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Fundamentals of

Core Concepts & ApplicationsGriffinGriffinThird Edition

MANAGEMENTMANAGEMENT

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookCopyrightCopyright 2003 Houghton Mifflin Company. All rights reserved.2003 Houghton Mifflin Company. All rights reserved.

Chapter 2

The Environment of Organizations and Managers

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Copyright by Houghton Mifflin Company. All rights reserved. 22

Chapter OutlineChapter Outline

The Organizations Environments The General Environment

The Task Environment

The Internal Environment

The Ethical and Social Environment of

Management

Individual Ethics in Organizations

Social Responsibility and Organizations Managing Social Responsibility

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Chapter Outline (contd)Chapter Outline (contd)

The International Environment of Management Trends in International Business

Managing the Process of Internationalization

Levels of International Business Activity

The Context of International Business

The Organizations Culture

The Importance of Organization Culture

Determinants of Organization Culture Managing Organization Culture

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Learning ObjectivesLearning Objectives

After studying this chapter, you should be ableto:

Discuss the nature of the organizational environment

and identify the components of the general, task, and

internal environments. Describe the ethical and social environment of

management.

Discuss the international environment of

management. Describe the importance and determinants of an

organizations culture.

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The Organizations EnvironmentThe Organizations Environment

External EnvironmentGeneral environment is everything outside an

organizations boundarieseconomic, legal, political,

socio-cultural, international, and technical forces.

Task environment is composed of specific groupsand organizations that effect the firm.

Internal Environment

Conditions and forces within an organization.

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The Organization and Its EnvironmentsThe Organization and Its Environments

Owners

Employees

Physical environment

Board of directors

Culture

Competitors

International

dimension

Political-

legal

dimension

Technological

dimension

Sociocultural

dimension

Economic

dimension

Regulators Customers

Strategic

partnersSuppliers

Internal environment

Task environment External

environmentGeneral environment

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The External EnvironmentThe External Environment

The General Environment The set of broad dimensions and forces in an

organizations surroundings that create its overall

context.

Economic dimension is the overall health and vitalityof the economic system in which the organization

operates.

Technological dimension refers to the methods

available for converting resources into products orservices.

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The External Environment (contd)The External Environment (contd)

The General Environment (contd) Sociocultural dimension includes the customs,

mores, values, and demographic characteristics of the

society in which the organization functions.

Political-legal dimension is the extent ofgovernment regulation of business and the general

relationship between business and government.

International dimension is the extent to which the

organization is affected by business in othercountries.

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The External Environment (contd)The External Environment (contd)

The Task Environment Specific groups affecting the organization

Competitors seeking the same resources as the

organization.

Customers who acquire an organizations products or

resources.

Suppliers that provide resources for the organization.

Regulators (agencies and interest groups) that control,

legislate, or influence the organizations policies andpractices.

Strategic partners (allies) who are in a joint venture or

partnership with the organization.

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McDonalds Task EnvironmentMcDonalds Task Environment

Figure 2.1

McDonalds

Competitors

Burger King

Wendys

Subway

Dairy Queen

Customers

Individual

consumers

Institutional

customers

Suppliers

Coca-Cola Wholesale food

processors

Packaging

manufacturers

Strategic Partners Wal-Mart

Disney

Foreign partners

Regulators

Food and Drug

Administration

Securities and

Exchange

Commission

Environmental

Protection

Agency

Internal environment

Task environment

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HowHow

OrganizationsOrganizations

andand

EnvironmentsEnvironments

InteractInteract

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How Business and GovernmentHow Business and Government

Influence Each OtherInfluence Each Other

TheGovernment

Business

The government influences business

through direct and indirect regulation:

Environmental protection legislation

Consumer protection legislation

Employee protection legislation Securities legislation

The tax codes

Bu

siness influ

ences the governmentthrough:

Personal contacts and networks

Lobbying

Political action committees (PACs)

Favors and other influence tactics

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FiveFive--Forces Analysis (Porter)Forces Analysis (Porter)

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The Internal EnvironmentThe Internal Environment

Conditions and stakeholder forces within anorganization

Owners with legal property rights to a business.

Board of directors elected by the stockholders to

oversee the general management of the firm to bestserve the stockholders interest.

Employees who work for the firm and have a vested

interest in its continued operation and existence.

Physical work environment of the organization andthe work that people do.

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Individual Ethics In OrganizationsIndividual Ethics In Organizations

Ethics An individuals personal beliefs regarding what is right

and wrong or good and bad.

Ethical Behavior

This behavior is in the eye of the beholder. However,

it also refers to behavior that conforms to generally

accepted social norms.

Examples of Unethical Behavior

Borrowing office supplies for personal use.

Surfing the Net on company time.

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Determinants of Individual EthicsDeterminants of Individual Ethics

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ManagerialManagerial

EthicsEthics Employees Organization

Conflicts of interest

Secrecy and

confidentiality

Honesty

Hiring and firing

Wages and working

conditions

Privacy and respect

Subject to ethical ambiguities Advertising and promotions

Ordering and purchasing

Bargaining and negotiation

Financial disclosure

Shipping and solicitation

Other business relationships

Economic Agents

Customers

Competitors

Stockholders

Suppliers

Dealers

Unions

Three areas of concern

for managerial ethics

The relationships of

the firm to the

employee.

The employee to the

firm.

The firm to othereconomic agents.

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Ethics in OrganizationsEthics in Organizations

Managing Ethical Behavior Begins with top management which establishes the

organizations culture and defines what will and will

not be acceptable behavior.

Includes training on how to handle different ethicaldilemmas.

Developing a code of ethics.

Written statement of

the values and ethicalstandards that guide

the firms actions.

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Social Responsibility and OrganizationsSocial Responsibility and Organizations

Social Responsibility The set of obligations (to behave responsibly) that an

organization has to protect and enhance the social

context in which it functions.

Areas of Social Responsibility Stakeholders: customers, employees, and investors.

The natural environment: environmentally sensitive

products, recycling, and public safety.

The general social welfare: charitable contributions,and support for social issues such as child labor and

human rights.

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Arguments For and AgainstArguments For and Against

Social ResponsibilitySocial Responsibility

1. Business creates problems and

should therefore help solve them.

2. Corporations are citizens in our

society.

3. Business often has the resources

necessary to solve problems.

4. Business is a partner in our

society, along with the govern-

ment and the general population.

Social

Responsibility

4. The purpose of business in U.S.

society is to generate profit

for owners.

2. Involvement in social programs

gives business too much power.

3. There is potential for conflicts

of interest.

1. Business lacks the expertise to

manage social programs.

Arguments For Social Responsibility Arguments Against Social Responsibility

Figure 2.2

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ArgumentsArguments

ForFor

andand

AgainstAgainst

SocialSocial

ResponsibilityResponsibility

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Approaches toApproaches to

SocialSocial

ResponsibilityResponsibility

Source: Barney, Jay B. and Ricky W. Griffin, The

Management of Organizations. Copyright 1992 by

Houghton Mifflin Company. Used with permissions.

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Managing Social Responsibility:Managing Social Responsibility:

Formal Organizational DimensionsFormal Organizational Dimensions

Legal Compliance

Extent to which the organization conforms to local,

state, federal, and international laws.

Ethical Compliance Extent to which members of the organization follow

basic ethical/legal standards of behavior.

Philanthropic Giving

Awarding of funds or gifts to charities and other social

programs.

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Managing Social Responsibility:Managing Social Responsibility:

Informal Organizational DimensionsInformal Organizational Dimensions

Organizational Leadership and Culture

Leadership practices and the culture of the

organization can help define the social responsibility

stance an organization and its members will adopt. Whistle Blowing

The organizational response to the disclosure by an

employee of illegal or unethical conduct on the part of

others within the organization is indicative of theorganizations stance on social responsibility.

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Trends in International BusinessTrends in International Business

Economic Recovery Industrialized nations in

Europe and Asia have

rebuilt their economic

systems that weredevastated in WWII.

Decreasing Isolation from Foreign Competition

U.S. consumer goods markets are open to overseas

competitors. Increasing Globalization of World Markets

Volume of international trade has increased more

than 3,000% from 1960 to 2000.

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Managing The Process of GlobalizationManaging The Process of Globalization

Exporting Making a product in the firms domestic market and

selling it in another country.

Importing

Bringing a good, service, or capital into a home

country from abroad.

Licensing

An arrangement whereby a firm allows a foreign

company to manufacture or market the products and

uses its brand name, trademark, technology, patent,

copyright, or other assets.

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Managing The Process of GlobalizationManaging The Process of Globalization

(contd)(contd)

Strategic Alliance and Joint Ventures

Two or more firms jointly cooperate for mutual gain,

by sharing business costs and/or sharing ownership

of a new enterprise. Direct Investment

Occurs when a firm headquartered in one country

builds or purchases operating facilities or subsidiaries

in a foreign country.Maquiladoras are light-assembly plants built in

northern Mexico close to the U.S. borderwhich are

given special tax breaks by the Mexican government.

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Managing The Process of Globalization (contd)Managing The Process of Globalization (contd)

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Environmental ChallengesEnvironmental Challenges

of International Managementof International Management

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Advantages and Disadvantages of VariousAdvantages and Disadvantages of Various

Approaches to InternationalizationApproaches to Internationalization

Approaches toInternationalization Advantages Disadvantages

Importing or

Exporting

1. Small cash outlay

2. Little risk3. No adaptation necessary

1. Tariffs and taxes

2. High transportation costs3. Government restrictions

Licensing 1. Increased profitability

2. Extended profitability

1. Inflexibility

2. Helps competitors

Strategic Alliance/

Joint Ventu

re

1. Quick market entry

2. Access to materials and technology

1. Shared ownership (limits

control and profits)

Direct Investment 1. Enhances control

2. Existing infrastructure

1. Complexity

2. Greater economic and

political risk

3. Greateruncertainty

Table 2.1

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Controls on International TradeControls on International Trade

Key Concepts Tariffs are collected on goods shipped across

national boundaries.

Quotas are limits placed on the number or value of

goods that can be traded as exports or imports. Export restraint agreements

are voluntary limits on the

volume or value of goods

exported to, or imported

from, another country.

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The Structure of the Global EconomyThe Structure of the Global Economy

Economic Communities Sets of countries that engage in high levels

of trade with each other through the elimination

of trade barriers such as quotas and tariffs.

European Union (EU)North American Free Trade Agreement (NAFTA)

Latin American Integration Association

Caribbean Common Market

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European UnionEuropean Union

(EU)(EU)

Member NationsMember Nations

Figure 2.3

Source: Lucas,

George H.,

Robert P. Bush,

and Larry R.

Gresham,Retailing.

Copyright

1994 by

Houghton

Mifflin

Company. Used

with

permissions.

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The Cultural EnvironmentThe Cultural Environment

Language In Japanese the word hai can

mean either yes or I understand.

General Motors brand name Nova

pronounced as no va in Spanishmeans doesnt go.

The Meaning of Colors

Green is popular in Muslim countries, yet it signifies

death in other countries. Pink is associated with feminine characteristics in the

U.S.; yellow is the most feminine color in other

countries.

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The Organization and CultureThe Organization and Culture

Organization Culture The collection of values, beliefs, behaviors, customs,

and attitudes that characterize a community of people.

The Importance of Organization Culture

Culture determines the overall feel of the

organization, although it may vary across different

segments of the organization.

Culture is a powerful force that can shape the firms

overall effectiveness and long-term success.

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The Organizations CultureThe Organizations Culture

Determinants of Organization Culture Organizations founder (personal values and beliefs).

Symbols, stories, heroes, slogans, and ceremonies

that embody and personify the spirit of the

organization. Corporate success that strengthens the culture.

Shared experiences that

bond organizational members

together.

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Organization Culture (contd)Organization Culture (contd)

Managing Organization Culture Understand the current culture to understand whether

to maintain or change it.

Articulate the culture through slogans, ceremonies,

and shared experiences. Reward and promote people

whose behaviors are

consistent with desired

cultural values.

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Organization CultureOrganization Culture

Changing Organization Culture Develop a clear idea of what kind of

culture you want to create.

Bring in outsiders to important

managerial positions. Adopt new slogans, stories,

ceremonies, and purposely

break with tradition.

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