What term is used to describe all the relevant forces outside an organizations boundaries?

they are affected by and in turn affect their external environments. They use inputs like goods and services from their environment to create goods and services that are outputs to their environment.

organization’s customers, competitive partnerships, or supplier relationships: The external environment includes all relevant forces outside the organization’s boundaries.

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

specific government organizations in a firm’s more immediate task environment. These agencies have the power to investigate company practices and take legal action to ensure compliance with laws.

Equal Employment Opportunity Commission (www.eeoc.gov).

Occupational Safety and Health Administration (www.osha.gov).

Federal Trade Commission (www.ftc.gov).

Food and Drug Administration (www.fda.gov).

National Labor Relations Board (www.nlrb.gov).

statistical characteristics of a group or population such as age, gender, and education level

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

Porter’s five forces: The organization’s competitive environment

1. Impact of new competitors entering the market
2. Power of customers
3. Power of suppliers
4. Impact of substitute or complimentary products or services

Rivals Can Be Domestic or Global

• Identify the Competition - Who is the competition?
• Analyze How They Compete - tactics such as price reductions, new-product introductions, and advertising campaigns to gain advantage over their rivals

Government policy—When a firm’s patent for a drug expires, other companies can enter the market.

Capital requirements—Getting started in some industries, such as building aircraft or operating a railroad, may cost so much that companies won’t even try to raise such large amounts of money.

Brand identification—When customers are loyal to a familiar brand, new entrants have to spend heavily.

Cost disadvantages—Established companies may be able to keep their costs lower because they are larger, have more favorable locations, and already have needed assets.

Distribution channels—Existing competitors may have such efficient distribution channels that new entrants struggle to get their goods or services to customers.

a customer who purchases products in their finished form

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

excellent customer service

• Speed of filling and delivering normal orders.

• Willingness to meet emergency needs.

• Merchandise delivered in good condition.

• Readiness to take back defective goods and resupply quickly.

• Availability of installation and repair services and parts.

• Service charges (i.e., whether services are free or priced separately).

substitute is a potential

an alternative, buying less of one kind of product but more of another. For example, substitutes for coffee could be tea, energy drinks, cola, or water.

complement is a potential opportunity

Examples include ink cartridges as a complement for printers; when people buy more printers, they buy more ink cartridges

Suppliers Provide Your Resources

• People—supplied by trade schools and universities.

• Raw materials—from producers, wholesalers, and distributors.

• Information—supplied by researchers and consulting firms.

• Financial capital—from banks and other sources.

fixed costs buyers face when they change suppliers

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

Environmental uncertainty

managers do not have enough information about the environment to understand or predict the future. Uncertainty arises from two related factors:

Complexity—the number of issues to which a manager must attend, and the degree to which they are interconnected. Industries (e.g., the automotive industry) with many different firms that compete in vastly different ways tend to be more complex—and uncertain—than industries with only a few key competitors (e.g., airplane manufacturers).

Dynamism—the degree of discontinuous change that occurs within the industry. High-growth industries (e.g., smartphones) with products and technologies that change rapidly are more uncertain than stable industries where change is less dramatic and more predictable (e.g., utilities).62

• Who are our current competitors?

• Are there few or many entry barriers to our industry?

• What substitutes exist for our product or service?

• Is the company too dependent on powerful suppliers?

• Is the company too dependent on powerful customers?

information that helps managers determine how to compete better - by asking above questions

a narrative that describes a particular set of future conditions

method for predicting how variables will change the future.

• Use multiple forecasts, and consider averaging their predictions.

• Remember that accuracy decreases as you go further into the future.

• Collect data carefully. Forecasts are no better than the data used to construct them.

• Use simple forecasts (rather than complicated ones) where possible.

• Keep in mind that important events often are surprises that sabotage the predictions.70

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

identifying the best-in-class performance by a company in a given area

RESPONDING TO THE ENVIRONMENT

• Adapting to the environment.

• Influencing the environment.

• Selecting a new environment.

the process of sharing power with employees to enhance their confidence in their ability to perform their jobs and contribute to the organization

creating supplies of excess resources in case of unpredictable needs

leveling normal fluctuations at the boundaries of the environment

methods for adapting the technical core to changes in the environment

exploiting a distinctive competence or improving internal efficiency for competitive advantage (e.g., aggressive pursuit of green goals

independent action to improve relations with competitors (e.g., helping competitors find raw materials)

establishing and maintaining favorable images in the minds of people in the environment (e.g., sponsoring sporting events).

voluntary commitment to various interest groups, causes, and social problems (e.g., donating supplies to schools).

engaging the company in a private legal battle (e.g., lawsuits against illegal music copying).

efforts to influence elected representatives to create a more favorable business environment or limit competition (e.g., issue advertising or lobbying at state and national levels)

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

cooperative strategies/actions

two or more organizations work together.

Contracts—negotiating an agreement between the organization and another group to exchange goods, services, information, patents, and so on. Suppliers and customers, or managers and labor unions, may sign formal agreements about the terms and conditions of their future relationships. These contracts are explicit attempts to make their future relationship predictable.

Cooptation—absorbing new elements into the organization’s leadership structure to avert threats to its stability page 60or existence. Many universities invite wealthy alumni to join their boards of directors.

Coalition—groups that act jointly on political initiatives. Local businesses may band together to curb the rise of employee health care costs, and organizations in some industries have formed industry associations and special interest groups.

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

entering a new market or industry with existing expertise

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

one or more companies combining with another

a firm selling one or more businesses

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

companies that stay within a stable product domain as a strategic maneuver

Three Criteria Help You Choose the Best Approach

1. Managers need to change what matters and can be changed
2. Managers should use the most appropriate response
3. Managers should choose responses that offer the most benefit at the lowest cost

all relevant forces inside a firm’s boundaries, such as its managers, employees, resources, and organizational culture

the set of assumptions that members of an organization share to create internal cohesion and adapt to the external environment

the components of an organization that can be seen and heard, such as office layout, dress, orientation, stories, and written material

the underlying qualities and desirable behaviors that are important to the organization

strongly held and taken-for-granted beliefs that influence behavior in the firm

Companies Give Many Clues About Their Culture

• Corporate mission statements and official goals
• Business practices can be observed
• Symbols, rites, and ceremonies
• The stories people tell

Four Different Types of Organizational Cultures

• Clan culture - The strategic orientation associated with this cultural type is one of implementation through consensus building. Its leaders tend to act as mentors and facilitators.
• Hierarchical culture - The U.S. armed forces are based on a hierarchical culture that is internally oriented by more focus page 65on control and stability. It has the values and norms associated with a bureaucracy.
• Market culture. - Oil and natural gas companies tend to have rational cultures that are externally oriented and focused on control. This type of culture’s primary objectives are productivity, planning, and efficiency
• Adhocracy. - Google is an adhocracy that is externally oriented and flexible. This culture type emphasizes growth, change, and innovation

Effective managers can take several approaches to managing culture:

• Craft an inspirational vision of “what can be” for the organizational culture.

• “Walk the talk”—actually do the things you want others to do—and show that you are serious about and committed to long-term change.

• Celebrate and reward members who behave in ways that exemplify the desired culture.

Which of the following is the best description of organizational culture?

What is the purpose of benchmarking quizlet?

What is the immediate environment surrounding a firm including suppliers Customers rivals in the lake?

Are the components of an organization that can be seen and heard?