MGT 300

2.3

--The internal environment within which managers work includes corporate culture, production technology, organization structure, and physical facilities. Of these, corporate culture surfaces as being extremely important to competitive advantage. The internal culture must fit the needs of the external environment and company strategy. When this fit occurs, highly committed employees create a high-performance organization that is tough to beat. -we define culture as the set of key values, beliefs, understandings, and norms shared by members of an organization.* The concept of culture helps managers understand the hidden, complex aspects of organizational life. Culture is a pattern of shared values and assumptions about how things are done within the organization. This pattern is learned by members as they cope with external and internal problems and taught to new members as the correct way to perceive, think, and feel.At the surface level are visible artifacts, which include things such as manner of dress, patterns of behavior, physical symbols, organizational ceremonies, and office layout. Visible artifacts are all the things one can see, hear, and observe by watching members of the organization. At a deeper, less obvious level are values and beliefs, which are not observable but can be discerned from how people explain and justify what they do. Members of the organization hold some values at a conscious level. -Some values become so deeply embedded in a culture that members are no longer consciously aware of them. These basic, underlying assumptions and beliefs are the essence of culture and subconsciously guide behavior and decisions. In some organizations, a basic assumption might be that people are essentially lazy and will shirk their duties whenever possible; thus, employees are closely supervised and given little freedom, and colleagues are frequently suspicious of one another. More enlightened organizations operate on the basic assumption that people want to do a good job; in these organizations, employees are given more freedom and responsibility, and colleagues trust one another and work cooperatively. -A symbol is an object, act, or event that conveys meaning to others. Symbols can be considered a rich, nonverbal language that vibrantly conveys the organization's important values concerning how people relate to one another and interact with the environment. -A story is a narrative based on true events that is repeated frequently and shared among organizational employees. Stories paint pictures that help symbolize the firm's vision and values and help employees personalize and absorb them -A hero is a figure who exemplifies the deeds, character, and attributes of a strong culture. Heroes are role models for employees to follow. Heroes with strong legacies may continue to influence a culture even after they are gone -A slogan is a phrase or sentence that succinctly expresses a key corporate value. Many companies use slogans or sayings to convey special meaning to employees. -A ceremony is a planned activity at a special event that is conducted for the benefit of an audience. Managers hold ceremonies to provide dramatic examples of company values. Ceremonies are special occasions that reinforce valued accomplishments, create a bond among people by allowing them to share an important event, and anoint and celebrate heroes

2.4

-A big influence on internal corporate culture is the external environment. Cultures can vary widely across organizations; however, organizations within the same industry often reveal similar cultural characteristics because they are operating in similar environments.* The internal culture should embody what it takes to succeed in the environment. If the external environment requires extraordinary customer service, the culture should encourage good service -four categories or types of culture, as illustrated in Exhibit 2.6. These categories are based on two dimensions: the extent to which the external environment requires flexibility or stability and the extent to which a company's strategic focus is internal or external. The four categories associated with these differences are adaptability, achievement, involvement, and consistency.* -The adaptability culture emerges in an environment that requires fast response and high-risk decision making. Managers encourage values that support the company's ability to rapidly detect, interpret, and translate signals from the environment into new behaviors. Employees have the autonomy to make decisions and act freely to meet new needs, and responsiveness to customers is highly valued. Managers also actively create change by encouraging and rewarding creativity, experimentation, and risk-taking.use the adaptability type of culture, as do many companies in the marketing, electronics, and cosmetics industries because they must move quickly to respond to rapid changes in the environment. -The achievement culture is suited to organizations concerned with serving specific customers in the external environment but without the intense need for flexibility and rapid change. This results-oriented culture values competitiveness, aggressiveness, personal initiative, cost cutting, and willingness to work long and hard to achieve results. An emphasis on winning and achieving specific ambitious goals is the glue that holds the organization together -The involvement culture emphasizes an internal focus on the participation of employees to adapt rapidly to changing needs from the environment. This culture places a high value on meeting the needs of employees, and the organization may be characterized by a caring, family-like atmosphere. Managers emphasize values such as cooperation, consideration of both employees and customers, and avoiding status differences. -The final category of culture, the consistency culture, uses an internal focus and a consistency orientation for a stable environment. Following the rules and being thrifty are valued, and the culture supports and rewards a methodical, rational, and orderly way of doing things. In today's fast-changing world, few companies operate in a stable environment, and most managers are shifting toward cultures that are more flexible and in tune with changes in the environment. -Each of these four categories of culture can be successful. In addition, organizations usually have values that fall into more than one category. The relative emphasis on various cultural values depends on the needs of the environment and the organization's focus. Managers are responsible for instilling the cultural values the organization needs to be successful in its environment.

2.5

-Many top leaders cite organizational culture as their most important mechanism for attracting, motivating, and retaining talented employees, a capability considered the single best predictor of overall organizational excellence. -Corporate culture plays a key role in creating an organizational climate that enables learning and innovative responses to threats from the external environment, challenging new opportunities, or organizational crises. However, managers realize that they can't focus all their effort on values; they also need a commitment to solid business performance. -Companies that succeed in a turbulent world are those in which managers are evaluated and rewarded for paying careful attention to both cultural values and business performance -When cultural values aren't connected to business performance, they aren't likely to benefit the organization during hard times -Quadrant A represents organizations that focus primarily on bottom-line results and pay little attention to organizational values. This approach may be profitable in the short run, but the success is difficult to sustain over the long term because the "glue" that holds the organization together—that is, shared cultural values—is missing. -Finally, companies in Quadrant B put high emphasis on both culture and solid business performance as drivers of organizational success. Managers in these organizations align values with the company's day-to-day operations—hiring practices, performance management, budgeting, criteria for promotions and rewards, and so forth -Quadrant B organizations represent the high-performance culture, a culture that is based on a solid organizational mission or purpose, embodies shared adaptive values that guide decisions and business practices, and encourages individual employee ownership of both bottom-line results and the organization's cultural backbone.* -One of the most important things that managers do is create and influence organizational culture to meet strategic goals because culture has a significant impact on performance. -For example, a company in Quadrant C pays little attention to either values or business results and is unlikely to survive for long. Managers in Quadrant D organizations are highly focused on creating a strong cohesive culture, but they don't tie organizational values directly to goals and desired business results. -A primary way in which managers shape cultural norms and values to build a high-performance culture is through cultural leadership. Managers must overcommunicate to ensure that employees understand the new culture values, and they signal these values in actions as well as words. A cultural leader defines and uses signals and symbols to influence corporate culture. The leader clarifies what the new culture should be and crafts a story that inspires people to change. A cultural leader is the "chief marketing officer" for the desired cultural values.* Cultural leaders influence culture in two key areas: The cultural leader articulates a vision for the organizational culture that employees can believe in. The leader defines and communicates central values that employees believe in and will rally around. Values are tied to a clear and compelling mission, or core purpose. The cultural leader heeds the day-to-day activities that reinforce the cultural vision. The leader makes sure that work procedures and reward systems match and reinforce the values. Actions speak louder than words, so cultural leaders "walk their talk."* When the culture needs to change, cultural leaders make sure people understand that the old way of doing things is no longer acceptable. -Cultural leaders also uphold their commitment to values during difficult times or crises. Upholding the cultural values helps organizations weather a crisis and come out stronger on the other side. Creating and maintaining a high-performance culture is not easy in today's turbulent environment and changing workplace, but through their words—and particularly their actions—cultural leaders let everyone in the organization know what really counts. -

2-1

-The external organizational environment includes all elements existing outside the boundary of the organization that have the potential to affect it.* The environment includes competitors, resources, technology, and economic conditions that influence the organization. It does not include those events so far removed from the organization that their impact is not perceived. The organization's external environment can be conceptualized further as having two components: task and general environments -task environment is closer to the organization and includes the sectors that conduct day-to-day transactions with the organization and directly influence its basic operations and performance. It is generally considered to include competitors, suppliers, customers, and the labor market. The general environment affects organizations indirectly. It includes social, economic, legal-political, international, natural, and technological factors that influence all organizations about equally. Changes in federal regulations or an economic recession are part of the organization's general environment, as are shifting social attitudes toward matters such as how and where the products we use are made. These events do not directly change day-to-day operations, but they do affect all organizations eventually. -A new view of the environment argues that organizations are now evolving into business ecosystems. An organizational ecosystem is a system formed by the interaction among a community of organizations in the environment. An ecosystem includes organizations in all the sectors of the task and general environments that provide the resource and information transactions, flows, and linkages necessary for an organization to thrive. -The organization also has an internal environment, which includes the elements within the organization's boundaries. The internal environment is composed of current employees, management, and especially corporate culture, which defines employee behavior in the internal environment and how well the organization will adapt to the external environment. -Those people and organizations in the environment that acquire goods or services from the organization are customers. As recipients of the organization's output, customers are important because they determine the organization's success. Organizations have to be responsive to marketplace changes. -Organizations in the same industry or type of business that provide goods or services to the same set of customers are referred to as competitors. Competitors are constantly battling for loyalty from the same group of customers. -Suppliers provide the raw materials that the organization uses to produce its output. A candy manufacturer, for example, may use suppliers from around the globe for ingredients such as cocoa beans, sugar, and cream. A supply chain is a network of multiple businesses and individuals that are connected through the flow of products or services. -JIT improves an organization's return on investment, quality, and efficiency because much less money is invested in idle inventory. In the 1970s, the Japanese taught U.S. companies how to boost profit by keeping inventories lean through JIT. "Instead of months' worth of inventory, there are now days and even hours of inventory," -The labor market represents people in the environment who can be hired to work for the organization. Every organization needs a supply of trained, qualified personnel. Unions, employee associations, and the availability of certain classes of employees can influence the organization's labor market. Labor market forces affecting organizations right now include the growing need for computer-literate knowledge workers; the necessity for continuous investment in human resources through recruitment, education, and training to meet the competitive demands of the borderless world; and the effects of international trading blocs, automation, outsourcing, and shifting facility locations on labor dislocations, all of which create unused labor pools in some areas and labor shortages in others. -Changes in the various sectors of the general and task environments can create tremendous challenges, especially for organizations operating in complex, rapidly changing industries -The dimensions of the general environment include international, technological, sociocultural, economic, legal-political, and natural. -As managers expand into global markets, they have to consider the international dimension of the external environment, which includes events originating in foreign countries, as well as new opportunities for U.S. companies in other countries. The international environment provides new competitors, customers, and suppliers and shapes social, technological, and economic trends as well. -The technological dimension of the general environment includes scientific and technological advancements in a specific industry, as well as in society at large. Advances in technology drive competition and help innovative companies gain market share. However, some industries have failed to adapt to technological shifts and are facing decline. -The sociocultural dimension of the general environment represents the demographic characteristics, norms, customs, and values of the general population. Important sociocultural characteristics are geographical distribution and population density, age, and education levels. Today's demographic profiles are the foundation of tomorrow's workforce and consumers. By understanding these profiles and addressing them in the organization's business plans, managers prepare their organizations for long-term success. Managers may want to consider how the following sociocultural trends are changing the consumer and business landscape: A new generation of technologically savvy consumers has intimately woven technology into every aspect of their lives. Mobile devices shape the way they communicate, shop, travel, and earn college credits. This generation will make up 40 percent of the population in the United States and Europe by 2020 and will constitute the largest cohort of consumers worldwide. Predictions of what they will value as consumers include brands that are trustworthy and products and companies that show a commitment to environmental, social, and fiscal responsibility.* Young people are also leading the trend toward widespread social equality. Polls show that views about social mores and lifestyles are shifting. The percentage saying society should encourage greater tolerance of people with different lifestyles and backgrounds has increased significantly. For example, support for same-sex marriage increased to 60 percent in 2015 from 32 percent in 2003, and the U.S. Supreme Court declared same-sex marriage legal in all 50 states in mid-2015.* Other polls show that 65 percent of people support a path to citizenship for illegal immigrants, and 58 percent support the legalization of marijuana.* The most recent U.S. census data show that more than half of all babies born in 2011 were members of minority groups, the first time that has happened in U.S. history. Hispanics, African Americans, Asians, and other minorities represented 50.4 percent of births in 2011. The nation's growing diversity has huge implications for business.* -The economic dimension represents the general economic health of the country or region in which the organization operates. Consumer purchasing power, the unemployment rate, and interest rates are part of an organization's economic environment. Because organizations today are operating in a global environment, the economic dimension has become exceedingly complex and creates enormous uncertainty for managers -The legal-political dimension includes government regulations at the local, state, and federal levels, as well as political activities designed to influence company behavior. The U.S. political system encourages capitalism, and the government tries not to overregulate business. However, government laws do specify rules of the game. The federal government influences organizations through the Occupational Safety and Health Administration (OSHA), Environmental Protection Agency (EPA), fair trade practices, libel statutes allowing lawsuits against business, consumer protection and privacy legislation, product safety requirements, import and export restrictions, and information and labeling requirements. One of the most prominent and far-reaching challenges in the legal-political dimension in recent years was the 2010 Dodd-Frank Act (financial regulatory reform). As one of the numerous federal regulations included in the Dodd-Frank Act, the Securities and Exchange Commission (SEC) in 2015 approved a rule requiring that large public companies disclose the pay gap between their CEOs and rank-and-file employees. The pay-ratio measure means companies will have to explain large pay disparities to shareholders and face public scrutiny of their pay practices. The SEC's action creates uncertainty for companies over how the requirement, which started with compensation paid in 2017, will influence not only shareholders and public opinion but also their own managers and employees. -As a result, the natural dimension of the external environment is growing in importance. The natural dimension includes all elements that occur naturally on Earth, including plants, animals, rocks, and resources such as air, water, and climate. Protection of the natural environment is emerging as a critical policy focus around the world. Governments are increasingly under pressure to explain their performance on pollution control and natural resource management. -

Remember this

-The organizational environment, consisting of both task and general environments, includes all elements existing outside the boundary of the organization that have the potential to affect the organization. -An organizational ecosystem includes organizations in all the sectors of the task and general environments that provide the resource and information transactions, flows, and linkages necessary for an organization to thrive. -The general environment indirectly influences all organizations within an industry and includes five dimensions. -The task environment includes the sectors that conduct day-to-day transactions with the organization and directly influence its basic operations and performance. -The internal environment includes elements within the organization's boundaries, such as employees, management, and corporate culture. -Customers are part of the task environment and include people and organizations that acquire goods or services from the organization. -Competitors are organizations within the same industry or type of business that vie for the same set of customers. -Suppliers provide the raw materials the organization uses to produce its output. The labor market represents the people available for hire by the organization. -The international dimension of the external environment represents events originating in foreign countries, as well as opportunities for U.S. companies in other countries. -t -he technological dimension of the general environment includes scientific and technological advances in society. -The sociocultural dimension includes demographic characteristics, norms, customs, and values of a population within which the organization operates. The economic dimension represents the general economic health of the country or region in which the organization operates. -The legal-political dimension includes government regulations at the local, state, and federal levels, as well as political activities designed to influence company behavior. -The natural dimension includes all elements that occur naturally on Earth, including plants, animals, rocks, and natural resources such as air, water, and climate. -Managers emphasize both values and business results to create a high-performance culture. -Culture enables solid business performance through the alignment of motivated employees with the mission and goals of the company. -Managers create and sustain adaptive high-performance cultures through cultural leadership. -Cultural leaders define and articulate important values that are tied to a clear and compelling mission, which they communicate widely and uphold through their actions. -When external factors change rapidly, the organization experiences high uncertainty. -Strategic issues are events and forces that alter an organization's ability to achieve its goals. As environmental turbulence increases, strategic issues emerge more frequently. -Boundary spanning links to and coordinates the organization with key elements in the external environment. -Big data analytics uses powerful computer technology to search and examine massive, complex sets of data to uncover hidden patterns and correlations so managers can make better decisions. -A merger occurs when two or more organizations combine to become one. -The Charter Communications acquisition of Time Warner Cable and AB InBev's purchase of SABMiller are two recent mergers. -A joint venture is a strategic alliance or program by two or more organizations. - Sikorsky Aircraft and Lockheed Martin teamed up to bid on a new contract for Marine One helicopters. -Organizational culture is the set of key values, beliefs, understandings, and norms shared by members of an organization. -A symbol is an object, act, or event that conveys meaning to others. -A story is a narrative based on true events and is repeated frequently and shared among organizational employees. -A hero is a figure who exemplifies the deeds, character, and attributes of a strong culture. -Steve Jobs is a hero at Apple, and he and his legacy represent the creativity, risk-taking, and striving for excellence that define the company's culture. -A slogan, such as Disney's "The happiest place on Earth," succinctly expresses a key corporate value. -Managers hold ceremonies, planned activities at special events, to reinforce company values. -For an organization to be effective, corporate culture should be aligned with organizational strategy and the needs of the external environment. -Organizations within the same industry often reveal similar cultural characteristics because they are operating in similar environments. -The adaptability culture is characterized by values that support the company's ability to interpret and translate signals from the environment into new behavior responses. -An achievement culture is a results-oriented culture that values competitiveness, personal initiative, and achievement. -A culture that places high value on meeting the needs of employees and values cooperation and equality is an involvement culture. -A consistency culture values and rewards a methodical, rational, orderly way of doing things.

2.2

-Why do organizations care so much about factors in the external environment? The reason is that the environment creates uncertainty for organization managers, and they must respond by designing the organization to adapt to the environment. -Uncertainty means that managers do not have sufficient information about environmental factors to understand and predict environmental needs and changes -When an organization deals with only a few external factors and these factors are relatively stable, such as those affecting soft-drink bottlers or food processors, managers experience low uncertainty and can devote less attention to external issues. -Environmental changes may evolve unexpectedly, such as shifting customer tastes for video and computer games or social media sites, or they may occur violently, such as the devastating Japanese earthquake and tsunami in 2011. The level of turbulence created by an environmental shift will determine the type of response that managers must make in order for the organization to survive. Managers continuously scan the business horizon for both subtle and dramatic environmental changes, also called strategic issues, and identify those that require strategic responses. Strategic issues are "events or forces either inside or outside an organization that are likely to alter its ability to achieve its objectives." As environmental turbulence increases, strategic issues emerge more frequently.* Managers use several strategies to adapt to these strategic issues, including business intelligence applications, attempts to influence the environment, and mergers or joint ventures. -Managers have learned the importance of not only being aware of what's going on inside the organization but also of getting a handle on what's going on in the external environment. Boundary spanning links to and coordinates the organization with key elements in the external environment.* One area of boundary spanning is the use of business intelligence, which results from using sophisticated software to search through internal and external data to spot patterns, trends, and relationships that might be significant. The fastest-growing segment of business intelligence is big data analytics. As described in Chapter 1, big data analytics refers to searching and examining massive, complex sets of data to uncover hidden patterns and correlations and make better decisions.* Big data analytics is becoming a driving force in many organizations. -Business intelligence and big data analytics are also related to the growing area of boundary spanning known as competitive intelligence (CI), which refers to activities to get as much information as possible about one's rivals.* -Boundary spanning is an increasingly important task in organizations because environmental shifts can happen quickly in today's world. Managers need good information about their customers, competitors, and other elements to make good decisions. Boundary spanning also includes activities that represent the organization's interest in the environment and attempt to influence elements of the external environment. -Companies may also become involved in mergers or joint ventures to reduce environmental uncertainty. -A merger occurs when two or more organizations combine to become one. -joint venture involves a strategic alliance or program by two or more organizations. A joint venture typically occurs when a project is too complex, expensive, or uncertain for one firm to handle alone.Joint ventures are on the rise as companies strive to keep pace with rapid technological change and compete in the global economy.