Organizational Environment

Managerial Issues and Challenges in today's business environment

1. Diversity 2. Globalization 3. Changing workforce 4. Technology 5. Innovation 6. Sustainability 7. Customer Service 8. Outsourcing and Offshoring 9. Economic Turbulence 10. Ethical Management

What are some of the recent issues and concerns that are influencing the business environment?

1. Financial crises 2. Increased social networking issues 3. Global power shifts

Eight Components of the task environment:

1.Customers -purchase the goods and services produced by the organization. 2.Suppliers and distributors- Suppliers provide resources to the organization; distributors sell the organization's end product or service to customers. 3.Competitors- offer similar products or services targeting the same set of customers. Firms seek a distinctive edge, or competitive advantage, against their rivals. 4.Government- consists of local, state, and federal agencies that regulate the business environment, protect workers from discrimination, and prevent fraudulent accounting. 5.Special interest groups- consist of like-minded individuals who are passionate about a specific issue, such as labor unions, who legally represent groups of workers. 6.Local communities- consist of the residents who live in the vicinity of the firm and may be its employees or customers. 7.Strategic partners- or strategic alliance, is an agreement between two or more firms to share resources in order to conduct business operations. 8. Mass Media- includes newspapers, magazines, television, radio, social media, and web pages that distribute information about the organization to the public.

Unions negotiate with management on behalf of their members regarding issues such as:

-Compensation (wages, raises, bonuses) -Benefits (health care, retirement plans) -Working conditions

External Environment

-Elements outside an organization that may affect everyday activities, comprising the task environment and general environment -Task Environment:A group of sectors that directly and immediately impact the organization and influence its decision making on a daily basis and Includes external stakeholders such as customers, suppliers, competitors, and regulators -General Environment: A far-reaching set of forces (e.g., economic forces, global forces) that indirectly impact the organization over time

internal environment

-Includes internal stakeholders such as the company's owners and/or stockholders, employees, and board of directors -Drives company strategy, culture, technology, policies, procedures, and intellectual capital

Six Forces in the General Environment

1.Political, Legal, and Ethical Forces Political forces: Governmental (executive) power, regulations, and enforcement Legal forces: Creation and interpretation of the law through the legislative and judicial processes Ethical forces: Foundation upon which most laws are created, interpreted, and subsequently enforced These forces are highly intertwined because influencing one can indirectly influence another. Economic Forces Labor and financial issues that affect organizations, including: Interest rates Unemployment Inflation Trade agreements Price controls Economic growth Currency fluctuations The same economic forces can affect two countries in vastly different ways. 3.Technological Forces The combination of tools, skills, and knowledge that an organization utilizes to make the conversion of inputs to outputs more efficient and effective 4.Demographic Forces Shifts in population composition regarding age, gender, ethnic origin, sexual orientation, and social class 5.Sociocultural Forces Trends regarding values, lifestyle, and social movements that strongly influence the popularity of a product or service 6.Global Forces General environment forces of one country that affect organizations in another country

The external environment is made up of two distinct areas:

1.Task Environment Involves groups and situations that affect the organization on a day-to-day basis Dictates how the firm will be run on a daily basis, allowing managers to focus their efforts on sectors having the most impact 2. General Environment Deals with dynamic and uncontrollable market forces that affect the organization over time Provides managers with necessary information that may influence an organization's long-term strategy

Key Characteristics #2 of Internal Environment

An organization's strategy reflects the unique combination of strengths and weaknesses within its internal environment.

Four Methods of Environmental Analysis used by managers to collect and analyze data on the organizational environment include:

Buffering -Absorbing uncertainty from an organization's environment so it can perform efficiently.Typically used in manufacturing firms; avoided by many service providers that value interacting with the uncertainties of the environment Boundary spanning-Scanning the environment to detect important information.Often incorporates software-driven business intelligence, or analytics, to detect patterns or trends Forecasting-Trying to predict what will happen in the future. May use quantitative forecasting (numerical data from past performance) or qualitative forecasting (subjective judgments) to make predictions Benchmarking - Comparing an organization's performance with the performance of competitors. Helps identify the organization's strengths and weaknesses from the perspective of competitors as well as that of consumers

General Environment

Definition: Far-reaching set of forces that indirectly affect and influence the organization over time Examples: Economic forces Global forces

Task Environment

Definition: Group of sectors that directly affect the organization and influence its decision making on a daily basis Examples: Customers Competitors

Ten Current Managerial Issues and Challenges

Diversity Changes in workplace demographics and interpersonal sensitivities Globalization Global shifts in economic power and status Changing workforce More educated, autonomous, and demanding workers Technology Shifts in communication, increased e-commerce, and growing social networking issues Innovation Constant demand for new solutions to problems Sustainability Increased concern with environmental preservation and sustainability Customer service Heightened concern with understanding customers and addressing their needs Outsourcing and offshoring Mounting pressure to reduce costs by contracting with third parties Economic turbulence Ongoing risk of global financial crises Ethical management Conflicts between the profit imperative and the need to behave ethically and responsibly

Elements of the external environment include:

Governmental policies and procedures Various economic indicators Social trends External stakeholders (e.g., customers, suppliers, competitors, and regulators)

Disadvantages of Labor Unions

Inability to compete with firms in countries lacking labor protections Perceptions of corrupt leadership or distrust in the union's agenda Antagonistic stance toward the organization

Benefits of Labor Unions

Increased pay or improved benefits Improved work conditions Changes to government policies affecting organizations and workers Incentive to invest more time and resources into workers

knowledge management

Innovative organizations assess and systematize their knowledge resources in order to find new solutions to ongoing problems and to gain a competitive advantage

Two Organizational Environment Components

Internal and External Environment

Diversity

The degree to which members of a group differ in terms of attributes often used to categorize people.

How have labor unions benefited organizations?

They often nudge firms to put more time and resources into their workers than into any other aspect of their organizations' environments.

Sectors

are parts of the external environment that provide the most influential opportunities or threats to the organization's overall performance.

Absorbing uncertainty from an organization's environment so it can perform efficiently is known as

buffering

Innovation can

can provide new sources of profits for creative organizations and, if managed correctly, can re-energize stagnant ones.

organizational environment

consists of the factors, forces, and groups both inside and outside an organization that impact everyday activities.

Impact of Labor Unions on Organizations

exert a strong influence on the organizations and industries in which they exist. In some cases unions are beneficial to organizations, while in others they represent an obstacle to the firm's success.

The factors, forces, and groups outside the boundary of an organization, which may affect everyday activities, are called the

external environment

right-to-work laws

forbid mandatory union membership.

stakeholders

individuals or groups who are affected by the organization. These individuals are what the organizational environment is partly determined by

Quantitative forecasting

involves making predictions based on numerical data from past performance.

Qualitative forecasting

involves making predictions based on subjective factors, such as the judgments and opinions of experts.

Offshoring

involves sourcing work, primarily business support services, to organizations in other countries.

Outsourcing

involves subcontracting with outside vendors to provide specific services that were previously done in house.

labor union

is a legal representative of a group of workers.

Forecasting

is a method of environmental analysis by which firms attempt to predict what will happen in the future.

Boundary spanning

is a method of environmental analysis in which organizations try to detect information they believe is important for their business.

Buffering

is a method of environmental analysis that involves absorbing uncertainty from the environment so the organization can perform its primary roles efficiently.

Key Characteristics #1 of Internal Environment

is created by: internal stakeholders: -managers, -functional employee -owners, -the board of directors.

An organization's domain

is the area of the external environment in which it operates, such as the customers it serves, where and how it obtains raw materials, and the governmental rules and policies it must follow.

Task Environment

is the part of the external environment that consists of sectors that directly and immediately impact the organization and influence its decision making on a daily basis.

Environmental Analysis

monitor what's is happening in the environment.

Boundary spanning involves

not only taking in important information, but also the tactical release of internal information to the external environment.

Business Intelligence

or analytics, a process by which firms can analyze large amounts of internal and external data to detect certain patterns or trends.

Customers

purchase the goods and services produced by the organization.

The role of government in an organization's environment is to

regulate the business environment protect workers from discrimination prevent fraudulent accounting

union security agreements

require all employees to join a union

Innovation

the act of looking at things differently and being creative in choosing solutions, is a key challenge that managers face.