CHAPTER 2 Understanding the External and Organizational Environments

Chapter 2
UNDERSTANDING THE EXTERNAL AND ORGANIZATIONAL
ENVIRONMENTS
Opening Case: Managing H!an Res"r#es at Haier
The Haier Group of China entered the U! mar"et in the #$$%s& selling small
refrigerators for dorm rooms in universities 'n 2%%(& Haier a)*uired U! +ased
,a-tag and later +e)ame the first Chinese )ompan- to +uild a fa)tor- in the
United !tates Haier has +een led +- CEO .hang Ruimin for more than /% -ears
.hang and his team have su))essfull- led the )ompan- a)ross man- )ountries
and man- )ultures& +ut the path 0as not 0ithout )hallenges .hang is the first to
admit that he and his team have learned man- things a+out managing
emplo-ees in different )ountries and )ultures One of the +iggest lessons is to
1a)t lo)al2 3hen Haier first opened its fa)tor- in !outh Carolina& for example& its
HR poli)ies and pra)ti)es refle)ted Chinese )ulture and la+or la0s 't too" some
experien)e and the advi)e of the lo)al HR dire)tor& Gerald Reeves& to
su))essfull- lo)alize Haier4s HR poli)ies and pra)ti)es Perhaps the most stri"ing
example 0as to move a0a- from giving feed+a)" that is pu+li)l- em+arrassing to
emplo-ees to giving su)h feed+a)" in private Another )hange 0as providing
health insuran)e for U! emplo-ees 'n China& health insuran)e is provided +-
the government Toda-& Haier4s HR poli)ies and pra)ti)es are )onsistent 0ith
those of the +est )ompanies in the 0orld
CHA$TER OUTLINE
I% THE STRATEGIC IM$ORTANCE O& UNDERSTANDING THE EXTERNAL
AND ORGANIZATIONAL ENVIRONMENTS
A% E'e!ents "( the En)ir"n!ent
Organizations exist 0ithin an external environment 5!ee Exhi+it 2#6& +ut
also have internal environments in 0hi)h emplo-ees are em+edded
!ta"eholders are not in)luded as elements of the external and
organizational environments 'nstead& the- are treated as distin)t groups
of people 0hom the organization see"s to satisf-
*% E+terna' En)ir"n!ent
The external environment in)ludes lo)al& national and multinational
)onditions that )onfront an organization 't )an +e )onsidered a set of
)onstraints and opportunities Elements of the external environment
in)lude7
E)onomi) glo+alization
#$
CHAPTER 2 Understanding the External and Organizational Environments
The politi)al lands)ape
'ndustr- d-nami)s
8a+or mar"ets
Countr- )ultures
Other important external environmental aspe)ts in)lude7
8egal institutions 5Chapter /6
Unions 5Chapter #96
Teaching Note: Ask your students what elements might be excluded from this
discussion of the external environment. A good example would be the weather,
which affects many industries from ski resorts to home repair
2% Organi,ati"na' En)ir"n!ent
The organizational environment )on)erns )onditions 0ithin the
organization itself The organizational environment must +e flexi+le
enough to adapt to )hanges in the external environment
Three highl- interdependent elements dis)ussed in this )hapter are7
Te)hnolog-
Compan- )ulture
:usiness strateg-
Teaching Note: Ask students to identify the environmental factors of their school.
Stress that an organiation!s boundaries are not always clear" as a result, it may
not be clear whether a particular group or individual is part of the external or
organiational environment, e.g., alumni, campus recruiters, bookstores.
-% The HR TRIAD
The su))ess of an organization is dependent upon its a+ilit- to adapt and
)hange as the external environment )hanges The mem+ers of the HR
triad )ontri+ute to the organization4s a+ilit- to adapt +- monitoring the
environment& interpreting events& and ma"ing ad;ustments as needed
!ee the HR Triad feature for spe)ifi) examples
II% ECONOMIC GLO-ALIZATION
The size& 0ealth& and relative openness of the U! mar"et ma"e it a highl-
attra)tive target for man- foreign )ompanies U! firms fa)e intense
)ompetition from foreign firms due to the U!4s open mar"et poli)-& eg&
shoes& textiles& ele)troni)s
Teaching Note: Ask students how economic conditions have affected your
college or university. #ake specific points about state revenues, alumni
contributions, government grants, etc.
2%
CHAPTER 2 Understanding the External and Organizational Environments
A% C"!peting "n C"st )erss C"!peting "n .n"/'e0ge
'n order to survive& U! )ompanies must diversif- into mar"ets 0here )ost
pressures are less severe ,enasha Corp leveraged its "no0ledge to
diversif- into logisti)s and information te)hnolog- to in)rease its
profita+ilit- ,alden ,ills leveraged its resear)h )apa+ilities to develop
ne0 produ)ts and produ)tion methods to )ompete 0ith lo0<)ost la+or from
foreign )ompetitors
-% 1"r'0/i0e Operati"ns
,an- Ameri)an )ompanies are learning to produ)e and deliver goods and
servi)es in international mar"ets due to rapid glo+al mar"et expansion
UP!& =edEx& E>!& and ':, are )ompanies that generate signifi)ant sales
overseas
Glo+alization is )hanging the 0a- )ompanies manage their human
resour)es 0hi)h has impli)ations for the organization4s sta"eholders
C% E#"n"!i# C2#'es
:usiness )-)les have long +een a realit- 0hi)h )reate )hallenges for HR
People do not al0a-s +u- a given produ)t ?servi)e or the same *uantit- of
that produ)t ea)h and ever- -ear 5ho0 often do -ou +u- refrigerators@6
and positive or negative expe)tations ma- expedite or dela- the
pur)hases of some items 3hen )ustomers 0ithin the nation or else0here
in the 0orld )ut +a)" on their pur)hases& a firm 0ill no longer need as
man- people to ta"e )are of those )ustomers As other firms en)ounter
the same pro+lem and ta"e the same a)tion to )ut +a)" on their
0or"for)e& there 0ill +e a re)ession and HR must attempt to maintain
morale as 0ell as loo" ahead to prepare for eventual e)onomi) expansion
Ultimatel- those 0ho are still emplo-ed ma- have to repla)e things that
have 0orn out and as more people do that& the )ountr- ma- emerge from
the re)ession and thus HR must then re+uild its 0or"for)e
D% Regi"na' Tra0e Z"nes
Trade relations are often strongest among )ountries that are 0ithin )lose
geographi) proximit- to ea)h other Trade zones help smaller )ountries
through e)onomies of s)ale and easier a))ess to la+or Ho0ever& man-
attempts at regionalism have not +een parti)ularl- su))essful
*% N"rth A!eri#an &ree Tra0e Agree!ent 3NA&TA4
This agreement )reated a free trade zone +et0een the U!& Canada&
and ,exi)o +- eliminating a 0ide range of tariffs& *uotas and li)ensing
re*uirements !in)e the passage of AA=TA& man- U! )ompanies
2#
CHAPTER 2 Understanding the External and Organizational Environments
have expanded their operations into ,exi)o The operations these
)ompanies have )reated along the U!<,exi)o +order are )alled
1ma*uiladoras2 The average 0age of 0or"ers in ma*uiladoras is mu)h
lo0er than 0hat it 0ould +e in the U!& +ut is five times higher than
,exi)o4s minimum 0age Average 0ages have in)reased on +oth
sides of the +order
One of the )hallenges asso)iated 0ith AA=TA for Canada is a 1+rain
drain2 phenomenon in 0hi)h professional 0or"ers have an in)entive to
)ome to 0or" in the U! 0here the- )an earn higher salaries
Although AA=TA4s e)onomi) effe)ts are still +eing de+ated& expansion
to the entire 3estern Hemisphere are no0 +eing entertained
2% Er"pean Uni"n 3EU4
The European Union 5EU6 is des)ri+ed as an 1institutional frame0or"
for the )onstru)tion of a united Europe2 0ith the primar- goal of
)reating a single mar"et through the removal of trade +arriers :esides
esta+lishing a free trade zone permitting free movement of goods and
servi)es a)ross mem+er )ountries& )reation of the EU also esta+lished
a )ommon )urren)- and allo0ed for the free movement of people
a)ross its mem+er )ountries
Barious emplo-ment dire)tives su)h as priva)- prote)tion&
dis)rimination la0s and emplo-ee a))ess to 0age information )reate a
fair and uniform emplo-ment )ondition among EU mem+er )ountries
5% Ass"#iati"n "( S"theast Asian Nati"ns 3ASEAN4
The o+;e)tive of A!EAA is to 1a))elerate the e)onomi) gro0th& so)ial
progress& and )ultural development in the regions through ;oint
endeavors in the spirit of e*ualit- and partnership in order to
strengthen the foundation for a prosperous and pea)eful )ommunit- of
!outheast Asian nations2 Although not initiall- )on)erned 0ith la+or
and emplo-ment issues& more re)entl- A!EAA has +een dis)ussing
poli)- related to these areas
III% THE $OLITICAL LANDSCA$E
Politi)al a)tivit- in a )ountr- )learl- shapes a)tivities of +usiness
organizations !ome of the ma;or politi)al fa)tors affe)ting organizations are
trade poli)ies& militar- )onfli)ts& and nongovernmental politi)al or )ommunit-
a)tion groups
Teaching Note: Note how the presidential elections can affect business. $or
example, when %.&. 'ush became president in (anuary )**+, one of his first
official acts was to change some environmental regulations that ,resident -linton
had signed late in his presidency.
22
CHAPTER 2 Understanding the External and Organizational Environments
A% Internati"na' La6"r Organi,ati"n 3ILO4
The '8O see"s 1to promote so)ial ;usti)e and internationall- re)ognized
human and la+or rights2 Representatives from government& emplo-ers
and 0or"ers 0or" together to set international standards on a variet- of
emplo-ment issues
-% S"#ia' A##"nta6i'it2 Internati"na' 3SAI4
!A' promotes responsi+le approa)hes to )ondu)ting +usiness
Companies in )omplian)e 0ith !A'4s standards re)eive an !A C%%%
)ertifi)ate
C% 1"r'0 Tra0e Organi,ati"n 31TO4
The 3TO provides a forum for its mem+ers to )ondu)t trade negotiations
and to settle trade disputes The 3TO is the onl- glo+al +od- a+le to
enfor)e its de)ision through its )ourt 't is +ased on the most favored
nation prin)ipleD trade )on)essions offered to one mem+er automati)all-
appl- to all
D% 1at#h0"gs an0 A#ti)ists
A multitude of private organizations exist that represent various )auses
a)ross the ideologi)al spe)trum The- ma- demand )hanges in +usiness
pra)ti)es 5that ma- in)lude HR impli)ations6 and ma- see" to enfor)e their
demands through +o-)otts or la0s C!R ma- minimize pro+lems from
some of the organizations though it ma- +e diffi)ult to avoid all opposition
from ever- group ever-0here
IV% La6"r Mar7ets
=irms must )ompete for emplo-ees& and organizations sometimes must see"
them domesti)all-& in glo+al mar"ets& or +oth
A% U%S% La6"r Mar7ets
*% S'"/ Gr"/th
Pro;e)tions indi)ate the U! population 0ill gro0 to approximatel- /C/
million +- the -ear 2%(% Aevertheless& the slo0ing rate of gro0th in
the domesti) 0or"ing populationDfueled +- +a+- +oomer retirements
and the entr- of 0omen over the past /% -earsDis trou+ling man-
emplo-ers
2% S7i''s Sh"rtage
Emplo-ers are having in)reasing diffi)ultl- finding 0or"ers 0ith the
2/
CHAPTER 2 Understanding the External and Organizational Environments
s"ills needed for so<)alled ne0 e)onom- and high<te)h ;o+s !ee
Exhi+it 29 for the fastest<gro0ing o))upations for the next #% -ears
Even entr-<level 0or"ers often must operate )omputer<)ontrolled
e*uipment
Resear)h +- the Constru)tion 'ndustr- 'nstitute indi)ates that this
industr- 0ill also experien)e a shortage due to impending retirements
HR impli)ations in)lude7
)hanges in re)ruitment strateg-
in)reased diversit-
in)reased )ompensation
5% I!!igrants
Aearl- half of the net la+or for)e in)rease re)entl- has +een from
immigrants& 0ho are over<represented in ;o+s re*uiring less s"ill and
edu)ation !tein0a- Pianos is one )ompan- that has used immigrants
for over #(% -ears& although the- have )hanged from European to
Cari++ean and Eugoslavian 0or"ers
8% M'tigenerati"na' 1"r7p'a#e
,ost )ompanies toda- have 0or"for)e populations
that fall into four generations7 Traditionalists& :a+- :oomers&
Generation F& and ,illennials 5also "no0n a s Generation E6 Ea)h
generation has gro0n up in different environments that have shaped
their values and attitudes to0ard 0or" :e)ause the 0or"for)es of
most )ompanies are multigenerational& it is important for HR
professionals to +e a0are of the values and attitudes of ea)h
generation and determine their possi+le impa)t in shaping HR poli)ies
and pra)ti)es The four generations des)ri+ed in Exhi+it 2( have
different values and attitudes to0ard 0or" +e)ause of the time in 0hi)h
the- gre0 up& +ut these four generations have similarities as 0ell A
)ommon guideline for HR professionals should +e to formulate HR
poli)ies to appeal to a 0ide variet- of emplo-ees
-% G'"6a' La6"r Mar7et
The )hara)teristi)s of the 0or" population is )hanging& and emplo-ers
ma- )onsider availa+ilit- of 0or"ers as one fa)tor 0hen de)iding 0here to
lo)ate Asians 0ill +e almost t0o<thirds of the glo+al la+or mar"et +- 2%2(
Teaching Note: $or a lively discussion, ask your students to debate the pros and
cons of outsourcing.
*% La6"r C"sts
Companies su)h as ':, )hoose to move operations overseas to ta"e
advantage of lo0er la+or )osts Exhi+it 2G sho0s relative la+or )osts
29
CHAPTER 2 Understanding the External and Organizational Environments
around the 0orld
2% S7i''s Le)e's
Another fa)tor for lo)ation is the la)" of s"ills of domesti) 0or"ers
Edu)ational gains are +eing made in developing )ountries Countries
su)h as 'ndia are proving ver- attra)tive to U! +usinesses
5% Hea'th Isses
The A'>! epidemi) has had a signifi)ant effe)t on emplo-ers Aot onl-
are the )osts of health +enefits in)reased& +ut e)onomi) development
in )ountries severel- hit +- this epidemi) )ould +e retarded
V% COUNTR9 CULTURES
,anagers 0ho fail to understand essential )ultural differen)es ma- ma"e
poor staffing and motivation de)isions& often a))ounting for the failure of
+usinesses in the international arena The feature& 1,anaging Glo+alization7
,er)edes<:enz !ets Up in Ala+ama&2 is an example of ho0 )ultural
differen)es from three different )ountries 0ere melded to produ)e a ne0
automo+ile
A% Di!ensi"ns "( C"ntr2 C'tres
The +est "no0n frame0or" for des)ri+ing )ultural differen)e 0as
developed +- Geert Hofstede Additional resear)h +- the Glo+al
8eadership and Organizational :ehavior Effe)tiveness 5G8O:E6 resear)h
pro;e)t )ontri+uted to "no0ledge a+out the ma;or dimensions of )ultural
differen)es A summar- of this resear)h is sho0n in Exhi+it 2H
Teaching Note: .ther examples: individualistic vs. collectivist cultures"
high and low context" perceptions of time.
-% C"nse:en#es "( C"ntr2 C'tre
>ifferent )ultures result in different HR pra)ti)es and ho0 emplo-ees
relate to 0or" U! emplo-ers )annot ;ust impose their HR pra)ti)es on
emplo-ees in their international operations and expe)t them to +e
effe)tive Cultural differen)es )an surprise even experien)ed glo+al
enterprises su)h as >aimlerChr-sler Although it is diffi)ult to separate
)ountr- and organizational )ultures& man- emplo-ees felt that it 0as the
differen)e in management philosophies that 0as )ausing pro+lems
The "e- )hallenge is finding a +alan)e +et0een respe)ting lo)al
differen)es and ena+ling glo+al su))ess
2(
CHAPTER 2 Understanding the External and Organizational Environments
VI% TECHNOLOG9
Te)hnolog- generall- refers to the pro)ess of ma"ing and using tools and
e*uipment plus the "no0ledge used in the pro)ess Te)hnolog- has evolved
from simple hand tools to )omplex modern s-stems of mass produ)tion and
the fa)tor- s-stem 8o0er produ)tion )osts& lo0er selling pri)es and therefore
expanded mar"ets have largel- +een the produ)ts of te)hnolog-
Teaching Note: Technology can also harm service organiations. /se of the
internet and faxing has hurt telephone companies and delivery firms such as
$ed0x.
A% &a#t"ries an0 Mass $r"0#ti"n Te#hn"'"gies
3ith the advent of the fa)tor- s-stem of produ)ing goods )ame a ne0 set
of )hallenges in managing human resour)es =irst& people had to +e
)onvin)ed to leave their farms and )ome to 0or" in fa)tories Then& the-
had to give up mu)h of their traditional autonom- and 0or" under
authorit- 'ndependen)e often had to give 0a- to learning ho0 to follo0
pro)edures !"ills also had to +e addressed ,u)h of the 0or"for)e had
little formal edu)ation and +arel- "ne0 ho0 to read and 0rite
-% C"!pter Te#hn"'"gies
Computers have revolutionized the 0a- 0e 0or" and are managed Their
impa)t in)lude ro+oti)s& information te)hnologies 5'T6& mo+ile devi)es 5and
their apps6& and a virtual 0or"for)e
,an- of the 0or"ers in manufa)turing toda- need to use ro+ots and
)omputers to perform their ;o+s Ae0 :alan)e is an example of a
)ompan- that uses )omputers and ro+ots to "eep its pri)es )ompetitive
3or"ers 1in the offi)e2 also need to use information te)hnolog- for their
;o+s 'nformation te)hnolog- en)ompasses a +road arra- of
)ommuni)ation devi)es that lin" together people 0ith information
hard0are and soft0are 5eg& the 'nternet& )ell phones& personal digital
assistants6 and in)reases the glo+alization of +usinesses Organizations
also use information te)hnolog- to implement strategies& su)h as Eello0
=reight4s )ustomer<fo)us Along 0ith the ne0 'T )omes managerial
)hanges su)h as empo0ered emplo-ees& in)reased training and
development& and a more informed 0or"for)e
,em+ers of a virtual 0or"for)e perform their ;o+s an-0here and an-time&
often on an as<needed +asis Challenges asso)iated 0ith a virtual
0or"for)e are that virtual emplo-ees ma- feel isolated and deta)hed from
their emplo-er& suffer lo0er morale if monitored )losel- +ut remotel-& and
2G
CHAPTER 2 Understanding the External and Organizational Environments
have pro+lems in )ommuni)ations +et0een themselves& their )o<0or"ers&
and managers
C% HR In("r!ati"n S2ste!s an0 E'e#tr"ni# HRM
Te)hnolog- is also revolutionizing HR,& in)luding the 0a- emplo-ees are
re)ruited and managed 3hen )omputer te)hnologies are used to gather&
anal-ze& and distri+ute information a+out ;o+ appli)ants and emplo-ees&
the resulting s-stem is referred to as a human resour)e information
s-stem 5HR'!6 3hen a )ompan- uses the 'nternet or an intranet to
deliver HR servi)es& the )ompan- ma- use the term ele)troni) human
resour)e management 5e<HR,6& 0hi)h refers to the use of 'T for
)ondu)ting HR, a)tivities and for so)ial net0or"ing among emplo-ee
VII% COM$AN9 CULTURE
Culture is the uni*ue pattern of shared assumptions& values& and norms
that shape the so)ialization a)tivities& language& s-m+ols& rites& and
)eremonies of people in the organization The )ulture of an organization
influen)es ho0 people thin" and +ehave in their 0or" environments HR
pra)ti)es )ontri+ute to the development of a strong )ompan- )ulture 0hen
the- are aligned 0ith and support a firm4s strateg- The feature 1,anaging
0ith ,etri)s7 Eou Change 3hat Eou ,easure2 des)ri+es ho0 Al+erto<
Culver firm 0ith la)"luster sales used )ultural )hanges lin"ing re0ards to
strateg- to improve its profits
Teaching Note: 1ahoo has used its culture to build a uni2ue brand, but that same
culture held it back from making forward3thinking business decisions.
A% Lea0ership
The leaders of an organization must provide a vision of 0hat the )ompan-
stands for& the mission it see"s to fulfill& and the values that 0ill guide the
means it uses to a)hieve its mission 8eaders also shape the )ulture +-
ho0 the- treat emplo-ees Container !tore and Ado+e !-stems are t0o
)ompanies that have developed HR pra)ti)es to +uild strong )ultures
Teaching Note: .ther examples include 4isney, 5#, -oca3-ola, /,S and 6'#.
-% Visi"n
A vision refers to top management4s vie0 of 0hat "ind of organization the-
0ant to )reate in the future The ultimate su))ess of a )ompan- in
a)hieving its vision depends to a signifi)ant degree on its emplo-ees
2H
CHAPTER 2 Understanding the External and Organizational Environments
C% Missi"n
A mission statement defines a firm4s +usiness and sets out )learl- 0hat
the firm intends to a))omplish for its )ustomers& emplo-ees& and other
sta"eholders 't is more spe)ifi) than a vision in guiding the a)tions of
organizational mem+ers& and addresses issues more dire)tl- in line 0ith
different sta"eholders
D% Va'es
Balues are the strong& enduring +eliefs and tenets that a )ompan-
)onsiders to +e )entral to its existen)e and survival Balue statements are
important +e)ause the- state ho0 emplo-ees are expe)ted to +ehave
to0ard ea)h other and to other organizational sta"eholders !ee Exhi+it
2C for an example UP! and Tim+erland are t0o )ompanies that value
)ommunit- partnerships
E% C"!pan2 S6#'tres
An organizational su+)ulture exists when assumptions, values and norms
are shared by somebut not allorganizational members !u+)ultures
ma- develop +ased on mergers& esta+lishing glo+al operations& different
demographi)s of emplo-ees in various parts of the organization& and
different divisions and o))upations
*% -ene(its
Having distin)t su+)ultures )an provide a diversit- of opinions and
insights into different )ustomers4 expe)tations
2% Cha''enges
!u+)ultures ma- )reate pro+lems& espe)iall- for emplo-ees of an
a)*uired firm 0ho ma- feel a loss of po0er or status if their )ulture is
not adopted Also& mem+ers of minorit- groups often per)eive a glass
)eiling& 0hi)h limits their )areer opportunities
,ulti)ultural organizations are formed 0hen a firm has a 0or"for)e
representing the full mix of )ultures found in the population at large and
a )ommitment to full- utilize these resour)es The- allo0 man-
different su+)ultures to exist simultaneousl-
VIII%-USINESS STRATEGIES
:usiness strateg- refers to a set of integrated and )oordinated )ommitments
and a)tions intended to a)hieve stated +usiness goals 5ie& improved
)ompetitiveness and more profits6 :usiness strateg- refle)ts a )ompan-4s
vision and mission and serves to guide its a)tions
2C
CHAPTER 2 Understanding the External and Organizational Environments
Teaching Note: 4epending on the background of the students, you may want to
give a brief overview of strategy, including S&.T analysis, ,orter!s generic
strategies and product life cycle strategies.
:usiness strategies influen)e man- emplo-ment issues A strateg- map is a
tool that sho0s the )ause and effe)t relationships that ultimatel- determine
the firm4s performan)e
A )ompetitive strateg- des)ri+es ho0 a parti)ular +usiness or +usiness unit
)ompetes against dire)t rivals 0ho offer the same produ)ts and servi)es
8arge )ompanies develop strategies for ea)h of its +usinessesI smaller firms
developed one )ompetitive strateg- for the entire )ompan-
Teaching Note: Ask students to identify the ma7or competitors for your school.
A% T"ta' ;a'it2
Jualit- is one 0a- to differentiate -our produ)ts or servi)es To a)hieve
this& a firm must have all parts of its organization 0or"ing together
Pra)ti)es su)h as TJ, and !ix !igma& 0hi)h empo0er 0or"ers& support
a *ualit- strateg-
Mabe is an example of a )ompan- that designs its HR pra)ti)es 5su)h as
training6 to support its *ualit- strateg-
-% L"/ C"st
Offering a))epta+le *ualit- at the lo0est pri)e is another name for )ost
leadership Keeping )osts lo0 through emphasis on effi)ien)- is the "e- if
this approa)h is to 0or" 8o0 investment in resear)h and development
5RL>6 and a minimal sales for)e are )hara)teristi) of this strateg-
C% Cst"!er Ser)i#e
Customer servi)e has +e)ome in)reasingl- important as a )ompan-
differentiator& as the )ompan- !a+re Holdings exemplifies !ee the
feature 1,anaging Teams7 !a+re4s Birtual Teams2 on page G2
D% Inn")ati"n
'nnovation is a strateg- involving differentiating a firm4s produ)ts and
servi)es from those of )ompetitors +- having something ne0 that its
)ompetitors )annot offer The "e- to innovation strateg- is hiring highl-
edu)ated emplo-ees in spe)ifi) fields and managing them in a 0a- that
en)ourages ris"<ta"ing and experimentation
2$
CHAPTER 2 Understanding the External and Organizational Environments
':, has innovation as its )entral strateg- To re<energize innovation at
':,& its CEO& !am Palmisano& restru)tured the +usiness around teams
)omprised of all emplo-ee levels
IX% CURRENT ISSUES
The )hanging external environment )reates man- )hallenges for emplo-ers
T0o )urrent issues are the aging 0or"for)e and glo+alization
A% Mergers an0 A#:isiti"ns
To )ompete in the glo+al mar"et& )ompanies often turn to mergers and
a)*uisitions 5,LAs6 to esta+lish a mar"et position =or example& in the
)omputer or +io<te)h industries& a )ommon o+;e)tive is to gain a))ess to
the s"ills and talents of another )ompan-4s emplo-ees 3hile produ)ts or
te)hnologies ma- +e)ome out<of<date& the people 0ho )reate them rarel-
do
*% HR Isses in M<A=s
Exhi+it 2#% sho0s the stages of the merger and a)*uisition pro)ess
and the HR issues that must +e addressed in ea)h stage ,LA4s are
extremel- )omplex and sophisti)ated pro)edures to minimize pro+lems
are often re*uired
2% Reas"ns ("r M<A &ai'res
Unfortunatel-& man- mergers and a)*uisitions are not su))essful and
usuall- do not a)hieve their finan)ial o+;e)tives The most )ommon
)auses of the failure of mergers and a)*uisitions are7
)ulture )lashes
in)ompati+ilit-
loss of "e- talent
-% G'"6a' Rea'ities "( MNCs ("r HRM
To survive and su))eed& organizations must adapt their operations to fa)e
the )hallenges and realities of glo+alization listed in Exhi+it 2##
The !o)iet- for Human Resour)e ,anagement and HR professionals
re)ognize that these realities have man- impli)ations 5!ee Exhi+it 2##6
for managing human resour)es
/%
CHAPTER 2 Understanding the External and Organizational Environments
;UESTIONS &OR DISCUSSION AND RE&LECTIVE THIN.ING
*% E#"n"!i# g'"6a'i,ati"n has !an2 i!p'i#ati"ns ("r 6siness% It a's"
has i!p'i#ati"ns ("r e!p'"2ees% &r"! 2"r perspe#ti)e> /hat are the
three !"st signi(i#ant i!p'i#ati"ns "( g'"6a'i,ati"n ("r e!p'"2ees "(
U%S% #"!panies?
2% Thin7 a6"t the !"st re#ent te#hn"'"gi#a' 0e)e'"p!ents% 1hat are
the 'i7e'2 i!p'i#ati"ns "( these 0e)e'"p!ents ("r e!p'"2ers 0ring the
ne+t *@ 2ears? &"r e!p'"2ees?
5% S"!e pe"p'e arge that "rgani,ati"ns #an 0e)e'"p their "/n str"ng
#"!pan2 #'tre an0 that 0"ing s" /i'' !a7e 0i((eren#es in #"ntr2
#'tres irre'e)ant t" e((e#ti)e'2 !anaging h!an res"r#es% D" 2"
agree? E+p'ain 2"r "pini"n%
8% Des#ri6e h"/ a p"/er(' an0 #'ear state!ent "( an "rgani,ati"n=s
)isi"n> !issi"n> an0 )a'es #an 6e he'p(' t" e!p'"2ees "( the
"rgani,ati"n%
A% I!agine that 2" /"r7 at a '"#a' 0epart!ent st"re in a !i0B'e)e'
!anage!ent p"siti"n% 9" 'earn that 2"r #"!pan2 is 6eing a#:ire0
62 1a'BMart% The rati"na'e gi)en ("r the sa'e "( 2"r #"!pan2 t" 1a'B
Mart is t" CE+p'"it !an2 s2nergies an0 '"/er "r #"sts% This !erger is
a6"t 6e#"!ing !"re e((i#ientD this is the /a2 "( the (tre ("r the retai'
in0str2%E Ass!e this state!ent is tre> an0 0es#ri6e three signi(i#ant
HR isses that 2" /i'' 'i7e'2 (a#e a(ter 2"r #"!pan2 is a#:ire0%
CASE STUD9: LEVI STRAUSS
DISCUSSION ;UESTIONS:
*% .n"/ing that its !anagers are /i''ing t" tra0e "(( s"!e e#"n"!i#
e((i#ien#2 t" "perate a##"r0ing t" their #"''e#ti)e )ie/ "( /hat is Cethi#a'>E
/"'0 2" 62 shares "( st"#7 in this #"!pan2? 1h2> "r /h2 n"t?
2% Managers at Le)i Strass 6e'ie)e that the2 rn an ethi#a' #"!pan2> 6t
s"!e #riti#s )ie/ their 'i6era' e!p'"2!ent an0 6ene(its p"'i#ies as
i!!"ra'% These #riti#s "6Fe#t t" the p"'i#ies 6e#ase the2=re in#"nsistent
/ith the #riti#s= re'igi"s )ie/s% Ana'2,e the pr"s an0 #"ns "( an
/#
CHAPTER 2 Understanding the External and Organizational Environments
"rgani,ati"na' #'tre that in#'0es s"#ia''2 'i6era' e!p'"2!ent p"'i#ies
that are )ie/e0 62 s"!e !e!6ers "( s"#iet2 3in#'0ing p"tentia'
e!p'"2ees an0 p"tentia' #st"!ers4 as i!!"ra'%
5% Spp"se 2" are '""7ing ("r a ne/ F"6% 9" ha)e t/" "((ers ("r si!i'ar
p"siti"ns: "ne at Ni7e an0 "ne at Le)i Strass% -"th "rgani,ati"ns ha)e
in0i#ate0 that the2 /"'0 'i7e 2" t" /"r7 ("r a 2ear in "ne "( their "((sh"re
pr"0#ti"n p'ants s"!e/here in S"theast Asia% The t/" sa'ar2 "((ers are
)er2 si!i'ar> an0 in 6"th #"!panies 2" /"'0 6e e'igi6'e ("r an anna'
6"ns% The 6"ns /"'0 6e 6ase0 'arge'2 "n the pr"0#ti)it2 "( the
pr"0#ti"n p'ant /here 2" /i'' 6e '"#ate0% 1hi#h "((er /"'0 2" a##ept?
E+p'ain /h2%
8% In the !i0B*GG@s> sa'es 6egan 0e#'ining an0 the #"!pan2 ha0 t" !")e
!an2 "perati"ns a6r"a0> 0ra!ati#a''2 re0#ing its U%S% /"r7("r#e% Le)is
Strass is n"/ a g'"6a' #"!pan2 /ith three !aF"r 0i)isi"ns ar"n0 the
/"r'0 3)isit 'e)istrass%#"!4% D" 2" thin7 /hat has happene0 at Le)is
Strass is 'i7e'2 t" happen /ith !"re U%S% #"!panies? 1hat are the
i!p'i#ati"ns "( this ("r 2"?
/2
CHAPTER 2 Understanding the External and Organizational Environments
VIDEO CASE STUD9: METRO$OLITAN -A.ER9
DISCUSSION ;UESTIONS:
*% H"/ 0"es training re'ate t" the (ir!=s s2ste! "( (inan#ia' re/ar0s?
2% T" /hat e+tent is there a rigi0 ("r!a' "rgani,ati"na' en)ir"n!ent at
Metr"p"'itan -a7er2? T" /hat e+tent is that g""0 "r 6a0?
5% 1i'' an0 the (ir! see! t" 6e appre#iati)e "( ea#h "ther% 1hat 0"es
1i''=s per("r!an#e sa2 a6"t the en)ir"n!ent at Metr"p"'itan -a7er2?
8% I( 2" /ere t" start a (ir!> /"'0 2" se the sa!e appr"a#h t"
per("r!an#e !anage!ent as Ha!es an0 1en02?
//