1. The Environment and
Corporate Culture
Chapter3

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Organizational Environment
 All elements existing outside the
boundary of the organization that have
the potential to affect the organization
Manager’s Challenge: IBM, p. 77

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External Environment
● General environment – affects indirectly
● Task environment
- Affects directly
- Influences operations and performances
● Internal environment – elements within the
organization’s boundaries

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Organizational Environments
Management
Internal
Environment
Suppliers
Competitors
Customers
LaborMarket
Technological
General
Environment
Task
Environment
Technological
Suppliers

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International Dimension
● Provides New
• Customers
• Competitors
• Suppliers
● Shapes:
• Social trends
• Technological trends
• Economic trends

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Technological Dimension
 Scientific and technological advances
– Specific industries
– Society at large
 Impact
– Competition
– Relationship with Customers
– Medical advances
– Nanotechnology advances

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Socio-Cultural Dimension
 Dimension of the general
environment
– Demographic characteristics
– Norms
– Customs
– Values

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Key Demographic Trends in U.S.
● By 2050 non-Hispanic whites will make up only about half of
the population, down from 74% in 1995; and 69% in 2004
● Baby boomer generation is aging and losing interest in high-
cost goods. Generation Y, rival them in size, will soon rival
them in buying power.
● The single father household is the fastest growing living
arrangement, which rose 62% in 10 years. Two-parent and
single-mother households are still much more numerous
● Unprecedented demographic shift = married couple households
slipped from 80% in 1950s to just over 50% in 2003. Couples
with kids= 25%, with projection 20% by 2010 and 30% of
homes inhabited by someone who lives alone.

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Economic Dimension
● General economic health
● Consumer purchasing power
● Unemployment rate
● Interest rates
● Recent Trends
● Frequency of mergers and acquisitions
● Small business sector vitality

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Task Environment
Sectors that have a direct working relationship
with the organization
● Customers
● Competitors
● Suppliers
● Labor Market

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Labor Market Forces
Labor Market Forces Affecting Organizations
today
● Growing need for computer literate information
technology workers
● Necessity for ongoing investment in human
resources – recruitment, education, training
● Effects of international trading blocks, automation,
outsourcing, shifting facility locations upon labor
dislocations

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Adopting to the Environment
 Boundary-spanning
 Inter-organizational partnerships
 Mergers or joint ventures

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External Environment and Uncertainty
Number of Factors in Organization Environment
Adapt to
Environment
High
Uncertainty
Low
Uncertainty
HighLow
Low
High
Rate of
Change in
Factors in
Environment

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Competitive Intelligence - CI
 What - Activities to get as much information as
possible about one’s rivals
 Where - Web sites, commercial databases,
financial reports, market activities, news clippings,
trade publications, personal contacts
 Why – Spot potential threats or opportunities
Ethical Dilemma: Competitive Intelligence Predicament, P. 105

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Interorganizational Partnerships
Shift in paradigm
● Trust, value added to both sides
● Equity, fair dealing, everyone profits
● E-business links to share information and conduct
digital transactions
● Close coordination; virtual teams and people on site
● Involvement in partner’s product design and production
● Long-term contracts
● Business assistance goes beyond the contract

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Levels of Corporate Culture
Visible
1. Artifacts, such as dress, office
layout, symbols, slogans,
ceremonies
2. Expressed values, such as “The
Penney Idea,” “The HP Way”
3. Underlying assumptions and deep
beliefs, such as “people are lazy
and can’t be trusted”
Invisible
Culture
that can
be seen at
the
surface
level
Deeper values
and shared
understandings
held by
organization
members

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Visible Manifestations
 Symbols
 Stories
 Heroes
 Slogans
 Ceremonies

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Environment and Culture
 A big influence on internal corporate culture
is the external environment
 Cultures can vary widely across
organizations
 Organizations within same industry reveal
similar cultural characteristics
Experiential Exercise: Working in an Adaptive Culture, p. 104

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Corporate Culture Adaptability
Adaptive Culture Unadaptive Culture
Visible Behavior
Expressed Values
Managers 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.
Managers tend to behave
somewhat insularly, politically, and
bureaucratically. As a result, they
do not change their strategies
quickly to adjust to or take
advantage of changes in their
business environments.
Managers care deeply about
customers, stockholders, and
employees. They strongly value
people and processes that can
create useful change (e.g.,
leadership initiatives up and down
the management hierarchy).
Managers care mainly about
themselves, their immediate work
group, or some product (or
technology) associated with that
work group. They value the orderly
and risk-reducing management
process much more highly than
leadership initiatives.
Source: John P. Kotter and Jmaes L. Heskett, Corporate Culture and Performance (New York, The Free Press, 1992), 51.

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Four Types of Corporate Cultures
Adaptability
Culture
Achievement
Culture
Consistency
Culture
Involvement
Culture
External
Internal
Flexibility Stability
StrategicFocus
Needs of the Environment

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Cultural Leadership
● Articulates a vision that employees can
believe in
● Defines and communicates central values that employees
believe in
● Values are tied to a clear and compelling mission, or core
purpose
● Heeds the day-to-day activities that reinforce
the cultural vision – work procedures and reward
systems match and reinforce the values

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High-Performance Culture
Creating and maintaining a high-performance culture in
today’s turbulent environment and changing
workplace is not easy.
– Managers widely communicate their cultural values through
their words and particularly their actions
– Value statements that are not reinforced by management
behavior are meaningless or even harmful for employees
and the organization
– Cultural leaders uphold their commitment to values during
difficult times or crises.