UNIT 2: ORGANIZATIONAL CULTURE AND

ENVIRONMENT (5 HRS.)

The manager: Omnipotent or symbolic? The

organization’s culture; Environment: Defining
environment, specific environment, general
environment, Influence on management practice
THE MANAGER: OMNIPOTENT OR SYMBOLIC?
 The traditional view of managers is that they have
virtually unlimited control over the organization and
its purpose, functions and operations and therefore
they alone are responsible for all its success and
failures. This view is called omnipotent view of
management.
 The omnipotent view of managers is that the
manager is all-knowing.
 He/she has total control over the organizations
mission and operations.
 That is, the manager is the visionary who steers all
aspects of the organization.
 If an organization is successful or unsuccessful, the
result is largely due to the efforts taken or decisions
made by the high-level managers.
 Example: Coaches, Faculties, Group leaders,
supervisors etc.
SYMBOLIC VIEWS
 Symbolic view of management is the view that managers have
only a limited effect on substantive organizational outcomes
because of large number of factors outside their control.
 This view is in direct contrast to the omnipotent view. It says that
the role of high-level management is largely symbolic. Managers
have a limited effect on the organization achieving its goals or
objectives.
 While the adequate performance of management responsibilities
has an effect on organizational performance, the manager's
activities are not the driving force behind strong organizational
performance.
 It recognizes that there are many environmental factors
(economic, political, legal, competitive, consumer-based,
technological, etc.) that affect the performance of the organization
that is outside of the control of managers.
 Thus managers are not individually responsible for the success or
failure of the organization. Lots of factors contribute to the
quality of an organization.
 Example: The economy, customers, governmental policies,
competitors, industry conditions, technology etc.
 THE ORGANIZATION’S CULTURE;
 Organizational culture is
generally understood as
all of a company’s
beliefs, values and
attitudes, and how these
influence the behaviour
of its employees.
 Culture affects how
people experience an
organization—that is,
what it’s like for a
customer to buy from a
company or a supplier to
work with it.
 It shows up in company
policies such as dress
code and office hours.
QUALITIES OF A GREAT ORGANIZATIONAL
CULTURE
Every organization’s culture is different, and it’s important to
retain what makes your company unique. However, the
cultures of high-performing organizations consistently reflect
certain qualities that you should seek to cultivate:
• Alignment comes when the company’s objectives and its
employees’ motivations are all pulling in the same direction.
Exceptional organizations work to build continuous alignment
to their vision, purpose, and goals.
• Appreciation can take many forms: a public kudos, a note of
thanks, or a promotion. A culture of appreciation is one in
which all team members frequently provide recognition and
thanks for the contributions of others.
• Trust is vital to an organization. With a culture of trust,
team members can express themselves and rely on others to
have their back when they try something new.
• Performance is key, as great companies create a culture
that means business. In these companies, talented
employees motivate each other to excel, and, as shown above,
greater profitability and productivity are the results.
• Resilience is a key quality in highly dynamic environments
where change is continuous. A resilient culture will teach leaders
to watch for and respond to change with ease.
• Teamwork encompasses collaboration, communication, and
respect between team members. When everyone on the
team supports each other, employees will get more done and feel
happier while doing it.
• Integrity, like trust, is vital to all teams when they rely on each
other to make decisions, interpret results, and form partnerships.
Honesty and transparency are critical components of this aspect
of culture.
• Innovation leads organizations to get the most out of available
technologies, resources, and markets. A culture of innovation
means that you apply creative thinking to all aspects of your
business, even your own cultural initiatives.
• Psychological safety provides the support employees need to
take risks and provide honest feedback. Remember that
psychological safety starts at the team level, not the individual
level, so managers need to take the lead in creating a safe
environment where everyone feels comfortable contributing. Now
that you know what a great culture looks like, let’s tackle how to
build one in your organization.
 BUSINESS ENVIRONMENT
 In general sense, all businesses aim to achieve multiple
objectives. A business manager identifies and sets some
important objectives like survival, stability, growth,
profitability and efficiency.
 Enterprise needs to balance these objectives.

 Profit is the biggest stimulus for the survival of the business

and its future development.
 There is always a risk involved in business and profit is the
reward for taking the risk.
 Business can be established, but it is difficult to survive in
this competitive world where whole world is one market.
So, it is important for business to scan the environment.
 Environment refers to all external forces which affect
the functioning of business.
 Environment factors are largely, if not totally, external
and beyond the control of individual industrial
enterprises and their managements.
 The surrounding in which business operates is called
business environment.
The word ‘Business Environment’ has been defined
by various authors as follows:

 According to Keith Davis, Business environment is

the aggregate of all conditions, events and influences

that surround and affect it.

 According to Reinecke and Schoell, the environment

of business consists of all those external things to

which it is exposed and by which it may be influenced

directly or indirectly.
 These definitions give a clear understanding of the
business environment.
 We can say that business environment is a
combination or mixture of complex, dynamic and
uncontrollable external factors within which a
business is to be operated.
 The change in tastes and preferences of customers,
introduction of new technologies, innovations,
government policies, etc., all are parts of the business
environment.
 Business needs to accept and adapt these changes
promptly to survive in the market. So, it is necessary
for the business to analyze the business environment.
 Business environment is thus the sum total of all
forces surrounding and influencing the life and
development of the firm. It reflects the total of all
things ( factors, forces, and institutions) external to a
firm that affects it.
NATURE OF BUSINESS ENVIRONMENT
 The business environment of an organization usually poses
threats as well as opportunities.
 To grasp the opportunities and reduce the threat, it is
important to know the nature of business environment.
 Following are some points which describe nature of
business environment:
1. Internal and external environment:
2. Dynamic and ever-changing:
3. Complexity of the environment:
4. Inter-relatedness:
5. Uncertainty:
6. Impact:
7. Inter-dependence:
 Internal and external environment:
 Every business is surrounded by internal and
external environment.
 Internal environment can be controlled by an
organization, like men, money, material,
machine and method, whereas external
environment is uncontrollable like political
conditions, technologies, legal regulations, etc.

 Dynamic and ever-changing:

 Business environment keeps on changing
frequently in terms of technologies, government
rules and regulations, socio-economic
conditions, etc. which make business dynamic.
 Complexity of the environment:
 Business environment cannot be easily analyzed
because of too much complexity involved.
 Environment consists of a number of factors,
events, conditions and influences, generating
from different sources which impact business,
thus, making the business complex.
 Inter-relatedness:

 Factors of business environment are related to

each other.
 For example, change in political parties will
result in changing the government rules, fiscal
policies, market conditions, technology, etc.
 So, all the factors need to be scanned properly
because these factors are inter-related to each
other.
 Uncertainty:
 It is difficult to predict the changes going to take
place in future because environment keeps on
changing.
 These changes are uncontrollable. So, business can
only try to combat from these challenges.
 For example, in case of fashion industries, changes
take place so frequently, economy could collapse any
time.

 Impact:
 Impact means the effect of environment on business.
 Business environment has both long-term and short-
term impacts on business.
 For example, different firms may get influenced
differently from change in monetary policy.
 Inter-dependence:
 A business firm and its environment are
mutually interdependent.
 The economic status of a country affects the
development of technology or it may change the
lifestyle of people
SCOPE OF BUSINESS ENVIRONMENT

 Internal and external environment:

 Internal environment includes all those factors that are
within an organization and impart strength or cause
weakness in business.
 For example, inefficient human resource, superior raw
material, etc.
 External environment includes those factors which are
beyond the control of business and are outside the
organization.
 They provide opportunities and pose threat to business.
 For example, change in political conditions, technological
change, etc.
 Specific and general environment:
 Specific environment includes external forces that
directly impact or influence organizations' decisions and
actions and are directly relevant to the achievement of
organizations' goals.
 The main forces that make up the specific environment are
customers, suppliers, competitors and pressure groups.

 General environment includes the economic,

political/legal, socio-cultural, demographic, technological
and global conditions that affect organizations.
 External forces do not affect organizations to a great
extent, but organizations must plan, organize, lead and
control their activities taking into account these factors.
 Micro environment and macro environment:
 Micro environment impacts the working of a particular
business. It has direct impact on business activities.
 It includes customers, suppliers, market intermediaries,
competitors, etc. These factors are controllable to some
extent.

 Macro environment is general environment that impacts

the working of all businesses.
 It is uncontrollable and influences indirectly. Political
conditions, economy, technology, etc., come under macro
environment.
 Controllable and uncontrollable environment:
 All those factors which are governed by business come
under controllable environment.
 Internal factors are treated as controllable factors, like
men, material, machine, money, etc.
 Uncontrollable factors are external and are beyond the
control of business like technological change and law
related change.
IMPORTANCE OF BUSINESS
ENVIRONMENT
 Identification of business
opportunities
 Optimum utilization of resources

 Identification of threat and early

warning signal
 Coping with the rapid changes

 Meeting competition

 Identifying firm’s strength and

weakness
 Assisting in planning and policy
formulation
 Identification of business opportunities:
 Many opportunities are provided by business environment
to the organization.
 Scanning business environment would help business get
the first mover advantage.
 If changes are analyzed carefully, then they can be the
reason for business success.

 Optimum utilization of resources:

 Resources like raw material, machine, money, labor, etc.
are input for business.
 All these inputs are provided by environment to the
business firms for carrying out their activities and also
expect something in return.
 Identification of threat and early warning signal:
 Business can recognize the threat by analyzing the change
taking place in the environment.
 For example, if any new multinational company is
entering the Nepalese market, the manager of an Nepalese
firm dealing with same product as that of the multinational
company should take it as a warning signal.
 Before the MNC launches its product, the manager should
implement measures, such as improving the quality of his
product and heavy advertisement.
 Coping with the rapid changes:
 To efficiently cope with these changes, managers must
understand the environment and should adopt appropriate
courses of action at the right time.
 It helps management become more sensitive to ever-
changing needs of customers. As a result, they are able to
respond to such changes effectively.
 Meeting competition:
 This helps firms analyze competitors’ strategies and
formulate their strategies accordingly.
 Identifying firm’s strength and weakness:
 Business environment helps identify the individual strength
and weakness in view of the technological and global
developments.
 Assisting in planning and policy formulation:
 Business environment brings both threats and opportunities
to a business.
 Having a good understanding of the business environment
can immensely help an organization's management in their
future planning and decision-making endeavors.
 For example, competition increases with the entry of new
firms in the market.
The management has to draft new plans and policies to deal with
new competitors. Environmental awareness provides intellectual
stimulation to planners in their decision making. They can make
changes in their plans efficiently and effectively.
COMPONENTS OF BUSINESS
ENVIRONMENT

 The performance of an organization is affected by the

business environment. It has a far-reaching impact on its
survival, profit and growth.
 There are certain forces inside and outside the
organization.
 These forces affect the business both in positive and
negative ways.
VARIOUS COMPONENTS OF BUSINESS
ENVIRONMENT ARE AS FOLLOWS:

 Internal environment:
 These are those factors or conditions that exist within an
organization and affect its performance.
 These factors are controllable in nature and organization
can try to change or modify these factors.
 Organization's resources like men, material, money,
method and machine come under internal environment.
Various internal factors are as follows:
 Value system: The values are the ethical beliefs that guide
the organization in achieving its mission and objectives. It is
framed by top-level managers like board of directors. The
extent to which the value system is shared by all in the
organization is an important factor contributing to its success.
 Mission and objectives: The objective is the end towards
which business activities are directed. All businesses focus on
maximization of profit. Mission is defined as the overall
purpose or reason for its existence. A mission guides and
influences an organization's decisions and economic
activities. An organization can change or modify its mission
and objective accordingly.
 Organization structure: The organizational structure is
the hierarchy in business that define roles, responsibilities and
supervision. The composition of the board of directors, the
professionalism of management, etc., come under
organization structure and are important factors influencing
business decisions. For efficient working of a business
organization and to facilitate prompt decision making, the
organization structure should be conducive.
 Corporate culture: Shared values and belief in an organization
which determine its internal environment are called corporate
culture. Organization where there is strict supervision and control
results in lack of flexibility and unsatisfied employees. The sets of
values that help members understand what organization stands for
how it does work, what it considers, cultural values of business
forces of business, and so on. It helps in direction of activities.
 Human resources: Human quality of a firm is an important
factor of internal environment. Skills, qualities, capabilities, attitude,
competencies and commitment of its employees, etc., could
contribute to the strengths and weaknesses of an organization.
Organizations may find it difficult to carry out modernization and
redesigning because of resistance by its employees.
 Physical resources and financial capabilities: Physical
resources, such as plant and equipment, facilities and financial
capabilities of a firm determine its competitive strength which is an
important factor for determining its efficiency and unit cost of
production. Also research and development capabilities of a
company determine its ability to introduce innovations which
enhance the productivity of workers. Financial capabilities are
company’s source of fund generation.
 External environment:
 These are those factors and the conditions which
are outside the organization and affect the
performance of business.
 External factors are further divided into micro
environment and macro environment which are
as follows:
 Micro environment: Those factors which have
direct impact on business. The various
constituents under micro environment are as
follows:
 Suppliers of inputs: The suppliers of
inputs are important factors in the external
micro environment of a firm. Suppliers
provide raw material and resources to the
firm. A firm should have more than one
supplier for proper inflow of inputs.
 Customers: They are the buyers of firm’s
products and services. Customers are an
important part of external micro
environment because sales of a product or
service are critical for a firm’s survival and
growth, so it is necessary to keep the
customers satisfied.
 Marketing intermediaries: Intermediaries
play an essential role of selling and
distributing its products to the final customers.
Marketing intermediaries are an important link
between a business firm and its ultimate customers.
Retailers and wholesalers buy in bulk and sell
business products and services to the ultimate
consumer.
 Competitors: Competitors are the rivalry in
business. Competition can based on pricing of
products or based on competitive advertising. For
example, organizations may sponsor some events
to promote the sale of different varieties and
models of their products. Business formulates
strategies after analyzing their competitor.
 Public: Public or groups, such as
environmentalists, media groups, women’s
associations, consumer protection groups, are
important factors in external micro environment.
Public, according to Philip Kotler, is any group
that has an actual or potential interest in or impact
on the company’s ability to achieve its objective.
 Macro Environment:
 These are the factors or conditions which are general to all
businesses and are uncontrollable.
 Because of the uncontrollable nature of macro forces, a
firm needs to adjust or adapt it to these external forces.
These factors are as follows:
 Economic environment: All those forces
which have an economic impact on businesses
are called economic environment. It includes
agriculture, industrial production,
infrastructure, and planning, basic economic
philosophy, stages of economic development,
trade cycles, national income, per capita
income, savings, money, etc., For example,
low per capital income will negatively impact
business because people have less money to
spend.
 Political-legal environment: The activities of
legislature, executive and judiciary play a vital
role in shaping, directing, developing and
controlling business activities. Rules and
regulations, framed by the government, like
licensing policy, polythene ban, etc., affect the
business. Business growth can be achieved by
using a stable and dynamic political-legal
environment.
 Technological environment: Systematic
application of scientific or other organized
knowledge to practical tasks or activities is
called technology. As it is changing fast,
businessmen should keep a close look on those
technological changes for its adaptation in
their business activities.
 Global or international environment: The
global environment is also important for
shaping business activity. In the era of
globalization, whole world is a market.
Business analyses international environment to
cope up with the changes.
 Socio-cultural environment: People’s attitude
towards work and wealth, lifestyle, ethical
issues, role of family, marriage, religion and
education and also social responsiveness of
business affect the business.
THE TASK ENVIRONMENT
 External environment of an organization which
affects its ability to reach business goals.
 Any business or consumer with direct involvement
with an organization may be part of the task
environment.
Factors of Task Environment
 The task environment is made up of external factors.
These factors include;
 Customers
 Suppliers
 Competition
 Labor force
 Government regulation
 Interest groups
ACTIVITY (ASSIGNMENT)- INDIVIDUAL

 Make a report on Environmental influence

on management practice with reference to
one company of your choice