Fundamental of Management. Lecture 2

Lecture 3
Corporate Culture and The Environment

The External Environment
The elements of the world constantly change
• The external organizational environment
includes all outside elements that effect the
organization
• General Environment:
– Outer layer that directly affects organization
• Task Environment:
– Sectors that conduct transactions with the
organization
• Internal Environment:
– Elements within the organization boundaries
Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 2

3.1 The General, Task, and Internal
Environments

General Environment: International
• Globalization influences all other aspects of the
external environment
– New competitors, customers, suppliers
– Changes in social, technological, and economic trends
• All organizations must compete and think globally
• Economic power has shifted to China and India
• The global environment is complex and ever-changing

Technological
 Massive changes for
organizations
 The tool for doing business
 Advances are impacting
organizations and managers

Sociocultural
Demographic characteristics, norms,
customs, and values
 U.S. Population is aging
 Large influx of immigrants
 Generation Y is entering the
workplace

Economic
• Economic health of the country/region
– Extended globally with uncertainty
• Consumer purchasing power
• Unemployment rate
• Economic shift impacted small business
although there is still vitality in small business

Legal-Political
• Government regulation; state, local, and federal
– Political activities
– Government agencies and regulation
• Managers must recognize the power of pressure
groups
– Work to influence companies to behave in a socially
responsible way

Natural
• Growing importance and pressure
• Organizations must be sensitive to the
environment
• Natural dimension does not have own voice
• Environmental groups advocate action/policy
– Reduce pollution
– Develop renewable energy
– Climate change/global warming

Task Environment
 Customers
 Competitors
 Suppliers
 Labor Market

3.2 Environmental
Performance Index

Organization-Environment Relationship
 The environment creates
uncertainty for managers
 Managers must respond and
design adaptive organizations
 Uncertainty can be managed
through effectiveness

3.3 Sample External Environment
SOURCES: “Chinese Ministry of Railways Chooses Nortel Mobile Network,” M2Presswire
(January 29, 2008); Nortel Web site, http:www.nortel.com (accessed May 12, 2010);
J. Weber with A. Reinhardt and P. Burrows, “Racing Ahead at Nortel,” BusinessWeek
(November 8, 1999): 93–99; “Nortel’s Waffling Continues: First Job Cuts, Then Product
Lines, and Now the CEO,” Telephony (May 21, 2001): 12; and M. Heinzl, “Nortel’s
Profits of 499 Million Exceeds Forecast,” The Wall Street Journal, January 30, 2004.

3.4 External Environment
and Uncertainty

Adapting to the Environment
 Boundary-spanning roles – link and coordinate
the organization with external environment,
seek:
• Business intelligence
• Competitive intelligence
 Interorganizational partnerships – reduce
boundaries and begin collaborating with other
organizations
 Mergers/joint ventures – legal combination of
operations; legal collaboration for specific
project

3.5 The Shift to a
Partnership Paradigm

The Internal Environment: Corporate
Culture
Corporate culture is the set of key values, beliefs,
understandings, and norms that members of an
organization share
Symbols
Stories
Heroes
Slogans
Ceremonies

3.6 Levels of Corporate Culture

3.7 Four Types of
Corporate Cultures

Shaping Corporate Culture for
Innovative Response
• Corporate culture plays a key role in
learning and innovate responses
• Bottom-line strategies are successful in the
short-term
• Successful companies balance culture and
performance
• Culture is the “glue” that holds the
organization together

High Performance Culture
 Based on solid organizational
mission/purpose
 Shared adaptive values that guide
decisions and practices
 Encourages individual employee
ownership
– Bottom-line results
– Organization’s culture

3.8 Combining Culture
and Performance

Cultural Leadership
Articulate a vision for the organizational culture
that employees can believe in
Heeds the day-to-day activities that reinforce the
cultural vision
Leaders communicate through words and actions

Fundamental of Management. Lecture 2

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