MF - Chap 4

MANAGEMENT FUNDAMENTALS
Chapter 4
Scanning Business Environment
ORGANIZATIONAL ENVIRONMENT
All elements existing outside the organization’s boundaries that

have the potential to affect the organization.
General
Environme
nt
Task
Environme
nt
Internal
Environme
nt
ORGANIZATIONAL ENVIRONMENT (CONT.)
This includes all elements existing outside the

boundary of the organization that have the
General
Environment potential to affect the organization.
Environment is closer to the organization and

includes the sectors that conduct day-to-day
Task
transactions with the organization and directly
Environm
influence its basic operations and performance.
ent
Intern The elements within the organization’s
al
Boundaries.
Env.
ORGANIZATIONAL ENVIRONMENT (CONT.)
EXTERNAL ENVIRONMENT
• International dimension
Events originating in foreign countries as well as opportunities in other countries.
• Technological dimension
Scientific and technological advancements in the industry and society at large.
• Sociocultural dimension
The demographic characteristics, norms, customs, and values of the population
within which the organization operates.
• Economic dimension
General economic health of the country or region in which the organization
operates. Consumer purchasing power, the unemployment rate, and interest rates are
part of an organization’s economic environment.
EXTERNAL ENVIRONMENT (CONT.)
• Legal-political dimension
Local government regulations and political activities
designed to influence company.
• Pressure group
An interest group that works within the legal-political
framework to influence company behavior.
• Natural dimension
Elements occur naturally on earth, including plants, animals,
rocks, and natural resources such as air, water, and climate.
TASK ENVIRONMENT
• Customers
People and organizations in the environment that acquire goods or
services from the organization.
• Competitors
Other organizations in the same industry or type of business that
provide goods or services to the same set of customers.
• Suppliers
People and organizations that provide the raw materials the
organization uses to produce its output.
• Labor market
The people available for hire by the organization.
PORTER'S 5 FORCES
INTERNAL ENVIRONMENT – CULTURE
INTERNAL ENVIRONMENT – CULTURE (CONT.)
That is a set of key values, beliefs, understandings, and norms shared by

members of an organization.
• Symbol
An object, act, or event that conveys meaning to others.
• Story
A narrative based on true events, repeated frequently and shared among
employees.
• Hero
A figure who exemplifies the deeds, character, and attributes of a strong
culture.
• Slogan
A phrase or sentence that succinctly expresses a key corporate value.
• Ceremony
A planned activity at a special event that is conducted for the benefit of an
• A big influence on internal corporate culture is the external

environment.
• Cultures can vary widely across organization. However,
organizations within the same industry often reveal similar cultural
characteristics.
• In considering what cultural values are important for the
organization, managers consider the external environment as well
as the company’s strategy and goals.
• The right fit between culture, strategy, and the environment is
associated with four categories based on two dimensions:
 The extent to which the external environment requires flexibility

Needs of the Environment
Flexibilit Stabilit
y y
Adaptability Achievement
External Culture Culture
Strategic
Focus
Involvement Consistency
Culture Culture
Internal
Adaptability culture
Environment that requires fast response and high-risk decision making. Managers
encourage values that support the company’s ability to rapidly detect, interpret,
and translate signals from the environment into new behavior responses.
Employees have autonomy to make decisions and act freely to meet new needs
and responsiveness to customers is highly valued. Managers also actively create
change by encouraging and rewarding creativity, experimentation and risk taking.
Achievement culture
Organizations concerned with serving specific customers in the external
environment. However no intense need for flexibility and rapid change. This
results-oriented culture values competitiveness, aggressiveness, personal
initiative and willingness to work long and hard to achieve results. An emphasis on
winning and achieving specific ambitious goals is the glue that holds the
organization together.
• Involvement culture
Internal focus on the involvement and participation of employees to adapt rapidly
to changing needs from the environment. This culture places high value on
meeting the needs of employees, and the organization. Managers emphasize
values such as cooperation, consideration of both employees and customers and
avoiding status differences by a caring, family-like atmosphere.
• Consistency culture
Internal focus and a consistency orientation for a stable environment. Following
the rules and being thrifty are valued. Culture supports and rewards a methodical,
rational, orderly way of doing things. In fast-changing world, few companies
operate in a stable environment and most managers are shifting toward cultures
that are more flexible and in tune with changes in the environment.
High-performance culture
• A culture based on a solid organizational mission or

purpose that uses shared adaptive values to guide
decisions and business practices and to encourage
individual employee ownership of both bottom-line results
and the organization’s cultural backbone.
• Managers create and sustain adaptive high-performance
cultures through cultural leadership.
Cultural Leadership
Cultural leader is a manager who uses signals and symbols to influence corporate
culture.
Cultural leaders influence culture in two key areas:
• The cultural leader articulates a vision for the organizational culture that
employees can believe in. The leader defines and communicates central values
that employees believe in and will rally around. Values are tied to a clear and
compelling mission, or core purpose.
• The cultural leader leads the day-to-day activities that reinforce the cultural
vision. The leader makes sure that work procedures and reward systems match
and reinforce the values. Actions speak louder than words, so cultural leaders
“walk their talk”.
McKinney's 7s Model
SWOT ANALYSIS

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MANAGEMENT FUNDAMENTALS

All elements existing outside the organization’s boundaries that

This includes all elements existing outside the

Environment is closer to the organization and

That is a set of key values, beliefs, understandings, and norms shared by

• A big influence on internal corporate culture is the external

 The extent to which the external environment requires flexibility

Needs of the Environment

• A culture based on a solid organizational mission or

Cultural leaders influence culture in two key areas:

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