MHR 3010 CH 3

BP stock prices falling 25% during the first month after the oil spill

Economic A fall in BP stock prices could either raise or lower the stock market as a whole, which would influence the overall economy.

President Barack Obama placing a six-month moratorium on offshore drilling

Legal-political President Obama could place a moratorium on drilling because of his political power as an elected official.

Political/Legal Component

includes the legislation, regulations, and court decisions that govern and regulate business behavior

Toyota is well known for having a good rapport with its suppliers. If Toyota wanted to lower costs on its vehicles, it might go to one of its suppliers and help them figure out how to become more efficient in order to lower costs. That supplier can then provide Toyota with a lower-priced component and Toyota can lower their prices. This is an example of:

relationship behavior Relationship behavior focuses on establishing long-term, mutually beneficial relationships between buyers and suppliers. Instead of demanding that the supplier lower prices on the component it sold to Toyota, Toyota helped the supplier become more efficient in order to lower costs. Toyota was interested in having the supplier benefit from the buyer-seller relationship as well.

After scanning the environment, Indra Nooyi wanted to use a cognitive map to help her summarize the relationships between the environmental factors and possible actions for PepsiCo. Which of the following would Indra list as potential strategies on a cognitive map? Check all that apply. Sugar content in Pepsi Cola is too high Acquire healthy snack food brands Reduce the amount of sodium in Frito-Lay brand chips and snacks Customers want healthier food and beverage options

Acquire healthy snack food brands Reduce the amount of sodium in Frito-Lay brand chips and snacks When listing potential strategies on a cognitive map, Indra should include acquiring healthy snack food brands and reducing the amount of sodium in Frito-Lay brand chips and snacks. The high sugar content in Pepsi Cola would be listed as a company weakness and customers wanting healthier food and beverage options would be listed as an environmental factor impacting PepsiCo.

Simple environments

An environment with few environmental factors The dairy industry is an excellent example of a simple external environment.

Your manager has a bigger office than you do to show that your company values rank and position within the organization.

Artifact Artifacts such as the size of your manager's office are the physical objects that represent an aspect of an organization's culture.

Management at Work EA Sports, which manufactures a large number of sports video games, frequently changes its products to stay abreast of new trends in both sports and gaming. New technology is constantly appearing, and new competitors emerge on a regular basis. Located in the heart of California's Silicon Valley, EA Sports must compete aggressively to hire engineers and game designers.

At EA Sports, the environment is dynamic Correct because of the pace of change Correct and complex Correct because of the number of factors that are changing. Resources are scarce. The managers at EA Sports are facing conditions of high uncertainty. This means that it will be difficult for them to make strategic decisions about the types of products the company will offer in the future.

Changing Environments - Management at Work

Management at Work In addition to its famous soft drink, PepsiCo also owns Frito-Lay, Quaker, Tropicana, and Gatorade brands. The company owns 22 global brands which each generate over $1 billion in annual revenue. In the early 2000s, PepsiCo recognized that consumers were interested in healthier drink and snack options. As a result PepsiCo. has set targets for reduced sugar, sodium, and fat in their food and beverage products. They have also introduced healthier food items including Quaker Real Medleys portable oatmeal with real fruit and nuts and SmartFood Delight a reduced-fat popcorn. In addition to changes to their current products, PepsiCo. acquired healthier snack and beverage brands including Stacy's Pita Chip Co., Naked Juice, and KeVita. In addition to diversifying their product line, PepsiCo CEO, Indra Nooyi, has increased spending in Research & Development. The company is researching ancient grains, berries, and plants, and hired a former Mayo Clinic endocrinologist to advise PepsiCo on the impact of sugar, salt, and fat on consumers.

Organizational Culture Culture makes organizations feel different from one another. Different companies, even companies in the same industry, just do things differently. You can experience this for yourself by going to two local supermarkets—one a part of a large chain and the other locally owned. Look around you. Does someone offer to help you when you walk in the door? Do the employees seem happier at one location compared to the other? Do people wear uniforms in one place but not at the other? All of these things can give you clues about the company's culture. In the following diagram, identify the levels of the corporate culture.

Seen Heard Believe

At a local university, students talk about being able to retake an exam three times as a way of showing how committed the school is to help them learn.

Story When people share tales about things that have been done in the past, they are telling stories, such as the tale about students being able to retake an exam three times. These stories capture the essence of the firm's vision and values by showing how people have lived them.

After British Petroleum's (BP) 2010 oil spill, BP required that vendors meet its qualification criteria, which include environmental and ethical standards. This impacts the supplier Correct component of BP's specific environment.

Supplier The supplier component of the specific environment consists of companies that provide material, human, financial, and informational resources to other companies.

Using deep-sea submersibles to take pictures of the oil leak a mile below the surface of the water

Technical Deep-sea submersibles incorporate new technology, and their introduction had a huge impact on underwater drilling

Apple pays close attention to the design of the new Samsung Galaxy phone. After thinking the designs were too similar, Apple filed a lawsuit for copyright infringement against Samsung. Samsung impacts the __________________ component of Apple's specific environment.

competitive

Apple pays close attention to the design of the new Samsung Galaxy phone. After thinking the designs were too similar, Apple filed a lawsuit for copyright infringement against Samsung. Samsung impacts the competitor Correct component of Apple's specific environment.

competitor The competitor component of the specific environment consists of companies in the same industry that sell similar products or services to customers.

Wal-Mart--the largest retailer in the world--is well-known for its everyday low prices. The store carries a Vlasic gallon-jar of pickles for just $2.97. When Vlasic approached Wal-Mart to raise the price of the jar to help Vlasic on its profits, Wal-Mart refused and threatened that another manufacturer could easily take its place. This is an example of:

opportunistic behavior Opportunistic behavior occurs when one party in the relationship benefits at the expense of the other. Although Vlasic felt they weren't making enough profit on the gallon-jar of pickles, they also felt like they couldn't afford for another manufacturer to take their place on Wal-Mart's shelves. Wal-Mart, on the other hand, used their position and power to force Vlasic to comply.

punctuated equilibrium theory

the theory that companies go through long periods of stability (equilibrium), followed by short periods of a dynamic, fundamental change (revolutionary periods), and then a new equilibrium

Sociocultural Component

refers to the demographic characteristics, general behavior, attitudes, and beliefs of people in a particular society. The sociocultural component of the general environment refers to the demographic characteristics, general behavior, attitudes, and beliefs of people in a particular society. Sociocultural changes and trends influence organizations in two important ways: First, changes in demographic characteristics, such as the number of people with particular skills or the growth of or decline in the number of people with particular population characteristics (marital status, age, gender, ethnicity), affect how managers staff their businesses Second, sociocultural changes in behavior, attitudes, and beliefs also affect the demand for a business's products and services. For example, urban dwellers in their twenties and early thirties who follow the latest styles, trends, and fashions—often referred to as hipsters—spend more of their income on food than their parents did at the same age. But rather than buying from the commercial food and beverage companies that their parents made into household names, these young adults gravitate toward organic foods, exotic ingredients, and craft beers, spirits, and mixers

four components of the general environment

1.)Economy 2.) Technological 3.) Sociocultural 4.) political/legal trends that indirectly affect all organizations.

Despite the fact that he is now retired, Costco employees still talk about how Jim Sinegal lives his principles of corporate responsibility. Not only did he spearhead Costco's purchase of Rwandan coffee, but he is also now sponsoring a school where Rwandan women can learn how to run their own businesses.

Hero When people hold others up as role models, they are using heroes such as Sinegal to embody an organization's values. Heroes can be real or mythical, and their actions show others what is expected of them.

Culture can be defined as

a set of key values, beliefs, and attitudes Managers and employees act the way they do because of their values, beliefs, and attitudes, and an organization's culture is expressed in the behavior of its workers. While fluency in different languages and diversity are aspects of culture, they do not define culture. A company's culture is also evident in its slogans and ceremonies. Slogans are sayings that capsulize key attitudes in a single phrase. For example, the slogans "Grasp the forces driving the change," or "Wisdom. Applied." are not just for advertising—they also tell employees what is expected of them in the organization. Ceremonies are ritualized activities that underscore what is important in an organization by giving it formal recognition. For example, around 4:00 PM on Friday afternoons, foam darts fly around the office at Aplia. This ceremony celebrates the spirit of play that is just as important as work in the Aplia culture.

PETA, People for the Ethical Treatment of Animals, are calling on a boycott of Hermés for the selling of luxury bags and belts made of alligator and crocodile skin. This product boycott impacts Hermés'advocacy group Correct component of its specific environment.

advocacy group The advocacy group component of the specific environment consists of groups of concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions.

External Environment

all events outside a company that has the potential to influence or affect it

After scanning the environment, PepsiCo discovered consumers' desire for healthier food options. The company then thought about how this environmental factor related to the possible actions the company could take. Managers at PepsiCo likely depicted these relationships by

creating a cognitive map Cognitive maps can help managers depict how environmental factors related to possible organizational actions. Creating a cognitive map usually occurs after managers have scanned the environment for events or issues that might affect the organization. Simply listing the threats and opportunities do not show a relationship--positive or negative--between the possible actions and environmental factors.

Keany Produce Co., a family-run produce farm in Maryland, provides organic greens and vegetables to Sweetgreen, a salad restaurant. Sweetgreen requires sustainable raw ingredients. For Keany, Sweetgreen impacts the customer Correct component of its specific environment.

customer The customer component of the specific environment represents the people or companies who purchase products and services. For Keany, Sweetgreen is a customer and their demands may change how Keany grows their greens and vegetables.

resource scarcity

the abundance or shortage of critical organizational resources in an organization's external environment

Specific Environment

the customers, competitors, suppliers, industry regulations, and advocacy groups that are unique to an industry and directly affect how a company does business

general environment

the economic, technological, sociocultural, and political/legal trends that indirectly affect all organizations

Management in the News

In April 2010, the explosion of British Petroleum's (BP) Deepwater Horizon oil drilling rig and the accompanying oil spill dramatically changed the external environment in which all oil companies operate. The explosion released more oil than any other accidental spill in history and had a huge impact on the waters and surrounding communities of the Gulf Coast. The conditions that led to the spill, the attempts to stop the spill, and the clean-up and aftermath of the spill prompted debates in the U.S. Senate, concern on Wall Street, and attention from companies all over the world.

dynamic environment

an environment in which the rate of change is fast. - Ex. cell phones, game consoles, network marketing. SiriusXM satellite radio makes money directly through the $15-a-month fees paid by 24 million subscribers, and indirectly via subsidies and revenue sharing paid to automakers (so that 75% of new cars have satellite radios that come with several free months of access to SiriusXM's 175 channels)

stable environment

an environment in which the rate of change is slow -ex: funeral business

complex environment

an environment with many environmental factors

uncertainty

doubt, the state of being unsure. the extent to which managers can understand or predict which environmental changes and trends will affect their businesses

Environmental complexity

the number and the intensity of external factors in the environment that affect organizations