Disclaimer: This study guide is NOT a substitute for reading the textbook chapters, and this guide

alone will not guarantee you a passing grade on exams. You must read the textbook chapters in their
entirety in order to fully prepare for the exam.

Management Chapter 3: Organizational environments and cultures

External environments: All events outside a company that have the potential to influence or affect it.
Its characteristics include:

1. Environmental change: The rate at which a company's general and specific environments
change.
 Stable environment: rate of change is slow.
 Dynamic environment: rate of change is fast.

Punctuated equilibrium theory: The theory that companies go through long periods of stability,
followed by short periods of dynamic, fundamental change, and then a new equilibrium.

Simply put: companies go through both stable and dynamic environments

Example:

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 2. Environmental complexity: number and the intensity of external factors in the environment
that affect organizations.
 Simple environment: few environmental factors.
 Complex environment: many environmental factors.

3. Resource scarcity: The abundance or shortage of critical organizational resources in an

organization's external environment.
a. Notes: response to resource scarcity..i.e. water shortage is sustainable practices

Uncertainty: how well managers can understand or predict which environmental changes and trends
will affect their business.

a. Notes: Environmental change, environmental complexity, and resource scarcity cause

uncertainty

There are 2 kinds of external environments that affect organizations:

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1. General environment changes: The economic, technological, sociocultural, and political
trends that indirectly affect all organizations.
a. Influences all businesses in many industries
b. Example: lowering prime lending rate so customers can afford to buy more
c. Economic trend: when economy grows, people are working, wages are growing, and
people have more money to spend
i. Business confidence indice: Indices that show managers' level of confidence
about future business growth; predict economic trends
d. Technological trend: better products or more efficient production methods
i. Technology: The knowledge, tools, and techniques used to transform input
into output.
e. Sociocultural trend: demographic characteristics, general behavior, attitudes, and beliefs
of people in a particular society
i. Married women with children are more likely to work now than 4 decades ago
affects staffing choices in a company
f. Political trend: legislation, regulations, and court decisions that govern and regulate
business behavior
2. Specific environment changes: The customers, competitors, suppliers, industry regulations,
and advocacy groups that are unique to an industry and directly affect how a company does
business
a. Unique to firm’s industry and directly affects day to day business
b. Affects only one industry
c. Example: recalling toys because of a glitch in production in China
d. Effects of:
i. Customers
ii. Competitors: Companies in the same industry that sell similar products or
services to customers.
1. Competitive analysis: A process for monitoring the competition that
involves identifying competition, anticipating their moves, and
determining their strengths and weaknesses.
iii. Suppliers: Companies that provide material, human, financial, and
informational resources to other companies.
1. Supplier dependence: The degree to which a company relies on a
supplier because of the importance of the supplier's product to the
company and the difficulty of finding other sources of that product.
2. Buyer dependence: The degree to which a supplier relies on a buyer
because of the importance of that buyer to the supplier and the
difficulty of finding other buyers for its products.
3. Opportunistic behavior: A transaction in which one party in the
relationship benefits at the expense of the other; high degree of seller
or buyer dependence
4. Relationship behavior: The establishment of mutually beneficial, long-
term exchanges between buyers and suppliers.

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 iv. Industry regulation: Regulations and rules that govern the business practices
and procedures of specific industries, businesses, and professions.

v. Advocacy groups: Concerned citizens who band together to try to influence

the business practices of specific industries, businesses, and professions.

1. Public communications: advocacy group tactic that relies on voluntary

participation by the news media and the advertising industry to get the
advocacy group's message out.
2. Media advocacy: An advocacy group tactic that involves framing group
issues as public issues; exposing questionable, exploitative, or unethical
practices; and forcing media coverage by buying media time or creating
controversy that is likely to receive extensive news coverage.
3. Product boycott: An advocacy group tactic that involves protesting a
company's actions by persuading consumers not to purchase its product
or service.

You make sense of changes in external environment through 3 steps:

1. Environmental scanning: Searching the environment for important events or issues that might
affect an organization.
2. Interpreting environmental factors: What do environmental events and issues mean to the
organization? Are they threats or opportunities?
3. Acting on threats and opportunities
a. Cognitive maps: Graphic depictions of how managers believe environmental factors
relate to possible organizational actions.

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Internal environment: The trends and events within an organization that affect the management,
employees, and organizational culture.

 Organizational culture:
o key component of internal environments
o The values, beliefs, and attitudes shared by organizational members.
o How are these organizational cultures made?
 Organization founders create organizations in their own images and imprint
them with their beliefs, attitudes, and values. They sustain culture with:
a. Organizational stories: to make sense of organizational events and
changes and to emphasize culturally consistent assumptions, decisions,
and actions.
b. Organizational heroes: People celebrated for their qualities and
achievements within an organization.

Organizational Culture and Success

 ***Organizational culture important for organizational success b/c cultures based on

adaptability, involvement, a clear mission, and consistency can help companies achieve higher
sales growth, return on assets, profits, quality, and employee satisfaction.

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  Company mission: A company's purpose or reason for existing.
 Consistent organizational culture: A company culture in which the company actively defines
and teaches organizational values, beliefs, and attitudes.

Ways to Change Organizational Cultures

a. Behavioral addition: The process of having managers and employees perform new behaviors
that are central to and symbolic of the new organizational culture that a company wants to
create.
b. Behavioral substitution: The process of having managers and employees perform new
behavior central to the new organizational culture in place of behaviors that were central to the
old organizational culture.
c. Visible artifacts: Visible signs of an organization's culture, such as the office design and layout,
company dress code, and company benefits and perks, like stock options, personal parking
spaces, or the private company dining room.