Lecture 02—The Environments

General environment (affects organizations indirectly)

- Includes changes in federal regulations

Task environment (Directly affects / closer to the organization

- Includes sectors that conduct day-to-day transactions

Internal environment
- Includes elements within the organization
- Defines how employee behavior and how the organization will adapt to the external environment

General environment

I. International (expand into global markets and build a global supply chain.)
Events originating in foreign countries; opportunities for local companies in other countries;
new competitors, customers, technological and economic trend

II. Technological
Scientific and technological advancements in an industry/society
Examples: social media, smart phones, videoconferencing

III. Sociocultural
Demographic characteristics and norms, customs, and values of the general population geographical
distribution, population density, age, and education levels;
Example: what are the key demographic trends in Hong Kong

IV. Economic
General economic health of the country; consumer purchasing power, unemployment rate, interest rates

V. Legal-Political
Government regulations and political activities that influence company behavior includes a
variety of pressure groups that influence companies provide more challenges today due to
globalization

VI. Natural dimension

Includes all elements occurring naturally on earth. Protection of the natural environment a critical
policy focus. Influence s organizations due to restrictions or goals from other sectors, such as
government regulations, consumer concerns, the media, etc.

Page 1 of 4; Lecture 02 Management Environment

Task environment

I. Customers
people and organizations in the environment that acquire goods or services from the organization.

II. Competitors
Other organizations in the same industry or type of business that provide goods or services to the
same

III. Suppliers
provide the raw materials the organization uses to produce its output

IV. Labor market

represents people in the environment who can be hired to work for the organization.

The Organization-Environment Relationship

I. Environmental uncertainty
Lack of sufficient information about environmental factors; influences understanding and predicting
environmental needs

II. Adapting to the environment

Managers continuously scan the business horizon for both subtle and dramatic environmental changes,
(strategic issues) and identify those that require strategic responses.
→ “events or forces either inside or outside an organization that are likely to alter its ability to achieve
its objectives.”

Page 3 of 4; Lecture 02 Management Environment

1. Boundary-spanning roles (business intelligence);
- using sophisticated software to search through internal and external data to spot patterns,
trends, and relationships that might be significant.

2. inter-organizational partnerships
- reduce boundaries and increase collaboration with other organizations.

3. mergers and joint ventures

The Internal Environment

Internal Environment: Corporate Culture

includes corporate culture, production technology, organization structure, and physical facilities

Adaptability culture
- characterized by values that support the company’s ability to interpret and translate signals
from the environment into new behavior responses.

Achievement culture
- results-oriented culture that values competitiveness, personal initiative, and achievement.

Involvement culture
- culture that places high value on meeting the needs of employees and values cooperation
and equality

Consistency culture
- values and rewards a methodical, rational, orderly way of doing things.

- Managers create and sustain adaptive high-performance cultures through cultural leadership.
- Cultural leaders define and articulate important values that are tied to a clear and compelling mission, which
they communicate widely and uphold through their actions.

Page 4 of 4; Lecture 02 Management Environment

The Global Environment -- A Borderless World
- Isolation from international forces no longer possible (Positive and negative forces)
- Globalization: the extent to which trade and investments, information, social and cultural
ideas, and political cooperation flow between countries.

On the rise since the ‘70s

Organizations go through 4 distinct stages as they become global.

1. Global (stateless) stage (critically important / many good ways)

- Transcends any single home country. Makes sales, acquires resources in whatever country offers
the best opportunities and lowest cost
- strategic orientation: global;
- stage of development: global

2. Domestic stage (little importance / one best way)

- Market potential is limited to the home country, with all production, marketing facilities
located at home
- strategic orientation: domestically oriented
- stage of development: initial foreign involvement

3. International stage (very important / many good ways

- Exports ↑ , company usually adopts multi-domestic approach, competition is handled for each
country independently.
- Marketing and advertising adapted to the specific needs of each country
- strategic orientation: export-oriented
- stage of development: competitive positioning

4. Multinational stage (somewhat important / the least-cost way)

- Marketing and production facilities located in many countries, with > 1/3 of its sales outside the
home country.
- strategic orientation: multinational
- stage of development: explosion of international operations

The International Socio-Cultural Environment

- Includes the shared knowledge, beliefs, and values, as well as the common modes of behavior
and ways of thinking among members of a society

Page 5 of 4; Lecture 02 Management Environment