Chapter 2: Organization And Environment

• The Organization’s Culture

• The Business Environment
• The External Environment
• Understanding the Global Environment
• Managing in a Global Environment
Organizational culture
• Organizational culture is a system of shared assumptions, values, and
beliefs, which governs how people behave in organizations. These
shared values have a strong influence on the people in the organization
and dictate how they dress, act, and perform their jobs. Every
organization develops and maintains a unique culture, which provides
guidelines and boundaries for the behavior of the members of the
organization. – Study.com
• Just as each individual has a unique personality — traits and
characteristics influence the way we act and interact with others. An
organization, too, has a personality, which is referred to as
organizational culture- Robbins
• An organization’s culture can make employees feel included,
empowered, and supported or it can make them feel the difference.
Organizational culture

• Organizational Culture —The shared values, principles, traditions, and ways of doing
things that influence the way organizational members act and that distinguish the
organization from other organizations.
• Cultural Values and practices evolve over time.
• Organizational Culture is:
• Perception — based on employee experience within the organization.
• Descriptive — how members describe it.
• Shared — employees share perception and experiences.
• Research suggests seven dimensions of culture that seem to capture the essence of an
organization’s culture.
 Contrasting organizational culture

• In many organizations, one cultural dimension is often emphasized

more than others and essentially shapes the organization’s
personality and the way the organization works.

• For example, Sony Corporation focuses on product innovation and

risk-taking. The company “lives and breaths” innovations, and
employees’ behaviors support that goal. (Product Orientation).

• Conversely, Southwest Airlines focuses on it’s employees and has

made them a central focus of it’s culture. (People Orientation).
 Contrasting organizational culture

Organization A Organization B

• Risk-taking and change • Risk-taking and change rewarded

discouraged • Creativity and innovation
• Creativity discouraged rewarded
• Close managerial supervision • Management trusts employees
• Work activities designed around • Work designed around teams
the individual employee

Both Organization A and Organization B are manufacturing firms, but each company emphasizes a different
dimension that have shaped organizational culture
 Contrasting organizational culture

Strong Cultures Weak Cultures

Values widely shared Values limited to a few people—usually top

management

Culture conveys consistent messages about what’s Culture sends contradictory messages about what’s
important important

Most employees can tell stories about company Employees have little knowledge of
history or heroes company history or heroes

Employees strongly identify with Employees have little identification with culture
culture

Strong connection between shared Little connection between shared values and behaviors
values and behaviors
 Strong Culture

• All organizations have cultures, but not all cultures equally influence
employees’ behaviors and actions.
• Strong Cultures—Organizational cultures in which the key values are
intensely held and widely shared.
• The more employees accept the organization's key values and greater their
commitment to those values, the stronger the culture.
• The stronger the culture becomes, the more it affects the way managers plan,
organize, lead, and control.
• Strong Cultures are associated with high organizational performance.
Strong Culture
• Apple’s strong culture of product innovation and customer-service
reflects the core values of it’s visionary cofounder, Steve Jobs. Jobs
instilled these core values in all employees, from top executives to
sales associates.
• Organizational Culture usually reflects the vision of the founder.
• The small size of most new organizations makes it easier to establish
organizational culture.
• Once culture is established, organizational practices help to maintain
it.
Establishing and Maintaining Culture
How Employees Learn Culture
• Employees “learn” an organization’s culture in a number of ways. The
most common are stories, rituals, material symbols, and language.
• Stories — organizational stories about significant events in the life of
the company help keep culture alive.
• Rituals — repetitive sequences of activities that express and reinforce
important organizational values and goals
• Material Artifacts and Symbols — convey to employees what is
important and the kinds of expected behaviors, eg. Risk-taking, etc.
• Language — many organizations or units of an organization use
language to identify and unite members of a culture. New employees
are frequently overwhelmed with acronyms and jargon that quickly
becomes a part of their language
Types of Managerial Decisions Affected by Culture

*
Creating an Innovative Culture

• Challenge and involvement—Are employees involved in, motivated

by, and committed to the long-term goals and success of the
organization?
• Freedom—Can employees independently define their work, exercise
discretion, and take initiative in their day-to-day activities?
• Trust and openness—Are employees supportive and respectful of
each other?
• Idea time—Do individuals have time to elaborate on new ideas before Canadian-based Peer 1 Hosting created a
taking action? culture that supports creativity and
• Playfulness/humor—Is the workplace spontaneous and fun? innovation. At its European headquarters,
the youthful staff of the global Web
• Conflict resolution—Do individuals make decisions and resolve infrastructure and cloud hosting provider
issues based on the good of the organization versus personal interest? interact in a casual and playful
• Debates—Are employees allowed to express opinions and put forth environment of trust and openness,
ideas for consideration and review? personal and professional challenge, and
• Risk taking—Do managers tolerate uncertainty and ambiguity, and involvement, freedom, debate, and risk
are employees rewarded for taking risks? taking.
Creating a Customer-Responsive Culture

Characteristics of Customer-Responsive
Culture Suggestions for Managers
Type of employee Hire people with personalities and attitudes consistent with customer service:
friendly, attentive, enthusiastic, patient, good listening skills

Type of job environment Design jobs so employees have as much control as possible to satisfy
customers, without rigid rules and procedures

Empowerment Give service-contact employees the discretion to make day-to-day decisions on

job-related activities

Role clarity Reduce uncertainty about what service-contact

employees can and cannot do by continual training on product knowledge,
listening, and other behavioral skills

Consistent desire to satisfy and delight Clarify organization’s commitment to doing whatever it takes, even if it’s
customers outside an employee’s normal job requirements
 Spirituality and Organizational Culture

• Workplace Spiritually — A culture where organizational values promote a sense

of purpose through meaningful work that takes place in the context of
community.
• Organizations with a spiritual culture recognize that people:
• Have a mind and spirit.
• Seek to find meaning and purpose in their work.
• Desire to connect with others and be a part of a community.
Five Cultural Characteristics of Spiritual
Organizations

Research indicates that Spiritual Organizations have five characteristics:

1. Strong sense of purpose, culture built around meaningful purpose.
2. Focus on individual development, recognize worth and value of individuals.
3. Trust and openness, characterized by mutual trust, honesty, and openness.
4. Employee empowerment, managers trust employees to make good decisions.
5. Tolerance of employee expression, employees free to express emotions.
Components of the External Environment
 Components/Classification of Business
Environment

Internal Environment Task Environment General Environment

• Economic Environment
• Customer
• Political Environment
• Organizational goals • Suppliers
• Legal Environment
and polices • Competitors
• Socio-cultural
• Organizational • Creditors/Financial
Environment
resources institutions
• Technological
• Organizational • Distributor
Environment
structure • Medias
• Physical/Natural
• Organizational culture • Government
Environment
• Pressure groups
• Global Environment
 Business System and Environment
Economic environment Political environment

Conversion Output
Input process
Technological environment

• Goods and

Socio-cultural environment
• Raw material Services
• Technology • Profit
• Labor • Employment
Business Value Chain
• Capital • Tax
• Facilities • Social
• Knowledge Responsibility

Feedback

Legal environment Global environment

Importance of Business Environment

• Identifying Firm’s Strength and Weakness: Business environment helps to

identify the individual strengths and weaknesses in view of the technological
and global developments
• Determining Opportunities and Threats: The interaction between the
business and its environment would identify opportunities for and threats to
the business. It helps the business enterprises for meeting the challenges
successfully.
• Giving Direction for Growth: The interaction with the environment leads to
opening up new frontiers of growth for the business firms. It enables the
business to identify the areas for growth and expansion of their activities.
• Continuous Learning: Environmental analysis makes the task of managers
easier in dealing with business challenges. The managers are motivated to
continuously update their knowledge, understanding and skills to meet the
predicted changes in realm of business.
• Image Building: Environmental understanding helps the business
organizations in improving their image by showing their sensitivity to the
environment within which they are working.
• Meeting Competition: It helps the firms to analyze the competitors’ strategies
and formulate their own strategies accordingly.
Assessing Environmental Uncertainty

• Environmental uncertainty refers to the degree of change

and complexity in an organization’s environment.
The first dimension of uncertainty is change.
1. Organizations are stable, minimal change
2. Organizations are dynamic, frequent change

• Organizational Complexity refers to the number of

components in an organization’s environment and the
extent of the organization’s knowledge about those
components.
Environmental Uncertainty Matrix
Managing Stakeholder Relationships
• The nature of stakeholder relationships is another way in which the
environment influences managers. The more obvious and secure these
relationships, the more influence managers will have over
organizational outcomes.
• Stakeholders – Any constituencies in an organization’s decisions and
actions.
• The following(next slide) figure identifies some of the organization’s
most common stakeholders which includes both internal and external
constituent groups.
Organizational Stakeholders
The Benefits of Good Stakeholder
Relationships

• Improved predictability of environmental changes

• Increased successful innovations
• Increased trust among stakeholders
• Greater organizational flexibility to reduce the impact of change
Contrast the actions of managers according
to the omnipotent and symbolic views
1. Omnipotent (supreme) View — Managers are directly responsible for the
organization’s success or failure.
2. Symbolic View — Much of the organization’s success or failure is due to
external forces outside of the manager’s control.
3. The two constraints on managers' discretion are organizational culture
(internal) and the environment (external).
Describe the constraints and challenges facing managers in today’s external
environment

1. The external environment includes those factors and forces outside the
organization that affect its performance.
2. The main components of the external environment are, economic,
demographic, political/legal, Sociocultural, technological, and global.
3. Managers face constraints and challenges from these components because
they have an impact on jobs, environmental uncertainty, and stakeholder
relationships
Discuss the characteristics and importance of organizational
culture.

1. The seven dimensions of culture are: attention to detail, outcome orientation,

people orientation, team orientation, aggressiveness, stability, innovation and
risk taking.
2. The stronger the culture, the greater the impact on the way managers plan,
organize, lead, and control.
3. The original source of the organizational culture reflects the founder’s vision.
4. Culture is transmitted through stories, rituals, material symbols, and
language.
Describe current issues in organizational culture
1. The characteristics of an innovative culture are challenge and involvement, freedom,
trust and openness, idea time, playfulness/humor, conflict resolution, debates, and
risk taking.
2. A customer responsive culture has five characteristics: outgoing and friendly
employees; jobs with few rigid rules, procedures, and regulations; empowerment;
clear roles and expectations; and employees who are conscientious in their desire to
please the customer.
3. Spiritual organizations have five characteristics: strong sense of purpose, focus on
individual development, trust and openness, employment, and toleration of
employee expression.
Understanding global environment
• Attitudes towards globalization
• Importance of global trading mechanism and regional trading alliances
• The structures and techniques organizations use as they go
international
• The relevance of the political/legal, economic, and cultural
environments to global business
Global Perspectives
• Parochialism – Viewing the world solely through your own
perspectives, leading to an inability to recognize differences between
people.
• Ethnocentric Attitude – The parochialistic belief that the best work
approaches and practices are those of the home country.
• Polycentric Attitude – The view that the managers in the host country
know the best work approaches and practices for running their
business.
• Geocentric Attitude – A world-oriented view that focuses on using
the best approaches and people from around the globe.
Understanding the Global Environment – Trading Alliances

• European Union (EU) – A union of 27 democratic European nations created

as a unified economic and trade entity with the Euro as a single common
currency
• North American Free Trade Agreement (NAFTA) – An agreement among
the Mexican, Canadian, and U.S. governments in which certain barriers to
trade have been eliminated.
• Association of Southeast Asian Nations (ASEAN) – A trading alliance of 10
Southeast Asian nations. ( India, Thailand, Singapore, Philippine, Vietnam,
Myanmar, Cambodia, Brunei, Laos and Malaysia)
• South Asian association for Regional Cooperation (SAARC): -(Nepal,
Bhutan, Bangladesh, India, Pakistan, Sri Lanka, Maldives, and Afghanistan)
Global Trade Mechanisms

• World Trade Organization (WTO) – A global organization of 164

countries that deals with the rules of trade among nations.
• International Monetary Fund (IMF) – An organization of 190 countries
that promotes international monetary cooperation and provides advice, loans,
and technical assistance.
• World Bank Group – A group of five* closely associated institutions that
provides financial and technical assistance to developing countries.
• Organization for Economic Cooperation and Development (OECD) –
An international economic organization that helps its 36 member countries
achieve sustainable economic growth and employment. (US, Germany,
France etc. )
Types of International Organizations
• Multinational Corporation (MNC) – A broad term that refers to any
and all types of international companies that maintain operations in
multiple countries.
• Multi-domestic Corporation – An MNC that decentralizes
management and other decisions to the local country.
• Global Company – An MNC that centralizes management and other
decisions in the home country.
• Transnational* or Borderless Organization – An MNC in which
artificial geographical barriers are eliminated
How Organizations Go Global
How Organizations Go Global

• Global Sourcing – Purchasing materials or labor from around the world

wherever it is cheapest.
• Exporting – Making products domestically and selling them abroad.
• Importing – Acquiring products made abroad and selling them
domestically.
• Licensing – An organization gives another organization the right to make or
sell its products using its technology or product specifications.
• Franchising – An organization gives another organization the right to use
its name and operating methods. Franchising is based on a marketing
concept which can be adopted by an organization as a strategy for business
expansion. Where implemented, a franchiser licenses its know-how,
procedures, intellectual property, use of its business model, brand, and
rights to sell its branded products and services to a franchisee. 
How Organizations Go Global
• Strategic Alliance – A partnership between an organization and one
or more foreign company partner(s) in which both share resources and
knowledge in developing new products or building production
facilities.
• Joint Venture – A specific type of strategic alliance in which the
partners agree to form a separate, independent organization for some
business purpose.
• Foreign Subsidiary – Directly investing in a foreign country by
setting up a separate and independent production facility or office.
Managing in a Global Environment
1. The Political/Legal Environment
• U.S. managers are accustomed (familiarized) to a stable legal and political
system
• Managers must stay informed of the specific laws in countries where they
do business
• Some countries have risky political climates
2. The Economic Environment
• Free Market Economy – An economic system in which resources are
primarily owned and controlled by the private sector.
• Planned Economy – An economic system in which economic decisions are
planned by a central government.
Managing in a Global Environment
3. The Cultural Environment
National Culture – The values and attitudes shared by individuals from
a specific country that shape their behavior and beliefs about what is
important.
Hofstede’s framework for assessing cultures – One of the most
widely referenced approaches to helping managers better understand
differences between national cultures.
Hofstede’s framework
for assessing cultures
Global Management in Today’s World
• Global Leadership and Organizational Behavior Effectiveness
(GLOBE) program – A research program that studies cross-cultural
leadership behaviors.
• The Challenge of Openness
• The increased threat of terrorism by a truly global terror network
• Economic interdependence of trading countries
• Intense underlying and fundamental cultural differences—differences that
encompass traditions, history, religious beliefs, and deep-seated values.
• Cultural Intelligence – Cultural awareness and sensitivity skills.
• Global Mind-Set – Attributes that allow a leader to be effective in cross-
cultural environments.
A Global Mind-Set
Learning Objectives
• Contrast ethnocentric, polycentric, and geocentric attitudes toward
global business.
• Parochialism – Viewing the world solely through your own eyes and
perspectives.
• Polycentric Attitude – Managers in the host country know the best work
approaches and practices for running their business.
• Geocentric Attitude – A world-oriented view that focuses on using the best
approaches and people from around the globe.
Discuss the importance of regional trading alliances and global trade mechanisms.

• The European Union consists of 28 democratic countries.

• NAFTA helps Canada, Mexico, and the United States strengthen their global
economic power.
• ASEAN is a trading alliance of 10 Southeast Asian nations.
• World Trade Organization (W T O) monitors and promotes trade
relationships.
• The International Monetary Fund (I M F) and the World Bank Group provide
monetary support.
• The Organization for Economic Cooperation and Development assists its
member countries with financial support.
Describe the structures and techniques organizations use as they
go international.

• A multinational corporation – An international company that maintains operations in

multiple countries.
• A multi-domestic organization – An MNC that decentralizes management and other
decisions to the local country.
• A global organization – An MNC that centralizes management and other decisions in
the home country.
• A transnational organization – An MNC that has eliminated artificial geographical
barriers.
• Global sourcing – Purchasing materials or labor from around the world wherever it is
cheapest.
• Exporting – Making products domestically and selling them abroad.
• Importing – Acquiring products made abroad and selling them domestically
Describe the structures and techniques organizations use as they
go international.

• Licensing – Gives that organization the right to use the company’s

brand name, technology, or product specifications.
• Franchising – Use another company’s name and operating methods.
• Global strategic alliance – Partnership between an organization and
foreign company partners.
• Joint venture – A strategic alliance in which the partners agree to form a
separate, independent organization for some business purpose.
• Foreign subsidiary is a direct investment in a foreign country that a
company creates by establishing a separate and independent facility or
office.
Explain the relevance of the political/legal, economic, and
cultural environments to global business.

• The laws and political stability of a country are issues in the global
political/legal environment with which managers must be familiar
• Managers must be aware of a country’s economic issues such as currency
exchange rates, inflation rates, and tax policies.
• Geert Hofstede identified five dimensions for assessing a country’s culture:
individualism-collectivism, power distance, uncertainty avoidance,
achievement-nurturing, and long-term/short-term orientation.
• The GLOBE studies identified nine dimensions for assessing country cultures.