Managing the External

Environment
and the Organization’s Culture
 The Manager: Omnipotent or
Symbolic?
• Omnipotent View of Management
– Managers are directly responsible for an organization’s success or failure.
– The quality of the organization is determined by the quality of its managers.
– When profits are up managers are rewarded with bonuses and when profits
are down managers are often fired ,in belief that new blood will bring
improved results.
– For example sport coaches are considered managers of their teams, coaches
who lose more games than they win are fired and replaced by new coaches
who are expected to correct the poor performance.
The Manager: Omnipotent or
Symbolic?
• Symbolic View of Management
– Much of an organization’s success or failure is due to
external forces outside of managers’ control.
– The ability of managers to affect outcomes is influenced
and controlled by external factors.
• The economy, customers, governmental policies,
competitors, industry conditions,
technology, and the actions of previous managers.
Defining the External Environment
• External Environment: Those factors and forces
outside the organization that affect the organization’s
performance.
– Components of the External Environment
• Specific environment
• General environment
The External Environment
Specific enviorment
• Specific environment: external forces that have a
direct and immediate impact on the organization.
an organization specific environment is unique to
it.
– The main forces that make up specific environment:
• Customers
• Suppliers
• Competitors
• Pressure groups.
Specific enviorment
• Customers: an organization exists to meet the needs
of customers who uses its output. Customers
represents potential uncertainty to an organization
as their taste changes and they became dissatisfied
with the organizations product or services.
• Suppliers: managers seek to ensure a steady flow of
needed input(supplies) at the lowest price possible.
An organization’s supplies being limited or delayed in
delivery can constraint managers decisions and
actions.
Specific enviorment
• Competitors: all organizations have competitors.
managers can not afford to ignore the competition.
• Pressure groups: managers must recognize the
special interest groups that influence the actions of
an organizations. For e.g pressure by PETA(people
for the ethical treatment of animals) on McDonalds
over its handling of animals during the slaughter
process led the company to stop buying beef from
one supplier until it met high standards for
processing cattle's.
General environment
• General environment: economic, socio-cultural,
political/legal, demographic, technological, and
global conditions that may affect the organization.
• Although these external factors don’t affect
organizations to the extent that changes in their
specific environment do, managers must consider
them as they plan, organize, lead, and control.
General environment
• Economic conditions: interest rates,inflation,changes
in disposable income, stock market fluctuations are
economic factors that can affect management
practices in an organization.
• Political/legal conditions: federal state, and local laws
as well as global and other country laws and
regulations, influence what organizations can and
cannot do.
General environment
• Socio-cultural conditions: The socio-cultural
component is concerned with society and cultural
factors such as values, attitudes, trends, traditions,
lifestyles, beliefs, tastes, and patterns of behavior.
• managers must adapt their practices to the changing
expectations of the society in which they operate .as
these values, customs, and taste changes and
managers must also change. For e.g. Pepsi co has
responded to customers changing attitudes about
food by offering customers healthier versions of their
favorite snacks.
General environment
• Demographic conditions: demographic conditions
encompass trends in population characteristics such
as gender, age, level of education, geographic
location, income and family composition. Changes in
these constraint how managers plan, organize, lead
and control.
• Technological conditions: in terms of the general
environment, the most rapid changes have occurred
in technology.
• Global : issues associated with globalization and a
world economy.
Stakeholder Relationships
Stakeholders
• Any constituencies in the organization’s environment that are
affected by the organization’s decisions and actions.
• These groups have a stake in or are significantly influenced by
what the organization does. In turn, these groups can influence
the organization.
• An organization depends on these external groups as sources
of inputs (resources) and as outlets for outputs (goods and
services), managers need to consider their interests as they
make decisions.
Organizational Stakeholders
Managing Stakeholder Relationships

1. Identify the organization’s external

stakeholders.
2. Determine the particular interests and
concerns of external stakeholders.
3. Decide how critical each external stakeholder
is to the organization.
4. Determine how to manage each individual
external stakeholder relationship.
Team Exercise
• Get into a small group with three to four other
class members and choose one organization.
Identify the important stakeholders of that
organization.
• As a group, be prepared to share your information
with the class and to explain your choices.
Tools for Environmental Analysis
• Porter's Five Forces Analysis
• PESTEL Analysis
Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter ©2012 Pearson Education, Inc. publishing as Prentice Hall
2-19
The Organization’s Culture
Organizational Culture
• The customs, rituals, and values shared by the
members of an organization that have to be
accepted by new members.
• An organization's prevailing ideas, values, attitudes, and
beliefs guide the way in which its employees think, feel,
and act.
• The culture decides the way employees interact at their
workplace.
Strong versus Weak Organizational Cultures
Dimensions of Organizational Culture
Dimensions of Organizational Culture

• Innovative Cultures
Companies that have innovative cultures are flexible and
adaptable, and experiment with new ideas. Innovative
Cultures consistently manages to innovate and capture
the majority of market share in a wide variety of
industries, in large part due to its unique culture. In
these companies, employees do not have bosses in the
traditional sense, and risk taking is encouraged by
celebrating failures as well as successes.
Dimensions of Organizational Culture
• Aggressive Cultures
Companies with aggressive cultures value competitiveness
and outperforming competitors: By emphasizing this, they
may fall short in the area of corporate social responsibility.
In aggressive companies, people may use language such
as “We will kill our competition.” For example, Microsoft
Corporation is often identified as a company with an
aggressive culture. In the past, Microsoft executives often
made statements such as “We are going to cut off
Netscape’s air supply. Everything they are selling, we are
going to give away.”
Dimensions of Organizational Culture
• Outcome-Oriented Cultures
Outcome-oriented cultures as those that emphasize
achievement, results, and action as important values. A
good example of an outcome-oriented culture may be
Best Buy Co. Inc. Having a culture emphasizing sales
performance. Employees are trained to sell company
products effectively, and they learn how much money
their department made every day. In these companies, it
is more common to see rewards tied to performance
indicators as opposed to seniority or loyalty. Insurance
companies etc..
Dimensions of Organizational Culture
• Stable Cultures
Stable cultures are predictable, rule-oriented, and
bureaucratic. Stable culture is blamed for killing good
ideas in early stages and preventing the company from
innovating. When the environment is stable and certain,
these cultures may help the organization be effective by
providing stable and constant levels of output. These
cultures prevent quick action, and as a result may be a
misfit to a changing and dynamic environment. Public
sector institutions may be viewed as stable cultures.
Dimensions of Organizational Culture
• People-Oriented Cultures
People-oriented cultures value fairness, supportiveness, and
respect for individual rights. These organizations truly live the
mantra that “people are their greatest asset.” In addition to
having fair procedures and management styles, these
companies create an atmosphere where work is fun and
employees do not feel required to choose between work and
other aspects of their lives. Starbucks is an example of a
people-oriented culture. The company pays employees above
minimum wage, offers health care and tuition reimbursement
benefits to its part-time as well as full-time employees, and
has creative perks such as weekly free coffee for all
associates. Pak army and atomic energy etc..
Dimensions of Organizational Culture
• Team-Oriented Cultures
Companies with team-oriented cultures are collaborative and
emphasize cooperation among employees. For example,
Southwest Airlines Company facilitates a team-oriented
culture by cross-training its employees so that they are
capable of helping each other when needed. Employees
participate in twice daily meetings named “morning overview
meetings” and daily afternoon discussions (DAD) where they
collaborate to understand sources of problems and determine
future courses of action. In team-oriented organizations,
members tend to have more positive relationships with their
coworkers and particularly with their managers. Zong etc …
Dimensions of Organizational Culture
• Detail-Oriented Cultures
Organizations with detail-oriented cultures are
characterized as emphasizing accuracy and paying
attention to details. Such a culture gives a competitive
advantage to companies in the hospitality industry by
helping them differentiate themselves from others. For
example, McDonald’s Corporation is the company that
specifies in detail how employees should perform their
jobs by including photos of exactly how French fries and
hamburgers should look when prepared properly.
How Do Employees Learn Culture?

• Stories - Narratives of significant events or

people, e.g. organization founders, rule
breaking, reaction to past mistakes etc.
• Rituals - Sequences of activities that express
and reinforce the important values and goals
of the organization
How Employees Learn Culture (cont.)

• Material Artifacts and Symbols - Convey the

kinds of behavior that are expected, e.g. risk
taking, participation, authority, etc.
• Language - Acts as a common denominator
that bonds members
Contrasting Organizational Cultures
Class Activity

Classrooms have cultures. Describe

your classroom culture using the seven
dimensions of organizational culture.