What is an external environment?
all events outside a company that have the potential to influence or affect it.
What are the 3 basic components of external environments?:
1. Environmental change
2. Environmental complexity
3. resource scarcity
What theory states that companies experience long periods of stability followed by short periods of dynamic, fundamental change, followed by a return of stability?:
punctuated equilibrium theory.
What two kind of external environments influence organizations?:
- specific environment
What are the trends in the general environment?:
How does the economy effect the general environment?:
the economy influences basic business decisions, managers often use economic statistics and business confidence indices to predict future economic activity.
Because economic statistics can be such poor predictors some managers try to predict future economic activity by keeping track of _.
Business confidence indices show:
how confident actual managers are about future business growth. For example, the Fortune Business Confidence Index is a monthly survey of chief financial offices at large Fortune 1000 firms.
How does technology effect the general environment?:
technology is the knowledge, tools and techniques used to transform input into output.
*Companies must embrace new technology and use it to improve products and services or decrease costs. If they don't, they will lose out to competitors who do.
How does sociocultural trends effect the general environment?:
sociocultural trends such as changing demographic characteristics affect how companies run their businesses. Similarly, sociocultural changes in behavior, attitudes and beliefs affect the demand for businesses' products and services.
How does political/legal effect the general environment?:
-court decisions and new federal and state laws have imposed much greater political/legal responsibility to companies.
- customer-initiated lawsuits
* the best way to manage legal responsibilities is to educate mangers and employees about laws and regulations as well as potential lawsuits that could affect a business.
What five components is a specific environment made up of?
4. industry regulations
5. advocacy groups
Each firms industry and has unique _ that affects the way it conducts day-to-day business.
How do customers effect specific environments?:
Customers purchase products and services, and companies cannot exist without customer support. Therefore, monitoring customers' changing wants and needs is critical to business success.
Reactive customer monitoring:
monitoring is identifying and addressing customer trends and problems after they occur.
-listening to customer complaints
Proactive customer monitoring:
customers means trying to sense events, trends, and problems before they occur (or before customers complain).
How does the competitor component effect the specific environment?:
Often, the differences between business success and failure comes down to whether your company is doing a better job of satisfying customer wants and needs than is the competition.
What two mistakes do managers tend to make when they do their competitive analysis?:
They tend to focus on only two or three well-known competition with similar goals and resources.
They underestimate potential competitors' capabilities. When this happens, managers don't take the steps they should to continue to improve their products or services. The result can be significant decreases in both market share and profits.
How do suppliers effect the specific environment?:
Suppliers are companies that provide material, human, financial, and informational resources to other companies.
A key factor influencing the relationship between companies and their suppliers is how dependent they are on each other.
is the degree to which a company relies on a supplier because of the importance of the supplier's product to the company and the difficulty of finding other sources of that product.
degree to which a supplier relies on a buyer because of the importance of that buyer to the supplier and the difficulty of selling its products to other buyers.
A higher degree of buyer and seller depedence can lead to opportunistic behavior which is:
, in which one party benefits at the expense of the other. Opportunistic behavior between buyers and suppliers will never be completely eliminated. However, many companies believe that both buyers and suppliers can benefit by improving the buyer-supplier relationship.
focuses on establishing a mutually beneficial, long-term relationship between buyers and suppliers.
How does industry regulation effect the environment?:
consists of regulations and rules that govern the practices and procedures of specific industries, businesses, and professions.
Regulatory agencies affect businesses by creating and enforcing rules and regulations to protect consumers, workers, or society as a whole.
Managers rank _ as one of the most demanding and frustrating parts of their job.
Consumer Product Safety Commission:
a federal agency established to protect the health and safety of consumers in and around their homes
Department of Labor
the federal department responsible for promoting the working conditions of wage earners in the United States
Environmental Protection Agency
an independent federal agency established to coordinate programs aimed at reducing pollution and protecting the environment
Equal Employment Opportunity Commission
ensures that employers do not discriminate against employees because of age, race, color or national origin, religion, gender, or physical challenge.
Federal Communications Commission
an independent governmeent agency that regulates interstate and international communications by radio and television and wire and cable and satellite
Federal Trade Commission
an independent agency of the United States fedeal government that maintains fair and free competition
Food and Drug Administration
a federal agency in the Department of Health and Human Services established to regulate the release of new foods and health-related products
National Labor and Relations Board
is an independent agency of the United States government charged with conducting elections for labor union representation and with investigating and remedying unfair labor practices.
Occupational Safety and Health Administration
a government agency in the Department of Labor to maintain a safe and healthy work environment
How do advocacy groups effect the specific environment?:
Advocacy groups are groups of concerned citizens who band together to try to influence the business practices of specific industries.
Unlike the industry regulation component of the specific environment, advocacy groups cannot force organizations to change their practices. However, they can use a number of techniques to try to influence companies: public communications, media advocacy, and product boycotts.
Public communication approach:
approach relies on voluntary participation by the news media and the advertising industry to get an advocacy group's message out. Such as the public service announcements for World No Tobacco Day.
Media Advocacy approach:
A media advocacy approach typically involves framing issues as public issues (i.e., affecting everyone); exposing questionable, exploitative, or unethical practices; and obtaining media coverage by buying media time or creating controversy that is likely to receive extensive news coverage. PETA's actions are a good example of this approach.
is a tactic in which an advocacy group actively tries to convince consumers to not purchase a company's product or service. Such groups are now using the web to get "the word out" on boycotts as evidenced by Ecopledge.com.
What are characteristics of changing external environments?:
- environmental change
the rate of environmental change is slow - decision makers can be more deliberate
the rate of environmental change is fast - decision makers must be nimble and quick.
The fast-paced world of EA Sports is a good example of a dynamic environment. EA Sports business environment changes quickly. With development and marketing costs exceeding $25 million for some games, unpopular games could signal ruin for the company.
the number of external factors in the environment that affect organizations
the degree to which an organizations external environment has an abundance or scarcity of critical organizational resources.
how well managers can understand or predict the external changes and trends affecting their business.
consists of the trends and events within an organization that affect the management, employees, and organizational culture. Internal environments affect what people think, feel, and do at work.
-the set of key values, beliefs, and attitudes shared by organizational members.
- often created by company founders and then sustained through repetition of organizational stories and recognition of organizational heroes.
promote employee involvement, make clear the organizations strategic purpose and direction and actively define and teach organizational values and beliefs that can help companies achieve higher sales growth, return on assets, profits, quality, and employee satisfaction.
Organizational cultures exists on three levels:
1. surface level (where visible artifcats and behaviors can be observed).
2. values and beliefs
3. unconsciously held assumptions and beliefs exist.
Managers can begin to change company cultures by concentrating on the _
top two levels (surface and values and beliefs).
What are some techniques for changing organizational cultures?:
-behavioral substitution and addition
- changing visible artifcats
- selecting job applicats who have values and beliefs consistent with the desired company culture.
What are three levels of organization culture?:
-SEEN: symbolic artifcats such as dress code or behaviors
-HEARD: what people say, how decisions are made and explained
-BELIEVED: widely shared assumptions and beliefs, buried deep below surface, rarely discussed or thought about.
5 dimensions of culture:
1. Innovation, risk taking, and aggressive (the degree to which employees are encouraged to be innovative and take risks
2. Attention to detail (the degree to which employees are expected to exhibit precision, analysis, and attention to detail
3. Outcome orientation (the degree to which managers focus on results or outcomes rather than on the techniques and processes used to achieve those outcomes)
4. People orientation (the degree to which management decisions take into consideration the effect on people within the organization
5. Team orientation (the degree to which work activities are organized around teams rather than individuals)
a transaction in which one party in the relationship benefits at the expense of the other.
an advocacy group tactic that relies on voluntary participation by the media and the advertising industry to get the advocacy groups message out.
graphic depictions of how managers believe environmental factors relate to possible organizational actions.