Chapter 2: The Environment of Business

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open systems

organizations that are affected by, and that affect, their environment

inputs

goods and services organizations take in and use to create products or services

outputs

the products and services organizations create

external environment

all relevant forces outside a firm's boundaries, such as competitors, customers, the government, and the economy

competitive environment

the immediate environment surrounding a firm; includes suppliers, customers, rivals, and the like

macroenvironment

the general environment surrounding a firm; includes governments, economic conditions, and other fundamental factors that generally affect all organizations

demographics

measures of various characteristics of the people who make up groups or other social units

barriers to entry

conditions that prevent new companies from entering an industry

switching costs

fixed costs buyers face when they change suppliers

supply chain management

the managing of the network of facilities and people that obtain materials from outside the organization, transform them into products, and distribute them to customers

final consumer

a customer who purchases products in their finished form

intermediate customer

a customer who purchases raw materials or wholesale products before selling them to final customers

environmental uncertainty

lack of information needed to understand or predict the future

environmental scanning

searching for and sorting through information about the environment

competitive intelligence

information that helps managers determine how to compare better

scenario

a narrative that describes a particular set of future conditions

forecasting

method for predicting how variables will change the future

benchmarking

the process of comparing an organization's practices and technologies with those of other companies

empowerment

the process of sharing power with employees, thereby enhancing their confidence in their ability to perform their jobs and their beliefs that they are influential contributors to the organization

buffering

creating supplies of excess resources in case of unpredictable needs

smoothing

leveling normal fluctuation at the boundaries of the environment

independent strategies

strategies that an organization acting on its own uses to change some aspect of its current environment

cooperative strategies

strategies used by 2 or more organizations working together to manage the external environment

strategic maneuvering

an organization's conscious efforts to change the boundaries of its task environment

domain selection

entering a new market or industry with an existing expertise

diversification

a firm's investment in a different product, business, or geographic area

merger

1 or more companies combining with another

acquisition

one firm buying another

divestiture

a firm selling 1 or more businesses

prospectors

companies that continuously change the boundaries for task environments by seeking new products and markets, diversifying and merging, or acquiring new enterprises

defenders

companies stay within a stable product domain as a strategic maneuver

organizational culture

the set of important assumptions about the organization and its goals and practices that members of the company share

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