1. Describe the three basic characteristics of changing external environments • Environmental change is the rate at which a company’s general and specific environments change. If the environment is stable, this means that the rate of change is slow; if the environment is dynamic, this means that the rate of change is fast. • Environmental complexity is the number of external factors in the environment that affect organizations. Complex environments have many environmental factors; simple environments have few. Resource Scarcity is the degree to which an organization’s external environment has an abundance or scarcity of critical organizational resources. 2. How do the characteristics of changing environments affect uncertainty? Environmental change, environmental complexity, and resource scarcity affect environmental uncertainty, which is how well managers can understand or predict the external changes and trends affecting their businesses. Environmental uncertainty is lowest when environmental change and environmental complexity are at low levels and resource scarcity is small (i. . , resources are plentiful). In these environments, managers feel confident that they can understand, predict, and react to the external forces that affect their businesses. By contrast, environmental uncertainty is highest when environmental change and complexity are extensive and resource scarcity is a problem. In these environments, managers may not be at all confident that they can understand, predict, and handle the external forces affecting their businesses. 3. What is the difference between the general and specific business environments?
The general environment includes the economic, technological, sociocultural, and political trends that indirectly affect all organizations. The specific environment includes the customer, competitor, supplier, industry regulation, and public pressure group trends that are unique to an industry and which directly affect how a company does business. All companies participate in the same general environment, but each company’s specific environment is distinct, based on its business and industry. 4. List the components of the general environment.
The general environment consists of economic, technological, sociocultural, and political/legal events and trends that affect all organizations. Because the economy influences basic business decisions, managers often use economic statistics and business confidence indices to predict future economic activity. Changes in technology, which is used to transform inputs into outputs, can be a benefit or a threat to a business. Sociocultural trends, like changing demographic characteristics, affect how companies run their businesses.
Similarly, sociocultural changes in behavior, attitudes, and beliefs affect the demand for a business’s products and services. Court decisions and new federal and state laws have imposed much greater political/legal responsibilities on companies. 5. How do the elements of the specific business environment affect businesses? 5. How do the elements of the specific business environment affect businesses? Each organization also has a specific environment that is unique to that firm’s industry and directly affects the way it conducts day-to-day business. The specific environment of any company can be divided in to five sectors: Customers influence the products and services a company offers, the prices charged for those offerings, the company’s reputation, and the sales generated by business operations. • Competitors also influence the products and services a company offers and the prices charged for those offerings. Competitors also influence how a company conducts business in a certain market segment, the company’s location, and the overall strategy a company pursues (attack or avoid competitors). • Suppliers influence the cost of the products and services a company offers and therefore affect the profitability of the firm.
Suppliers (who they are and what they can provide) also affect the types of products that a company is able to put on the market. • Industry regulation has the potential to influence nearly every aspect of a company’s operations. For example, a caterer would need to comply with all the health codes and liquor laws that govern its industry. • Advocacy groups affect businesses through boycotts (or support). For example, advocacy groups were ultimately responsible for Home Depot changing its policy of buying lumber harvested from old-growth forests. 6.
Describe the three-step process that managers use to make sense of their changing environments. • Environmental scanning: Managers search the environment for important events or issues that might affect an organization. This allows managers to stay up-to-date on important industry factors and to reduce uncertainty. • Interpreting environmental factors: Managers determine what these environmental events and issues mean to the organization. These events could present either threats to or opportunities for the organization. 7. How are organizational cultures created and maintained?
An organizational culture is the set of key values, beliefs, and attitudes shared by organizational members. Founders of organizations are the primary drivers of organizational culture. However, when they are gone, organizational heroes sustain their values, attitudes, and beliefs. Organizational heroes are people admired throughout the organization for their qualities and achievements. Their activities provide the basis for organizational stories, which help employees make sense of organizational events and changes 8. What are the characteristics of successful organizational cultures?
Organizational cultures create a successful internal environment by binding all employees together in a “we’re- in-this-together” attitude. When employee attitudes are congruous with the culture, employees are happy and motivated to work hard for the organization because they believe in what they’re doing. Preliminary research shows that organizational culture is related to organizational success. Cultures based on adaptability, involvement, a clear vision, and consistency can help companies achieve higher sales growth, return on assets, profits, quality, and employee satisfaction.
Adaptability is the ability to notice and respond to changes in the organization’s environment. Involvement is the degree to which employees participate in decision making. (Higher involvement leads to a greater sense of ownership and responsibility among employees. ) A clear vision provides a direction for organizational activities, and consistency involves actively defining and teaching organizational values, beliefs, and attitudes throughout the company. 9. Identify the three levels of organizational culture and give examples of each.
Three levels of organizational culture are: 1) the surface, where reflections of culture can be heard, seen, or otherwise observed (examples of such artifacts include dress codes, office layouts, and specific employee behaviors); 2) just below the surface, where values, beliefs, and attitudes are expressed by people (such values and beliefs can be understood by observing what people say and decision-making processes); and 3) far below the surface, where unconsciously held assumptions and beliefs lie (those are the unwritten views and rules of the organization that constitute its core principles and values). 0. How can managers change organizational cultures? Managers can successfully change the surface levels of culture by motivating different behavior. The underlying elements (far below the surface) are difficult to identify and change. Managers can change culture through behavioral addition or behavioral substitution. In behavioral addition, employees are motivated to perform a new behavior in addition to already accepted ones. In behavioral substitution, employees perform a new behavior in place of another.