《Contemporary Management》chpt 3 The Organizational Environment

3 The Organizational o Environment CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 3-1 The Organizational Environment 3

3-2 Organizational Environment oOrganizational Environment:: those forces outside its boundaries that can impact it. Forces can change over time and are made up of Opportunities and Threats oPportunities: openings for managers to enhance revenues or open markets. New technologies new markets and ideas o Threats. issues that can harm an organization economic recessions, oil shortages o Managers must seek opportunities and avoid threats win/MeGraw-Hill OThe McGraw-Hill Companies. Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 3-2 Organizational Environment ⚫Organizational Environment: those forces outside its boundaries that can impact it. ◼ Forces can change over time and are made up of Opportunities and Threats. ⚫Opportunities: openings for managers to enhance revenues or open markets. ◼ New technologies, new markets and ideas. ⚫Threats: issues that can harm an organization. ◼ economic recessions, oil shortages. ⚫Managers must seek opportunities and avoid threats

3-3 Forces in the Organizational Environment Figure 3.1 General Environment Technological Task Environment Sociocultural Forces Forces Competitors Global Supplier Firm Customers Economic Forces F orces Distributors Political Demographic Legal Forces Forces " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 3-3 Forces in the Organizational Environment Figure 3.1 Distributors Firm Task Environment Supplier s Competitors Customers General Environment Economic Forces Global Forces Sociocultural Forces Demographic Forces Technological Forces Political & Legal Forces

3-4 Task Environment o Task Environment: forces from suppliers distributors customers, and competitors o Suppliers: provide organization with inputs Managers need to secure reliable input sources Suppliers provide raw materials, components, and even labor Working with suppliers can be hard due to shortages, unions. and lack of substitutes Suppliers with scarce items can raise the price and are in a good bargaining position Managers often prefer to have many, similar suppliers of each item " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 3-4 Task Environment ⚫Task Environment: forces from suppliers, distributors, customers, and competitors. ⚫Suppliers: provide organization with inputs ◼ Managers need to secure reliable input sources. ◼ Suppliers provide raw materials, components, and even labor. ◆ Working with suppliers can be hard due to shortages, unions, and lack of substitutes. ◆ Suppliers with scarce items can raise the price and are in a good bargaining position. ◼ Managers often prefer to have many, similar suppliers of each item

3-5 Task Environment dIstributors: organizations that help others to sell goods Compaq Computer first used special computer stores to sell their computers but later sold through discount stores to reduce costs Some distributors like Wal-Mart have strong bargaining power They can threaten not to carry your product o Customers. people who buy the goods Usually, there are several groups of customers e For compag there are business home . government uyers Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 3-5 Task Environment ⚫Distributors: organizations that help others to sell goods. ◼ Compaq Computer first used special computer stores to sell their computers but later sold through discount stores to reduce costs. ◼ Some distributors like Wal-Mart have strong bargaining power. ◆ They can threaten not to carry your product. ⚫Customers: people who buy the goods. ◼ Usually, there are several groups of customers. ◆ For Compaq, there are business, home, & government buyers

3-6 Task Environment o Competitors. other organizations that produce similar goods Rivalry between competitors is usually the most serious force facing managers High levels of rivalry often means lower prices e Profits become hard to find Barriers to entry keep new competitors out and result from o Economies of scale: cost advantages due to large scale production o Brand loyalty: customers prefer a given product " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 3-6 Task Environment ⚫Competitors: other organizations that produce similar goods. ◼ Rivalry between competitorsis usually the most serious force facing managers. ◼ High levels of rivalry often means lower prices. ◆ Profits become hard to find. ◼ Barriers to entry keep new competitors out and result from: ◆ Economies of scale: cost advantages due to large scale production. ◆ Brand loyalty: customers prefer a given product

3-7 Industry Life Cycle Reflects the changes that take place in an industry over time. o Birth stage: firms seek to develop a winning technology. VhS vS. Betamax in video or 8-track vs cassette in audio e Growth stage: Product gains customer acceptance and grows rapidly. New firms enter industry, production improves distributors emerge " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 3-7 Industry Life Cycle ⚫Reflects the changes that take place in an industry over time. ⚫Birth stage: firms seek to develop a winning technology. ◼ VHS vs. Betamax in video, or 8-track vs. cassette in audio. ⚫Growth stage: Product gains customer acceptance and grows rapidly. ◼ New firms enter industry, production improves, distributors emerge

3-8 o stage: at end of growth, there is a slowing customer demand Competitor rivalry increases, prices fall Least efficient firms fail and leave industry mAturity stage: most customers have bought the product, growth is slow. Relationships between suppliers, distributors more stable Usually, industry dominated by a few, large firms o Decline stage: falling demand for the product. Prices fall, weaker firms leave the industry win/MeGraw-Hill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 3-8 ⚫Shakeout stage: at end of growth, there is a slowing customer demand. ◼ Competitor rivalry increases, prices fall. ◼ Least efficient firms fail and leave industry. ⚫Maturity stage: most customers have bought the product, growth is slow. ◼ Relationships between suppliers, distributors more stable. ◼ Usually, industry dominated by a few, large firms. ⚫Decline stage: falling demand for the product. ◼ Prices fall, weaker firms leave the industry

3-9 The General environment o Consists of the wide economic technological, demographic and similar Issues。 Managers usually cannot impact or control these Forces have profound impact on the firm oEconomic forces: affect the national economy and the organization. Includes interest rate changes, unemployment rates economic growth When there is a strong economy people have more money to spend on goods and services " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 3-9 The General Environment ⚫Consists of the wide economic, technological, demographic and similar issues. ◼ Managers usually cannot impact or control these. ◼ Forces have profound impact on the firm. ⚫Economic forces: affect the national economy and the organization. ◼ Includes interest rate changes, unemployment rates, economic growth. ◼ When there is a strong economy, people have more money to spend on goods and services

3-10 Technological forces: skills equipment used in design production and distribution Result in new opportunities or threats to managers Often make products obsolete very quickly Can change how we manage o Socialcultural forces: result from changes in the social or national culture of society. Social structure refers to the relationships between people and groups o Different societies have vastly different social structures National culture includes the values that characterize a society o Values and norms differ widely throughout the world These forces differ between cultures and over time win/MeGraw-Hill CThe McGraw-Hill Companies, Inc, 2000

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 3-10 ⚫Technological forces: skills & equipment used in design, production and distribution. ◼ Result in new opportunities or threats to managers. ◼ Often make products obsolete very quickly. ◼ Can change how we manage. ⚫Socialcultural forces: result from changes in the social or national culture of society. ◼ Social structure refers to the relationships between people and groups. ◆ Different societies have vastly different social structures. ◼ National culture includes the values that characterize a society. ◆ Values and norms differ widely throughout the world. ◼ These forces differ between cultures and over time