The Environment and

Corporate Culture

Chapter 3
 Organizational Environment

 All elements existing outside the

boundary of the organization that have
the potential to affect the organization

Manager’s Challenge: IBM, p. 77

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2
 External Environment

● General environment – affects indirectly

● Task environment
- Affects directly
- Influences operations and performances

● Internal environment – elements within the

organization’s boundaries

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3
 Technological

Organizational Environments

Technological General
Environment

Soc
al
Customers

io-C
ation

Labor Market

Competitors

u l tu
n

s
Inter

Task
ee

ral
Cu
oy

ltu
Environment
pl

re
Em

Management

Le
ga Suppliers
l /P ic Internal
ol m
iti ono Environment
c al Ec

Suppliers
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 International Dimension
● Provides New
• Customers
• Competitors
• Suppliers

● Shapes:
• Social trends
• Technological trends
• Economic trends

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 Technological Dimension

 Scientific and technological advances

– Specific industries
– Society at large
 Impact
– Competition
– Relationship with Customers
– Medical advances
– Nanotechnology advances

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6
 Socio-Cultural Dimension

 Dimension of the general

environment
– Demographic characteristics
– Norms
– Customs
– Values

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7
 Key Demographic Trends in U.S.
● By 2050 non-Hispanic whites will make up only about half of the
population, down from 74% in 1995; and 69% in 2004
● Baby boomer generation is aging and losing interest in high-cost
goods. Generation Y, rival them in size, will soon rival them in
buying power.
● The single father household is the fastest growing living
arrangement, which rose 62% in 10 years. Two-parent and single-
mother households are still much more numerous
● Unprecedented demographic shift = married couple households
slipped from 80% in 1950s to just over 50% in 2003. Couples with
kids= 25%, with projection 20% by 2010 and 30% of homes
inhabited by someone who lives alone.

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 Economic Dimension

● General economic health

● Consumer purchasing power
● Unemployment rate
● Interest rates

● Recent Trends
● Frequency of mergers and acquisitions
● Small business sector vitality

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 Task Environment

Sectors that have a direct working relationship

with the organization
● Customers
● Competitors
● Suppliers
● Labor Market

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10
 Labor Market Forces

Labor Market Forces Affecting Organizations

today
● Growing need for computer literate information
technology workers
● Necessity for ongoing investment in human
resources – recruitment, education, training
● Effects of international trading blocks, automation,
outsourcing, shifting facility locations upon labor
dislocations

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11
 Adopting to the Environment

 Boundary-spanning
 Inter-organizational partnerships
 Mergers or joint ventures

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 External Environment and Uncertainty

High
Adapt to
High
Environment
Rate of Uncertainty
Change in
Factors in
Environment

Low
Uncertainty
Low
Low High
Number of Factors in Organization Environment
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13
 Competitive Intelligence - CI

 What - Activities to get as much information as

possible about one’s rivals
 Where - Web sites, commercial databases,
financial reports, market activities, news clippings,
trade publications, personal contacts
 Why – Spot potential threats or opportunities

Ethical Dilemma: Competitive Intelligence Predicament, P. 105

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14
 Interorganizational Partnerships

Shift in paradigm
● Trust, value added to both sides
● Equity, fair dealing, everyone profits
● E-business links to share information and conduct digital
transactions
● Close coordination; virtual teams and people on site
● Involvement in partner’s product design and production
● Long-term contracts
● Business assistance goes beyond the contract

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15
 Levels of Corporate Culture

Culture
that can be
Visible
seen at the 1. Artifacts, such as dress, office
surface layout, symbols, slogans,
level ceremonies

Invisible
2. Expressed values, such as “The Deeper values
Penney Idea,” “The HP Way” and shared
understandings
3. Underlying assumptions and deep held by
beliefs, such as “people are lazy organization
and can’t be trusted” members

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 Visible Manifestations

 Symbols
 Stories
 Heroes
 Slogans
 Ceremonies

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17
 Environment and Culture

A big influence on internal corporate culture

is the external environment
 Cultures can vary widely across
organizations
 Organizations within same industry reveal
similar cultural characteristics

Experiential Exercise: Working in an Adaptive Culture, p. 104

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18
 Corporate Culture Adaptability
Adaptive Culture Unadaptive Culture
Visible Behavior Managers pay close attention to Managers tend to behave
all their constituencies, especially somewhat insularly, politically, and
customers, and initiate change bureaucratically. As a result, they
when needed to serve their do not change their strategies
legitimate interests, even if it quickly to adjust to or take
entails taking some risks. advantage of changes in their
business environments.
Managers care deeply about Managers care mainly about
Expressed Values
customers, stockholders, and themselves, their immediate work
employees. They strongly value group, or some product (or
people and processes that can technology) associated with that
create useful change (e.g., work group. They value the orderly
leadership initiatives up and down and risk-reducing management
the management hierarchy). process much more highly than
leadership initiatives.
Source: John P. Kotter and Jmaes L. Heskett, Corporate Culture and Performance (New York, The Free Press, 1992), 51.

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 Four Types of Corporate Cultures
Needs of the Environment
Flexibility Stability
External
Achievement
Adaptability Culture
Strategic Focus

Culture

Involvement Consistency
Culture Culture
Internal

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 Cultural Leadership

● Articulates a vision that employees can

believe in
● Defines and communicates central values that employees
believe in
● Values are tied to a clear and compelling mission, or core
purpose
● Heeds the day-to-day activities that reinforce
the cultural vision – work procedures and reward
systems match and reinforce the values

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 High-Performance Culture

Creating and maintaining a high-performance culture in

today’s turbulent environment and changing workplace
is not easy.
– Managers widely communicate their cultural values through
their words and particularly their actions
– Value statements that are not reinforced by management
behavior are meaningless or even harmful for employees and
the organization
– Cultural leaders uphold their commitment to values during
difficult times or crises.

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