The Environment & Corporate

Culture

GOHAR ALAM SIDDIQUI

The External Environment
The external organizational environment includes all elements existing outside the boundary of
the organization that have the potential to affect the organization.

 Competitors,
 Resources, Technology, and
 Economic conditions

Further Categorization as:

 Task Environment
o Closer to organization
o Day to day transactions
o Directly influence the basic operations & Performance
o Suppliers
o Customers
o Labour market
The External Environment
 General Environment

Affects Organisation indirectly

o Social

o Legal

o Political

o International

o Natural and

o Technological
Dimensions of the Organization’s General, Task,
and Internal Environments
Organizations Ecosystem

A new view of the environment argues that organizations are now evolving into business
ecosystems.

 An organizational ecosystem is
o a system formed by the interaction among a community of organizations in the environment.

 An ecosystem includes
o organizations in all the sectors of the task and general environments that provide the
resource and information transactions, flows, and linkages necessary for an organization to
thrive.

 For example,
o Apple’s ecosystem includes hundreds of suppliers and millions of customers for the products
that it produces across several industries, including consumer electronics, Internet services,
mobile phones, personal computers, and entertainment.
Internal Environment
The organization also has an internal environment, which includes the elements within the
organization’s boundaries such as:

• Current employees,
• Management, and especially
• Corporate culture,

which defines employee behavior in the internal environment and how well the organization
will adapt to the external environment.
Task Environment
The task environment includes those sectors that have a direct working relationship with
the organization, among them customers, competitors, suppliers, and the labor market.

Customers

• Those people and organizations that acquire goods or services from the organization are
customers.

• As recipients of the organization’s output, customers are important because they determine the
organization’s success.

• Organizations have to be responsive to marketplace changes.

• Customers no longer had time for door-to-door salespeople

• Managers knew something had to be done.

Task Environment
Encyclopedia Britannica example

• Managers followed a carefully planned strategic transition to remake Encyclopedia Britannica

into a totally different organization by 2012, when the last bound volumes were printed and
the company’s digital strategy was fully in place. Managers placed heavy emphasis on their
K–12 customers, where Britannica’s high editorial quality had always been appreciated.
Content is updated every 20 minutes by teams of scholars from around the world.

• Today, more than half of U.S. students and teachers have access to online Britannica
content, and the service is growing even faster overseas. The company also has around
500,000 household subscribers, who prefer quality and credibility over Wikipedia’s quantity
and free access.

The Encyclopedia Britannica (Latin for "British

Encyclopedia") is a general knowledge English-
language encyclopedia. It is published by Encyclopedia
Britannica, Inc.; the company has existed since the 18th
century, although it has changed ownership various times
through the centuries.
Task Environment
Competitors

• Organizations in the same industry or type of business that provide goods or services to the
same set of customers are referred to as competitors.

• Competitors are constantly battling for loyalty from the same group of customers.

 For example, in early 2013, Samsung became the world leader in smartphone sales, topping
Apple in several countries, and the competition has gotten even hotter as Samsung has
stepped up the challenge in the U.S. market. The company held its first promotional event
for its flagship smartphone, the Galaxy S4, at a packed event at New York’s Radio City
Music Hall.

• Apple’s iPhone still has strong brand loyalty, but the buzz at the moment is on Samsung’s side. A
survey found that first-time smartphone buyers preferred Samsung by about a 3-to-1 margin.
“This is Samsung’s time right now,” said Gene Munster, an analyst at Piper Jaffray.
Task Environment
Suppliers
• Suppliers provide the raw materials that the organization uses to produce its output.

• A candy manufacturer, for example, may use suppliers from around the globe for ingredients
such as cocoa beans, sugar, and cream.

• A supply chain is a network of multiple businesses and individuals that are connected
through the flow of products or services.

• For Toyota, the supply chain includes over 500 global parts suppliers organized by a
production strategy called just-in-time ( JIT).
• JIT improves an organization’s return on investment, quality, and efficiency because much
less money is invested in idle inventory.

• In the 1970s, the Japanese taught U.S. companies how to boost profit by keeping
inventories lean through JIT.
Task Environment
Suppliers
• Instead of months’ worth of inventory, there are now days and even hours of inventory,”
there is a downside.
Downside
• However— there is a down side also like in case of any unforeseen circumstances like
Japan Earth Quake in 2011 disrupted supplies and it was the situation nowhere to get
product.

• The quake, resulted in breakability of today’s JIT and Japanese parts suppliers for the
global auto industry were shut down, disrupting production at auto factories around the
world. “Even a missing

• Toyota’s production fell by 800,000 vehicles—10 percent of its annual output. Despite the
potential for such disruptions, most companies aren’t willing to boost inventories to
provide a cushion. Even a slight increase in inventory can cost companies millions of
dollars.

• COVID is another example, when Indus Hospital wanted to pay any price to purchase
Ventilators from the west but not a single item was supplied.
Task Environment
Labor Market

It represents people in the environment who can be hired to work for the organization. Every
organization needs a supply of trained, qualified personnel.

Unions, employee associations, and the availability of certain classes of employees can influence
the organization’s labor market. Labor market forces affecting organizations right now include

1) the growing need for computer-literate knowledge workers;

2) the necessity for continuous investment in human resources through recruitment, education, and
training to meet the competitive demands of the borderless world; and

3) the effects of international trading blocs, automation, outsourcing, and shifting facility locations
on labor dislocations, creating unused labor pools in some areas and labor shortages in others.
Costco Wholesale Corporation

• American multinational corporation which operates a chain of membership-

only big-box retail stores.

• As of 2020, Costco was the third largest retailer in the world,

• and the world's largest retailer of choice and prime beef, organic foods,
rotisserie chickenW

Stock price 504 $

Founded 1976
Employees 214000
Head office Washington USA
Task Environment

General Environment
Costco Wholesale Corporation Complex Environment

Costco Wholesale Corporation, a no-frills, self-service warehouse club, operates an international

chain of membership warehouses offering a limited selection of products at reduced
prices.

Costco’s business model focuses on maintaining its image as a pricing authority, consistently
providing the most competitive prices. “Everything we do is to provide goods and services
to the customer at a lower price,” said Jim Sinegal, co-founder and recently retired CEO.
New CEO Craig Jelinek has vowed that a low-price philosophy will continue to guide the
company. Costco warehouses are designed to operate efficiently and to communicate value
to members. The warehouse decor—high ceilings, metal roofs, exposed trusses—keeps costs
low and contributes to the perception that Costco is for serious shoppers seeking serious
bargains. Other strategies for keeping prices low include offering only around 4,000 unique
products at a time (by contrast, Walmart offers over 100,000) and negotiating low prices
with suppliers.
Costco Wholesale Corporation Complex Environment

Only about 28 percent of sales come from outside the United States, but same store sales in
overseas markets have been growing about four times faster than those in the United States.
The biggest part of Jelinek’s plan is to increase Costco’s international presence.

In a 2013 interview, he said that the company would open its first locations in France and Spain
within the next two years, and that two-thirds of Costco’s expansion over the next five years
would be international, with a focus on Japan, Taiwan, and South Korea.

Costco’s biggest competitive advantage is its loyal workforce. “Costco compensates employees
very well—well above the industry in terms of wages and benefits,” says R. J. Hottovey, a retail
analyst at Morningstar. When the economic downturn worsened in late 2009 and many retailers
cut wages and issued layoffs, Costco handed out raises. The happiness and morale of
employees is often overlooked in the retail industry, but not at Costco. Thanks to its good
treatment of workers, Costco has one of the lowest turnovers in the retail industry (around 5
percent), and since 2009, sales have grown 39 percent and the stock price has doubled.
 Remember this
• The organizational environment, consisting of both task and general environments, includes all
elements existing outside the boundary of the organization that have the potential to affect the
organization.

• An organizational ecosystem includes organizations in all the sectors of the task and general
environments that provide the resource and information transactions, flows, and linkages necessary for
an organization to thrive.

• The general environment indirectly influences all organizations within an industry and includes five
dimensions.

• The task environment includes the sectors that conduct day-to-day transactions with the
organization and directly influence its basic operations and performance.
Remember this

• The internal environment includes elements within the organization’s boundaries, such
as employees, management, and corporate culture.

• Customers are part of the task environment and include people and organizations that
acquire goods or services from the organization.

• Competitors are organizations within the same industry or type of business that vie for
the same set of customers.

• Suppliers provide the raw materials the organization uses to produce its output.

• The labor market represents the people available for hire by the organization.
General Environment
The dimensions of the general environment include

 international,

 technological,

 sociocultural,

 economic,

 Legal

 political, and

 natural.
Task Environment

General Environment
General Environment
International Environment

• Geographical divisions are irrelevant

• Companies expand to global market

• International Challenges in terms of product acceptance, culture, compliance

• Star-bucks failed in France for several years

• Company culture-portraying same sex marriages acceptable.????

• Products banned in one country because of social or religion reason (V – Lev)

Technological Environment

 The technological dimension of the general environment includes scientific and technological
advancements in a specific industry, as well as in society at large.

 Advances in technology drive competition and help innovative companies gain market share.

 However, some industries have failed to adapt to technological shifts and are facing decline.

 Fuji, Kodak, Canon have wiped out, they could not see the change coming and vanished.

 Now the use of internet, digitalization, wifi, etc is imminent

 Netflix-Blockbuster ?
Sociocultural Environment

The sociocultural dimension of the general environment represents the

• Demographic characteristics, norms, customs, and values of the general population.

• Important sociocultural characteristics are geographical distribution and population density,

age, and education levels.

• Today’s demographic profiles are the foundation of tomorrow’s workforce and consumers.

• By understanding these profiles and addressing them in the organization’s business plans,
managers prepare their organizations for long-term success.

• Smart managers may want to consider how the following sociocultural trends are changing
the consumer and business landscape:
Sociocultural Environment

1. A new generation of technologically savvy consumers, called Gen Z, or simply Post-

Millennials, has intimately knitted technology into every aspect of their lives.

2. Mobile devices shape the way they communicate, shop, travel, and earn college credits.
This generation will make up 40 percent of the population in the United States and
Europe by 2020 and will constitute the largest unit of consumers worldwide.

3. Predictions of what they will value as consumers include brands that are trustworthy
and products and companies that show a commitment to environmental, social, and
fiscal responsibility.

4. Young people are also leading the trend toward widespread social equality. Polls
show that views about social mores and lifestyles are shifting. Same Sex / Gay
marriages are a trend now and generally young people like to tolerate that
 Economic Environment

• The economic dimension represents the general economic health of the country or region in which
the organization operates.

• Consumer purchasing power, the unemployment rate, and interest rates are part of an
organization’s economic environment. Because organizations today are operating in a global
environment, the economic dimension has become exceedingly complex and creates enormous
uncertainty for managers.

• In the United States, many industries, such as banking, are finding it difficult to make a comeback
despite the slowly rebounding economy.
Legal & Political

• The legal-political dimension includes government regulations at the local, state, and
federal levels, as well as political activities designed to influence company behavior.

• The U.S. political system encourages capitalism, and the government tries not to
overregulate business. However, government laws do specify rules of the game.

• The federal government influences organizations through the Occupational Safety and
Health Administration (OSHA), Environmental Protection Agency (EPA), fair trade
practices, libel statutes

• Obama Care 2012 upheld by Supreme court and Insurance companies have to pay
penalties

• Pakistan Financial Act, Minimum Wage, political instability

• Child labour, Sialkot….Carpet industry

Natural

 In response to pressure from environmental advocates, organizations have become

increasingly sensitive to the Earth’s diminishing natural resources and the environmental
impact of their products and business practices.

 As a result, the natural dimension of the external environment is growing in importance.

The natural dimension includes all elements that occur naturally on Earth, including
plants, animals, rocks, and resources such as air, water, and climate.

 The Oil spill in the gulf of Mexico, 2010??

 Contaminated water because of industry.,..Hard Board.

 Cement Industry
 Atomic reactor
 Use of Coal
Note: The scores for each country are based on 25 performance indicators covering both environmental public health and
ecosystem vitality, such as air pollution and greenhouse gas emissions
The Organization-Environment Relationship
Why do organizations care so much about factors in the external environment? The reason
is that the environment creates uncertainty for organization managers, and they must respond by
designing the organization to adapt to the environment.

Environmental Uncertainty

Uncertainty means that managers do not have sufficient information about environmental
factors to understand and predict environmental needs and changes
The Internal Environment : Corp Culture
• Culture as the set of key values, beliefs, understandings, and norms shared by members of
an organization.

• The concept of culture helps managers understand the hidden, complex aspects of
organizational life.

• Culture is a pattern of shared values and assumptions about how things are done within the
organization. This pattern is learned by members as they cope with external and internal
problems and taught to new members as the correct way to perceive, think, and feel.

Although strong corporate cultures are important, they can also sometimes promote negativity
due to some tough action by the management
Types of Culture
Cultures can vary widely across organizations; however, organizations within the same industry often
reveal similar cultural characteristics because they are operating in similar environments.
The internal culture should embody what it takes to succeed in the environment. If the external
environment requires extraordinary customer service, the culture should encourage good service; if it
calls for careful technical decision making, cultural values should reinforce managerial decision
making.
Managing the high performance Culture
Companies succeed in a turbulent world where careful attention is given both cultural values and
performance

When cultural values aren’t connected to business performance, they aren’t likely to benefit the
organization during hard times.
Thank You