Chapter 3

The Environment and Corporate Culture

 The External Environment

The elements of the world constantly change

• The external organizational environment
includes all outside elements that effect the
organization
• General Environment:
– Outer layer that directly affects organization
• Task Environment:
– Sectors that conduct transactions with the
organization
• Internal Environment:
– Elements within the organization boundaries
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3.1 The General, Task, and
Internal Environments

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 General Environment:
International

• Globalization influences all other aspects of the

external environment
– New competitors, customers, suppliers
– Changes in social, technological, and economic trends

• All organizations must compete and think globally

• Economic power has shifted to China and India
• The global environment is complex and ever-
changing
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 General Environment:
Technological

 Massive changes for

organizations
 The tool for doing business
 Advances are impacting
organizations and managers

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 General Environment:
Sociocultural

Demographic characteristics, norms,

customs, and values
 U.S. Population is aging
 Large influx of immigrants
 Generation Y is entering the
workplace

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 General Environment:
Economic

• Economic health of the country/region

– Extended globally with uncertainty

• Consumer purchasing power

• Unemployment rate
• Economic shift impacted small business
although there is still vitality in small business

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 General Environment:
Legal-Political

• Government regulation; state, local, and federal

– Political activities
– Government agencies and regulation

• Managers must recognize the power of pressure

groups
– Work to influence companies to behave in a socially
responsible way

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 General Environment:
Natural

• Growing importance and pressure

• Organizations must be sensitive to the
environment
• Natural dimension does not have own voice
• Environmental groups advocate action/policy
– Reduce pollution
– Develop renewable energy
– Climate change/global warming
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 Task Environment

 Customers
 Competitors
 Suppliers
 Labor Market

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Environmental Performance Index

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 Organization-Environment
Relationship

 The environment creates

uncertainty for managers
 Managers must respond and
design adaptive organizations

 Uncertainty can be managed

through effectiveness

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 Sample External Environment
SOURCES: “Chinese Ministry of Railways Chooses Nortel Mobile Network,” M2Presswire
(January 29, 2008); Nortel Web site, http:www.nortel.com (accessed May 12, 2010);
J. Weber with A. Reinhardt and P. Burrows, “Racing Ahead at Nortel,” BusinessWeek
(November 8, 1999): 93–99; “Nortel’s Waffling Continues: First Job Cuts, Then Product
Lines, and Now the CEO,” Telephony (May 21, 2001): 12; and M. Heinzl, “Nortel’s
Profits of 499 Million Exceeds Forecast,” The Wall Street Journal, January 30, 2004.

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 3.4 External Environment
and Uncertainty

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 Adapting to the Environment

 Boundary-spanning roles – link and coordinate

the organization with external environment,
seek:
• Business intelligence
• Competitive intelligence

 Interorganizational partnerships – reduce

boundaries and begin collaborating with other
organizations
 Mergers/joint ventures – legal combination of
operations; legal collaboration for specific
project
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 3.5 The Shift to a
Partnership Paradigm

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 The Internal Environment:
Corporate Culture

Corporate culture is the set of key values, beliefs,

understandings, and norms that members of an
organization share
Symbols
Stories
Heroes
Slogans
Ceremonies

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3.6 Levels of Corporate Culture

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 3.7 Four Types of
Corporate Cultures

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 Shaping Corporate Culture for
Innovative Response

• Corporate culture plays a key role in

learning and innovate responses

• Bottom-line strategies are successful in the

short-term

• Successful companies balance culture and

performance

• Culture is the “glue” that holds the

organization together

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 High Performance Culture

 Based on solid organizational

mission/purpose
 Shared adaptive values that guide
decisions and practices
 Encourages individual employee
ownership
– Bottom-line results
– Organization’s culture

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 3.8 Combining Culture
and Performance

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 Cultural Leadership

Articulate a vision for the organizational culture

that employees can believe in
Heeds the day-to-day activities that reinforce the
cultural vision

Leaders communicate through words and actions

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