition
External environment
General environment
The External Environment (contd)
Competitors
Burger King
Wendys
Subway
Regulators Dairy Queen
Food and Drug
Administration Customers
Securities and Individual
Exchange consumers
Commission Institutional
Environmental McDonalds customers
Protection
Agency
Suppliers
Strategic Partners Coca-Cola
Wal-Mart Wholesale food
Disney processors
Foreign partners Packaging
manufacturers
Internal environment
Task environment
The Internal Environment
Conditions and stakeholder forces within an organization
Owners are persons with legal property rights to a business.
Board of directors are elected by the stockholders and are
charged with overseeing the general management of the firm
to ensure that it is run in a way that best serves the
stockholders interest.
Employees are persons who work for the firm and have a
vested interest in its continued operation and existence.
Physical work environment is the actual physical
environment of the organization and the work that people do.
How Environments Affect Organizations
James D. Thompson was one of the first people
to recognize the importance of the
organizations environment.
Simple
Degree of Homogeneity
Least Moderate
uncertainty uncertainty
Moderate Most
uncertainty uncertainty
Complex
Competitive Forces
Porters Five Competitive Forces
Threat of new entrants into the market
Competitive rivalry among present competitors
Threat of substitute products
Power of buyers
Power of suppliers
Environmental Turbulence
Unexpected changes and upheavals in the environment of an
organization.
Porters Five Competitive Forces
Power of suppliers
Extent to which suppliers influence market rivals.
How Organizations Respond to Their
Environments
General Environment
Task Environment
Information
management
Mergers, takeovers,
Social
acquisitions,
responsibility
alliances
The
Organization
Strategic Direct
response influence
Organization
design and
flexibility
How Organizations Respond to
Transformation
Feedback
5 4
and satisfies the
making it easier to
strategic constituents
acquire future
in the environment, . . .
resources.
(Strategic constituencies
(Combined approach)
approach)
Examples of Admired and
High-performing Firms