Chapter 2

The Environment and Corporate Culture

General EnvironmentGeneral Environment

The layer of the The layer of the external external environment environment that affects the that affects the organization organization indirectly.indirectly.

General EnvironmentGeneral Environment

Task EnvironmentTask Environment

TechnologicalTechnologicalIn

tern

atio

nal

Inte

rnat

iona

l Socio

cultural

So

ciocultural

Economic

Economic

Legal/Political

Legal/Political

The layer of the external The layer of the external environment that directly environment that directly influences the influences the organization’s operations organization’s operations and performance.and performance.

General EnvironmentGeneral Environment

Task EnvironmentTask Environment

TechnologicalTechnologicalIn

tern

atio

nal

Inte

rnat

iona

l Socio

cultural

So

ciocultural

Economic

Economic

Legal/Political

Legal/Political

CustomersCustomers

SuppliersSuppliers

ManagementManagementLab

or

Mar

ket

Lab

or

Mar

ket C

om

petitio

nC

om

petitio

nEmployeesEmployees CultureCulture

Organization’s Organization’s Internal Internal

EnvironmentEnvironment

The Organization-Environment Relationship

Three Strategies for Coping with High

Uncertainty

1. Adapt the organization to the changes in the environment

2. Influence the environment to make it more compatible with organizational needs.

3. Moving from one environment to another (“Domain Shift”)

Adapting to the Environment

Boundary-spanning roles link and coordinate the organization with key elements in the external environment

Forecasting = spotting trends that enable managers to predict future events

Flexible structure---Organic (non-bureaucratic) structure

Has few rules and regulations

Decentralized Decision Making

Mergers and Joint Ventures Also Reduce

Uncertainty

Merger occurs when two or more organizations combine to become one

Joint venture is a strategic alliance by two or more organizations.

Influencing the Environment

Advertising

Public relations

Political activity

Trade associations

Domain Shifts

Acquisitions

Divestures

New Product Creation

Old Product Discontinuance

Geographical Moves

Corporate Culture

Key values, beliefs, understandings, and norms shared by members of an organization.

VisibleVisible

Artifacts such as dress, Artifacts such as dress, office layout, symbols, office layout, symbols, slogans, ceremoniesslogans, ceremonies

InvisibleInvisible

Expressed values such as “The Expressed values such as “The Penney Idea,” “The H-P Way”Penney Idea,” “The H-P Way”

Underlying assumptions and deep Underlying assumptions and deep beliefs such as “people are lazy beliefs such as “people are lazy and can’t be trusted”and can’t be trusted”

Culture that can be seen at the surface levelCulture that can be seen at the surface level

Deeper values and shared understandings held by Deeper values and shared understandings held by organization members.organization members.

Types of CulturesThere are many classification systems,

including those based on:

Risk Tolerance

Communication Patterns

Types of Control

Coordination Techniques

Reward Systems

Open-Systems Focus

Four Types of Corporate Cultures

Four Types of Corporate Cultures

Fast-Changing External EnvironmentFast-Changing External EnvironmentAdaptability CultureAdaptability Culture

Puts customers first, stressing Puts customers first, stressing innovation, risk taking, innovation, risk taking, Little stress on people, teamwork Little stress on people, teamwork

Involvement CultureInvolvement CultureEmphasizes employee participation in Emphasizes employee participation in determining changes in response determining changes in response to the environment to the environmentMuch stress on employee well-being,Much stress on employee well-being,

teamwork teamwork

Four Types of Corporate Cultures

Stable External EnvironmentStable External EnvironmentAchievement CultureAchievement Culture

Puts customers first, stressing Puts customers first, stressing competition, hard work competition, hard work

Consistency CultureConsistency CultureEmphasizes following rules, being carefulEmphasizes following rules, being careful

High-Performance Culture

Based on solid mission / clear agreed upon purpose

Fast changing environment provides opportunities

Has shared adaptive values

Employee involvement encouraged

(i.e., Balances needs of Customers and needs of Employees

Sources of Culture

Founder

Change Agents

Experience

National, Regional Culture

Why Change a Culture?

To keep up with the competition

To meet customer needs

Your company is doing poorly

Your company is growing rapidly

Maintaining/Changing Culture

Cultural LeadershipCommunicate

Reward

Set Examples