5 Chapter

PowerPoint Presentation by Charlie Cook

Copyright The McGraw-Hill Companies, Inc., 2003. All rights reserved.
Managing the
Organizational
Environment
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Forces in the Organizational Environment
Figure 5.1
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The Task Environment
Suppliers
Individuals and organizations that provide an
organization with the input resources that it needs
to produce goods and services
Raw materials, component parts, labor (employees)
Relationships with suppliers can be difficult due to
materials shortages, unions, and lack of substitutes.
Suppliers that are the sole source of a critical item are
in a strong bargaining position to raise their prices.
Managers can reduce these supplier effects by
increasing the number of suppliers of an input.
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The Task Environment (contd)
Distributors
Organizations that help other organizations sell
their goods or services to customers
Powerful distributors can limit access to markets
through its control of customers in those markets.
Managers can counter the effects of distributors by
seeking alternative distribution channels.
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The Task Environment (contd)
Customers
Individuals and groups that buy goods and services
that an organization produces
Identifying an organizations main customers and
producing the goods and services they want is crucial
to organizational and managerial success.
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The Task Environment (contd)
Competitors
Organizations that produce goods and services that
are similar to a particular organizations goods and
services
Potential Competitors
Organizations that presently are not in the task
environment but could enter if they so chose
Strong competitive rivalry results in price
competition, and falling prices reduce access to
resources and lower profits.

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The Task Environment (contd)
Barriers to Entry
Factors that make it difficult and costly for the
organization to enter a particular task environment
or industry
Economies of scale
Cost advantages associated with large operations
Brand loyalty
Customers preference for the products of
organizations currently existing in the task
environment.

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The Industry Life Cycle
Industry Life Cycle
The changes that take place in an industry as it
goes through the stages of birth, growth, shakeout,
maturity, and decline.
Birth: industry competitors seek to develop the
winning technology
Growth: industry products gain acceptance and
rapid growth in product demand attracts new
competitors
Shakeout: industry growth slows, weak firms exit
the industry, and rivalry increases
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The Industry Life Cycle (contd)
Industry Life Cycle (contd)
Maturity: the market stabilizes as demand levels
off, the industry is now dominated by a few large
competitors
Decline: demand for industry products declines,
competition increases, failing competitors either exit
the market or are acquired by rival firms
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Stages in the Industry Life Cycle
Figure 5.3
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The General Environment
Economic Forces
Interest rates, inflation, unemployment, economic
growth, and other factors that affect the general
health and well-being of a nation or the regional
economy of an organization
Managers usually cannot impact or control these.
Forces have profound impact on the firm.
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The General Environment
Technological Forces
Outcomes of changes in the technology that
managers use to design, produce, or distribute
goods and services
Results in new opportunities or threats to managers
Often makes products obsolete very quickly.
Can change how managers manage.
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The General Environment (contd)
Sociocultural Forces
Pressures emanating from the social structure of a
country or society or from the national culture
Social structure: the arrangement of relationships
between individuals and groups in society
National culture: the set of values that a society
considers important and the norms of behavior that
are approved or sanctioned in that society.
Cultures and their associated social structures,
values, and norms differ widely throughout the
world.
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The General Environment (contd)
Demographic Forces
Outcomes of change in, or changing attitudes
toward, the characteristics of a population, such as
age, gender, ethnic origin, race, sexual orientation,
and social class
During the past two decades, women have entered
the workforce in increasing numbers and most
industrial countries populations are aging.
This will change the opportunities for firms competing
in these areas as demands for child care and health
care are forecast to increase dramatically.
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The General Environment (contd)
Political Forces
Outcomes of changes in laws and regulations, such
as the deregulation of industries, the privatization
of organizations, and increased emphasis on
environmental protection
Increases in laws and regulations increase the costs
of resources and limit the uses of resources that
managers are responsible for acquiring and using
effectively and efficiently.

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The General Environment (contd)
Global Forces
Outcomes of changes in international relationships;
changes in nations economic, political, and legal
systems; and changes in technology, such as falling
trade barriers, the growth of representative
democracies, and reliable and instantaneous
communication
Important opportunities and threats to managers:
The economic integration of countries through free-
trade agreements (GATT, NAFTA, EU) that decrease
the barriers to trade.
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Managing the Organizational Environment
Environmental Change
The degree to which forces in the task and general
environments change and evolve over time
Reducing the Impact of Environmental Forces
Top management: devise strategies that take
advantage of opportunities and counter threats
Middle managers: collecting about competitors
intentions, new customers, and new suppliers for
the firms crucial or low-cost inputs
First-line managers: use resources efficiently and
get closer to customers
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Managing the Organizational Environment
(contd)
Creating an Organizational Structure
Increasing the complexity of the organizations
structure in response to the changing organizational
environment
Departments are assigned to develop the skills and
knowledge necessary to deal with environmental
changes and to cooperate with other departments
to efficiently and effectively get products to
customers