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The
Organizational
Environment
and Culture
Chapter
Three

chapter3 Open Systems

• Organizations are open systems

– Organizations that are affected by, and that
affect, their external environment.
– The environment of an organization is its
surroundings – anything that affects its
operations, favorably or unfavorably.

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Types of organizational
chapter3
environment
• External environment
- All relevant forces outside a firm’s boundaries that
might affect it.
- The uncontrollable environment.
- Includes the General and the Task environment

• Internal environment
- Elements within the organizational boundaries
- The controllable environment.

The External
chapter3
Environment
• The General environment:
Includes governments, economic conditions,
and other fundamental factors that generally
affect all organizations.
• The Task environment
Includes Sectors that conduct transactions
with the organization like costumers,
competitors…that affects specifically the
organization

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chapter3 General Environment

• International
● Portion of the external
environment that
• Technological
represents events
originating in foreign
• Socio-cultural
countries as well as
• Economicopportunities for U.S.
companies in other
• Legal-Political
countries.
• Natural

chapter3 International Dimension

• Events originating
● Portioninofforeign countries as well as
the external
opportunities in other countries.
environment that
Exp: World Trade Organization / BREXIT / wars
represents events
• Impacts all originating
aspects of the
in external
foreign environment
countries
• New competitors/ Newas well as New suppliers
customers/
opportunities for U.S.
• Economic power has shifted
companies to China and India
in other
countries. compete globally
• Today, all companies

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chapter3 Technological Dimension

• Scientific and technological advances

allowing innovation :
(new business models/cost saving, customer targeting, etc.)
• Impacts:
Organizations/Managers/Customers
• Organizations should always
keep an eye on the recent
technological changes
(Can be an opportunity or a threat)

chapter3 Socio-Cultural Dimension

• Today’s demographics are
the foundation of the future
workforce
• Demographic trends affect
organizations globally:
• Business strategies/ Product&service
offer
• influence marketing, advertising, and
human resources policies

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chapter3 Economic Dimension

● General economic state in terms of:

Inflation/ Interest rates/ Income levels/ Gross
Domestic Product/ Consumer purchasing power/
Unemployment rate …

● Recent Trends
- Frequency of mergers and acquisitions
- Small business sector vitality
Exp: the forecast of business recession influences managers
to reduce expenses or postpone a new projects.

chapter3 Legal-Political Dimension

• Issues including: political stability, relationships with
neighbor countries, terrorism, pressure groups (lobbying for
or against some laws) etc.

• Exp: US trade policy toward China/ Iran

• The government intervenes in the economy

through setting policies (import/export policy, taxation
policy, investment policy, labor policy, competition policy,
consumer protection policy, etc.)

• A good business-government relationship is

crucial

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chapter3 Natural Dimension

• Concern for the natural environment that has no
voice.

• Growing importance and pressure comes from

different stakeholders

• Action examples:
– Eliminate nonbiodegradable plastic bags from the
environment

– Improving efficiency of plants and factories

– Investing in cleaner technologies and renewable energy

chapter3 Task Environment

Sectors that have a direct working relationship with

the organization:

➢ Customers
➢ Competitors

➢ Suppliers

➢ Labor Market

➢ Investors

➢ Regulators

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The Task
chapter3
Environment
• Customer: whoever pays money to acquire an
organization’s products or services.
-Customer's purchase keeps a company alive and profitable
-They may drive down prices and push for more or higher-
quality products

• Competitors: organizations competing with other

organizations
-Rivalry among competitors leads to price cutting /
advertising promotions/ enhanced customer service or
warranties/ improvements in product or service quality …

chapter3 Clash marketing

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chapter3 Clash marketing

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chapter3

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chapter3

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Copyright ©2010 by
South-Western, a division

The Task
chapter3
Environment
• Suppliers: provider of resources for other
organizations.
- A good relationship with suppliers helps to keep a steady
level of quality input materials
• Labor market: (or job market) refers to the
supply of and demand for labor.
• Regulators: control, regulate or influence an
organization’s policies and practices.
-It includes government agencies and interest groups like
Trade unions and chamber of commerce

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The Internal
chapter3
Environment

• Owner(s): someone who has legal property rights to

a business.
• Board of directors: governing body elected by a
corporation’s stockholders and charged with overseeing
the general management of the firm.
• Employees: those employed by the organization.
• Unions
• Physical work environment: the firm’s facilities.
• Culture: shared values and norms

The Internal Environment:

chapter3
Organizational Culture
• Each of us has a unique personality. An organization, too, has a
personality, which we call its culture.

• The culture of a company is a set of shared values and practices

that define an organization, both internally for employees and
externally as part of its public image.

• These shared values are rarely explicit. They’re not written down.
But they’re there, and all managers quickly learn what to do and
not do in their organization.

• Culture may be a powerful force or a limit on change

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chapter3 Culture

• Symbols
• Stories
• Heroes
• Slogans
• Ceremonies

chapter3 Environment and Culture

• The external environment influences

culture

• The internal environment should embody

the requirements for success

• Manager’s must pay attention to culture

– Recognize the ways culture can help or hurt
your department

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Sources of Organizational
chapter3
Culture
• The founder (owner) of the company who
shapes the culture of his organization
(vision, mission, leadership)

• The past practices of the organization

(The way things have been done)

• The behavior of top management

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Continuation of the
chapter3
Organizational Culture
• Recruitment of like-minded employees
who “fit”
• Socialization of new employees to help
them learn and adapt to the culture

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chapter3 Conservative vs Innovative

cultures
Conservative culture Innovative culture

• New ideas met with • Change perecived

resistance/ skepticism positively
• Low tolerance of • Value creativity/risk taking
ambiguity/risk • High tolerance of ambiguity
• Failure not tolerated • Focus on teamwork and
• Value open communication
stability/security/statusquo • Flat hierarchy
• Perefer directive • Failure is perceived as a
leadership learning opportunity
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