Chapter 3 Environmental Forces Hellriegel Jackson and Slocum

Chapter 3 Environmental Forces Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Environmental Forces n n n Business Environment Task Environment Competitive Forces in the Task Environment Technological Forces Political and Legal Forces Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT 3. 2 The General Environment and Environmental Forces Affecting Organizations The General Environment Cultural Forces Po em Political - Legal Forces yst liti Technological Forces ys os Ec l. S ca Competitive Forces tem Organization m Dem ogr Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999 aph ics Eco te Sys c omi n Adapted from Figure 3. 1

PPT The General Environment n n Sometimes called the macro-environment. Are external factors, such as inflation and demographics, that usually affect indirectly all or most organizations. Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Factors in the General Environment n n n Type of economic system and economic conditions Type of political system Condition of the ecosystem Demographics Cultural Background Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Roles of Government in Business n n n n In the US, the government acts as a watchdog over business Provides direction in areas such as: antitrust, monetary policy, defense, human rights environmental matters Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT The Economic System n n n n The US has an economic system in which there are: privately controlled markets based on supply and demand free market competition private contracts profit incentives technological advancement Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT The Ecosystem n n n There is a renewed commitment to the environment in the US 1981 - 4% wanted environmental improvements 1997 - 80% want improvements Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT 3. 3 Environmentally-Conscious Business Practices n n n Cut back on environmentally unsafe operations Compensate for environmentally risky endeavors Avoid confrontation with state and federal pollution control agencies Comply early with government regulations Promote new manufacturing technologies Recycle wastes Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Demographics n n n Characteristics of a population such as age, race, gender, ethnic origin, and social class determine the characteristics of work groups, organizations, specific markets, or nations population. Demographics influence marketing, advertising, and human resources decisions. Such as the number of individuals the ages of 18 to 25 They change all the time. Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Cultural Forces n n Culture is the shared characteristics, values, and beliefs of a group that distinguishes them from another group Such as religion, language, and heritage Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Hofstede’s Framework n Power distance n n Uncertainty avoidance n n Degree to which influence/control are unequally distributed among individuals within a particular culture nsalary differentiation from CEO to front line employees Degree to which members of a society attempt to avoid ambiguity, riskiness, and indefiniteness of future Individualism n n Extent to which society expects people to take care of themselves and their immediate families And/or the degree to which individuals believe they are masters of their own destiny Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999 3. 5

PPT 3. 6 Hofstede’s Framework (contd. ) n Collectivism n n Masculinity n n Measures tendency of group members to focus on the common welfare and feel loyalty toward one another Degree to which acquisition of money and things is valued and high quality of life for others is not Confucian dynamism n Stability of society is based on unequal relationships n Family is the prototype of all organizations n People should treat others as they would like to be treated Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT 3. 8 Basic Types of Task Environments S I M P L E Factors in environment are C O M P L E X Factors in environment are n n n few quite similar to each other basically the same over time Factors in environment are n n n Example: Soft-drink distributors n numerous not similar to each other basically the same over time Example: Basic food production firms STABLE Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999 few somewhat similar to each other continually changing Example: Fast-food outlets Factors in environment are n numerous not similar to each other continually changing Example: Computer firms CHANGING Adapted from Figure 3. 3

PPT 3. 6 Environmental Uncertainty n Ambiguity or unpredictability of certain factors external to an organization n governmental regulations n competition n stability of inputs n demand characteristics ne. g. Customer bargaining power Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Turbulent Environment n n Complex, constantly changing Both ambiguous and unpredictable Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT 3. 9 Competitive Forces in the Task Environment Threat of new competitors Suppliers bargaining power Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999 Rivalry among existing firms in industry Buyers bargaining power Threat of substitute goods/services Adapted from Figure 3. 4

PPT Competitors n Importance and Effect of Competitors n n competitors are an important day-to-day environmental force facing organizations rivalry among competitors leads to n n Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999 price cutting advertising promotions enhanced customer service or warranties improvements in product or service quality

PPT New Entrants n n Barriers to Entry: economies of scale n n decrease in per unit costs as volume of goods/services produced increases product differentiation n uniqueness in quality, price, design, brand image, or customer service that gives a product an edge over the competition Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT New Entrants cont. n capital requirements n n dollars needed to finance equipment supplies, advertising, R&D, and the like necessary to start government regulation n may bar or severely restrict potential new entrants to an industry Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Substitute Goods and Services n Goods/Services n n that can easily replace the firm’s goods/services I. e. Starbucks introduced a new drink called Frappuccino. It is a cold drink that can substitute for the more traditional hot coffee drink Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Customers n Potential Effects of Customers n n n they may drive down prices push for more or higher-quality products increase competition among sellers by playing one against each other Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Integration n Purchasing or developing related business units n n Forward Integration-purchasing your customer n n Why? Backward Integration-purchasing your supplier n n thought of as facing the customer Why? Horizontal Integration-purchasing competitors n Why? Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Customers cont. . . n Exhibit Bargaining Power to the Extent that: n n they purchase a large volume relative to the supplier’s total sales the product/service represents a significant expenditure by the customer they pose a realistic threat of backward integration, for example: the purchase of one or more of its suppliers they have readily available alternatives for the same services/products Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Suppliers n Bargaining Power of Suppliers n often controls how much they can : n n raise prices above their costs reduce the quality of goods and services is increased by patents and copyrights is increased by supplier-customer alliances n Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999 which are advocated by total quality programs

PPT Impact of Technology n What is technology? n knowledge, tools, techniques, and actions n n used to transform material , information, and other inputs into finished goods and services plays pivotal role in creating and changing an organization’s task environment Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999

PPT Impact of Technology cont. . . n n Role in Strategy : creates strategic options not feasible with older technologies n n n marketing over the internet online, real-time financial management systems n n approaching those of traditional large-scale manufacturing facilities can determine profit and loss on a a daily basis improved access to services (e. g. Banking) Hellriegel, Jackson, and Slocum MANAGEMENT, 8 E South-Western College Publishing Copyright © 1999