the environment of business, technology & global context

8/10/2019 The Environment of Business, technology & global context

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BASIC MANAGEMENT - CourseRecommended Text Book: – Management A Functional Approach by Joseph M. Putti, McGraw

Hill Book CompanyChapters: – The Environment of Business – The Nature and Meaning of Management –

The Planning Function – The Organizing Function – The Controlling Function – The Staffing Function – Motivating Employees – Participation in Organizations1



Marks DistributionMetric

Assignments/ProjectQuizzes

Class Participation & AttendanceMid-Term ExamFinal Exam

Marks1010

52550

2

Final Evaluation 100



The Environment ofBusiness



What is “Management”? - Formal Definitions:

“The attainment of organizational goals in an effective andefficient manner through planning, organizing, leading andcontrolling organizational resources” (Daft & Marcic)“the process of coordinating work activities so that they arecompleted efficiently and effectively with and through other

people” (Robbins)“A set of activities directed at an organization’s resources withthe aim of achieving organizational goals in an efficient andeffective manner” (Griffin)

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What is an Organization?- Formal Definitions:

“A social entity that is goal directed and deliberatelystructured” (Daft & Marcic)“A deliberate arrangement of people to accomplish somespecific purpose” (Robbins) “A group of people working together in a structured andcoordinated fashion to achieve a set of goals” (Griffin)

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What is a Business Environment?Business environment encompasses all those factors that affect acompany's operations; including customers, competitors, suppliers,

distributors, industry trends, substitutes, regulations, governmentactivities, the economy, demographics, social and cultural factors,innovations, and technological developments. It may also be referredto as Operating environment.

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Types of SystemOpen System

• An open system is one that interacts with its environment and thus

exchanges information, material, or energy with the environment,including random and undefined inputs. Open systems are adaptivein nature as they tend to react with the environment in such a wayorganizing', in the sense that they change their continued existence. Such systems are ‘self organizing’, because they change theirorganization in response to changing conditions.

Closed System• A closed system is one, which doesn’t interact with its environment.

Such systems, in business world, are rare. Thus the systems that arerelatively isolated from the environment but not completely closed

are termed closed systems. 9



EMERY & TRIST’s Classification ofEnvironmentsThey offer a model that identifies four kinds of environments thatorganizations might confront:

1. Placid-randomized : resources unchanging, random distribution2. Placid-clustered: resources unchanging, but location becomes

important for survival3. Disturbed-reactive: org. strategy is to get resources important for

survival)4. Turbulent-field: all actors are interconnected, and overall field

becomes an important force

Placid-randomized is least complex, turbulent-field isthe most complex.

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PLACID-CLUSTERED ENVIRONMENT

Environment changes slowly, but threats are clustered, not random. Theforces in the environment are linked, and pose a higher threat thanrandomized changes.

These organizations use long-range planning and forecasting to learn asmuch as possible about their environments. Structures will tend to becentralized.

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DISTURBED-REACTIVE ENVIRONMENTS

A more complex environment than either placid one. Many similarorganizations seeking similar ends. One or more may be large and have

ability to influence the environment. Two or three large companies candominate an industry.

Organizations in this type of environment used planned tactical initiatives,calculate reactions by other, and develop counteractions. This requiresflexibility and a structure with some decentralization.

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TURBULENT-FIELD ENVIRONMENTSThe most dynamic of the environments and has the highest level ofuncertainty associated with it. Environmental elements are increasinglyorganized and interrelated.

Major, dynamic shifts can occur in the environment as one, or a smallgroup of large companies “change the rules” of competition. Thus,planning is not as useful here.

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Nature of EnvironmentStable EnvironmentIn-between Environment

Dynamic Environment

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UNCERTAINTY IN THE ENVIRONMENT

Stable DynamicDEGREE OF CHANGE

DEGREE OFHOMOGENEITY

Simple

Complex

Small number of

external elements.Elements remain thesame or changeslowly

Small number of

external elements.Elements are incontinuous change

Large number ofexternal elements.Element remain thesame or changeslowly

Large number ofexternal elements.Elements are incontinuous change.

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Simple

Complex

LEASTUNCERTAINTY

MODERATEUNCERTAINTY

MODERATEUNCERTAINTY

MOSTUNCERTAINTY

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Simple

Complex

Soft drink bottlers,

beer distributors,container manuf.,local utilities

Personal computers,

fashion clothing,music industry, toymanufacturers

Universities,hospitals,Insurance companies

American Airlines,oil companies,electronic firms,aerospace firms

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BURNS & STALKERUsed interviews with managers and their own observations to evaluatethe impact of environment on organizational structure and managementpractice.

The type of structure that existed in rapidly changing and dynamicenvironments was different from that in organizations with stableenvironments.

B & S labeled the two types organic and mechanistic, respectively

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ORGANIC ORGANIZATIONOrganic organizations are relatively flexible and adaptable. They rely onlateral communication rather than vertical communication. Influence isbased upon expertise and knowledge rather than on authority of position.Responsibilities are defined loosely rather than rigid job definitions.Emphasis is on exchanging information rather than on giving direction.

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MECHANISTIC ORGANIZATIONMechanistic structures are characterized by high complexity, formalizationand centralization. They perform routine tasks, rely heavily onprogrammed behaviors, and are relatively slow in responding tothe unexpected.

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BURNS & STALKERCHARACTERISTIC MECHANISTIC ORGANIC

Task Definition Rigid Flexible

Communication Vertical Lateral

Formalization High Low

Control Centralized Diverse

Influence Authority Expertise

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Environmental ForcesSupplier – supply materials, machine, service and information used toproduce its products and services

Financial institution – the capital resources that available for the firmCustomers – targets for the firm to market its products and servicesCompetitor - all of the entities that compete with the firm inmarketplaceStockholders/owners – persons who are invest money in the firm and

represent the high level of managementlabor union – organization of skilled and unskilled workersThe community – people in the area where the firm perform itsoperationGovernment – federal, state and local level government that providesnot only constraints in the form of law, regulation, and taxes taking but

also provides assistance in form of purchases, information and funds.23



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Environmental ManagementEnvironmental management – how to manage the environmental

elements by executing strategies that alter uncertainly environment toa certain extent

Environmental Management Strategy: Independent Strategy – carry out its own resources to make better itsenvironmentCooperative Strategy – involve working with other environmentalelement for the same purposeStrategic Maneuvering – try to alter its environment

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Environmental ManagementBasic Strategy Specific Strategy Example

IndependentStrategy

Competitiveaggression

Legal ActionPolitical Action

Product differentiationAggressive Pricing and

Advertising Suits broughtagainst competitorsLobbying

CooperativeStrategy

Co-optationCoalition

Consumer representativesIndustry Association

StrategicManeuvering Domain SelectionDiversificationMerger and

Acquisition

Entry in specific marketWide product mixMerger with competitors

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Social ResponsibilitySocial Responsibility – the awareness that business activities have an

impact on its environment so it should try to balance its commitment inits environment

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Social ResponsibilityResponsibility to consumers, such as:

• the right to safety,• the right to be informed• the right to choose,• the right to be heard

Responsibility to employees, such as:• The right to safety•

The right to equality in the workplace,• The right to improve its capability

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Social ResponsibilityResponsibility to investors, such as:

• The right to be proper management of funds• The right to access information

Responsibility to the environment, such as• Preventing to water and air pollution,• Safe to the land and Forest• natural resources

Social responsibility, such as• Community support• Social audit

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Business Challenges/EnvironmentalVariables

Challenges in the Economic EnvironmentChallenges in the Competitive EnvironmentChallenges in the Social and Culture EnvironmentChallenges in the Political-Legal EnvironmentChallenges in the Technological Environment

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Challenges in the EconomicEnvironment

MacroeconomicsMicroeconomics

The Forces of Supply and DemandThe Business CycleState BudgetInternational Trade

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Challenges in the CompetitiveEnvironment

Types of Market StructureGlobal Competition

Dealing with Competitors

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Challenges in the TechnologicalEnvironment

Technology DevelopmentApplying Technology

Technology Transfer

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Thanks… Qs. If any?

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the environment of business, technology & global context

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