Chapter 3 EnvironmentalForces by Haitham2012

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									  Chapter 3

Environmental
    Forces


   MGT 301
Learning Goals

1. Explain how economic, demographic, and
   cultural factors affect organizations
2. State the five competitive forces in an industry

3. Describe the political and legal strategies
   managers use to cope with changes in the
   environment

4. Explain how technology changes the structure
   of industries
General Environment—sometimes called the
 macroenvironment, includes the external
     factors that usually affect all or
           most organizations
Forces Impacting Organizations
                  (adapted from Figure 3.1)

                     Macroenvironment
      Demographics                             Technology




Politics
                                                   Competitors


       Country          Organization
       Cultural                               Economy
       Values
               The Economy

   Economics is the
    discipline that focuses
    on understanding how
    people or people or
    nations produce,
    distribute, and
    consume various
    goods and services.
 Trends in the New Versus the Old
             Economy
               (adapted from Table 3.1)
                            Old
New
                             Size of organization
 Value matters –             matters – manufacturing
  information is key          is key
 New markets –              Defined market
  distance vanished           segments –
 Customers buy               demographics
  activities not products    Customers for a lifetime
  – a click away              – loyalty, repeat
 Human capital – rise        business
  of knowledge worker        Physical and capital
                              assets – tangible assets
                   The Economy (cont’d)
                The New Age of Competition
                 Old                              New
      Low-cost manufacturing             Value-added services
             Self-reliance                    Outsourcing

           Made in U.S.A.               Borderless competition

          Local knowledge               Customer convenience
                                       Human capital, software,
            Physical labor
                                       knowledge management
       Smoke-stack industries        Environmental stewardship
Source: Adapted from Friedman, T.L. The World is Flat. New York: Farrar,
Straus & Giroux, 2005, 48-172.
     Snapshot




         “Our assets leave on the elevator every night.
         Organizations do not own human capital;
         they can only rent them. In today’s world,
         human capital will have greater power than
         other resources because it is the people who
         create knowledge.”


Andy Grove, Founder and CEO
Intel Corporation
           Demographics

Demographics are the characteristics of a        
  work group, an organization, a specific
         market, or various populations.
    Some current demographic changes             
                                 include:
                      Increasing Diversity   

                      Education and Skills   

                    Managerial Challenges    
Impact of Changing Demographics
        on Organizations
 Increasing diversity
    Women participation rate increasing
    Hispanic men rate increasing
    People of color rate increasing

 Managerial challenges
     Multicultural awareness programs
     Language offerings
     Career challenges
     Lifestyle issues
     Illegal immigration
 Culture: refers to the unique pattern of shared
characteristics, such as values, that distinguish the
Members of one group of people from those of
another.


     Value: a basic belief about a condition that has
      considerable importance and meaning to
      individuals and is relatively stable over time
     Value system: comprises multiple beliefs that are
      compatible and supportive of one another
Why is Culture Important to Managers?
                    (cont’d)

     How values can effect a manager?
  Perceives                          Goes about
  situations and               solving problems
  problems
                   Views other
                   people and
  Determines         groups              Leads
  what is                          and controls
  and is not                         employees
  ethical behavior
Why is Culture Important to Management:
      Overview of Cultural Factors
                   Power
                  Distance
Long-Term
Orientation
                               Uncertainty
                               Avoidance

Gender Role   Culture
Orientation

               Individualism
   Why is Culture Important to Management:
            Hofstede’s Framework

 Power Distance—the degree to which less powerful
  members of society accept that influence is unequally
  divided

 Uncertainty Avoidance—the extent to which members
  of a culture feel threatened by risky or unknown
  situations

 Individualism—a combination of the degree to which
  society expects to take care of themselves and their
  immediate family and the degree to which people
  believe they are masters of their own destinies
  Why is Culture Important to Management:
        Hofstede’s Framework (cont’d)

 The opposite of individualism is collectivism—a tight
  social framework in which group (family, clan,
  organization, and nation) members focus on the
  common welfare and feel strongly toward one another

 Gender Role Orientation— refers to the extent to
  which a society reinforces traditional norms of
  masculinity versus femininity

 Long-Term Orientation—reflects the extent to which a
  culture stresses that its members accept delayed
  gratification of material, social, and emotional needs
                                     100

                                     90
Importance of Cultural Orientation




                                     80

                                     70

                                     60                                                                               Japan
                                                                                                                      USA
                                     50
                                                                                                                      Canada
                                     40
                                                                                                                      France
                                     30

                                     20

                                     10

                                      0
                                           Power Distance   Uncertainty   Individualism   Gender Role   Short-term/
                                                            Avoidance                     Orientation   Long-term
                                                                                                        Orientation
                                                                   Cultural Value Dimension
 Competitive Forces in the Task
         Environment
                (adapted from Figure 3.3)



 Supplier       Threat of             Threat      Customer
bargaining   substitute goods         of new      bargaining
  power         or services         competitors     power


                        Rivalry among
                       existing firms in
                           industry
        Competitors


                “For virtually all organizations,
      the critical environment constraint is their actions
     in relation to competitors. Therefore, any change in
    the environment that affects any competitor will have
    consequences that require some degree of adaptation.
    This requires continual change and adaptation by all
                competitors merely to maintain
                        relative position.”


Bruce D. Henderson, founder and chairman of the
Boston Consulting Group
Key Influences on New Entrants
  High versus low barriers to entry
  Economies of scale: achieved when increased volume
   lowers the unit cost of a good or service produced by a
   firm
  Product differentiation: the uniqueness in quality,
   price, design, brand image, or customer service that
   gives one firm’s product an edge over another firm’s
  Capital requirements: the dollars needed to finance
   equipment, purchase supplies, purchase or lease land,
   hire staff, and the like
  Government regulation: barrier to entry if it bars or
   severely restricts potential new entrants to an industry
 In a general sense, all competitors produce
  substitute goods or services, or goods or services
  that can easily replace another’s goods or services

 Movie rental            versus movie theatres

 Books          versus TV       versus newspapers

 Purchase          versus rental

 Cell phone        versus hard lines
           Customers
 Customer bargaining power may be relatively
  great when:
    Customer purchases a large volume relative
     to the supplier’s total sales
    Product or service represents a significant
     expenditure by the customer
    Large customers pose a threat of backward
     integration
    Customers have readily available alternatives
     for the same services or products
 Bargaining power of suppliers often
  controls:

   1. how much they can raise prices above
      their costs or

   2. reduce the quality of goods and services
      they provide before losing customers
       Political-Legal Forces: Managerial
                Political Strategies

Political Strategies       Political-Legal Forces


 Negotiation                 Political action
 Lobbying                     committees (PACs)
 Alliance                    Laws
 Representation              Government
 Socialization               Labor unions
                              Others
  Technology Forces: Technology
     Impacts on Organizations


                   Technology



Workplace   Strategy   Manufacturing   Distribution
       Technology Impacts on
           Organizations
   Snapshot

          “With 135 million users selling goods in
              more than 45,000 categories in 27
           international markets, eBay has left all
          competitors in the dust. Technology has
             really changed people’s lives for the
                           better.”


Meg Whitman, CEO, eBay
Technology's Impact in the
       Workplace
   Workers need greater problem-
    solving skills



   Outsourcing routine tasks



   Virtual organizations
 Faster new product introductions to market
 Entrance of “electronic” competitors
 Formation of “electronic shopping malls”
 Wider choice of suppliers for company
 More substitute goods and services available
  to company
 Product differentiation based on technological
  sophistication
          Mass
      Customization

     Reduction in
   Manufacturing time



Outsourcing of routine jobs
        Internet
       access for
       shopping


   Telecommunication
         devices


Information superhighway
  for global competition

								
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