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Chapter 02 - The External and Internal Environments

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chapter 2
2-1
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
The External and Internal

Environments
CHAPTER CONTENTS
Learning Objectives 2
Key Student Questions 3
Class Roadmap 4
Bottom Line 13
Social Enterprise 14
Lecturettes 15
Discussion Questions 16
Experiential Exercises 19
Concluding Case 21
Examples 22
Supplemental Features 24
Chapter Video 24
Manager‘s Hot Seat 24
Self-Assessment 24
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LEARNING OBJECTIVES
1 Describe how environmental forces influence organizations and

how organizations can influence their environments.
2 Distinguish between the macroenvironment and the competitive
environment.
3 Explain why managers and organizations should pay attention to

economic and social developments.
4 Identify elements of the competitive environment.
5 Summarize how organizations respond to environmental

uncertainty.
6 Define elements of an organization’s culture.
7 Discuss how an organization’s culture and climate affect its

response to its external environment.
KEY STUDENT QUESTIONS
The two questions that come up most often for this chapter are:

and the task environment?” (Or request to explain a particular 1.
“Can you explain the difference between the macroenvironment element of
either environment.)
2. “As a manager, what should I do to respond to a changing environment?”
Fortunately, the text has tools to help you deal with both of these questions more effectively.
• The first question is best addressed with examples, and students often find it useful to go
through an example or two for a specific company. Start by discussing the high tech
industry, using the information in the text and the ―Management Connection‖ section called
―Apple‘s Rocky Relationships.‖ Next, ask students to name a company with which they are
familiar, and have them identify examples of each of the different environmental factors for
that organization. If your students can‘t think of an organization, try using something with
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Education.
which they are likely to be familiar, such as Kaiser Permanente (a large national HMO.) A
completed example appears below in the instructions for Experiential Exercise 2.1,
―External Environment Analysis‖.
• The second question is best addressed by having students work together to complete the
concluding case study ―Wild Water Gets Soaked.‖ The brainstorming activity that students
complete for the third discussion question on the case also serves as an excellent introduction
to Chapter 3 - Decision Making.
• ―Now, create a plan for Wild Water. In your plan, describe what changes the organization
needs to make to its culture to meet the upcoming challenges in the external environment.
Then describe steps that Wild Water can take to compete successfully against the new
amusement park. How can the Salernos keep their loyal customers happy while attracting
new ones?‖
CLASS ROADMAP
Management in Action
Can Mark Zuckerberg Help Facebook Reach the Next Level by Outmaneuvering
the Competition and Refocusing on Its Developers?
One of the most dramatic business stories of the past decade has been how Mark Zuckerberg
created a social-networking website that helped transform how people use the Internet.
Facebook, along with other popular social-media sites, converted consumers of media content
into creators of that content, and it vastly widened the scope of what information people share
about themselves.
Some observers expected that Facebook would continue to be primarily a force that changes the
online environment and social communities. However, other signs point to the possibility that
change is beginning to outpace the company. Today Facebook‘s managers are trying to keep up
with the race to mobile devices even as Facebook users are looking around for the latest hot new
thing to do online.
Introduction
LO 1: Describe how environmental forces influence organizations, and how organizations can
influence their environments
A. Organizations are open systems (Figure 2.1)
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1. Receive raw materials, services, and financial, human, and information resources
from the environment, called inputs
2. Transform resources into finished goods and services
3. Send outputs back into the environment
B. External Environment Influences
1. When resources change, environment influences the organization 2. When outputs

differ, organization influences the environment 3. The organization operates in a
competitive environment.
E.G.
Use Example 2.1 – Environment Influences here
I. THE MACROENVIRONMENT
1. Macroenvironment is defined by the most general elements in the external

environment that can potentially influence strategic decisions
LO 2: Distinguish between the macroenvironment and the competitive environment
A. The Economy (Exhibit 2.3)

a. The economic environment dramatically affects companies‘ ability to function
effectively and influences their strategic choices.
b. Interest and inflation rates affect the availability and cost of capital, the ability to
expand, prices, costs, and consumer demand for products.
c. Unemployment rates affect labor availability and the wages the firm must pass, as
well as product demand.
B. Technology
a. Technological advances create new products. As technology evolves, new
industries, markets, and competitive niches develop.
b. New technologies provide new production techniques. Sophisticated robots
perform jobs without suffering fatigue.
c. New technologies also provide new ways to manage and communicate.
Computerized management information systems (MIS) make information
available when needed.
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C. Laws and Regulations
1. U.S. government policies both impose strategic constraints and provide opportunities.
2. Government can affect business opportunities through tax laws, economic policies,
and international trade rulings.
3. Regulators are specific government organizations in a firm‘s environment.
4. Regulatory agencies have the power to investigate company practices and take legal
actions to ensure compliance with the laws are:
i. Securities & Exchange Commission (SEC) ii.

Occupational Safety and Health Administration (OSHA) iii.
Food & Drug Administration (FDA) iv. Federal Aviation
Administration (FAA)
v. Equal Employment Opportunity Commission (EEOC) vi.
National Labor Relations Board (NLRB)
vii. Office of Federal Contract Compliance Programs (OFCCP)
viii. Environmental Protection Agency (EPA)
E.G.
Use Example 2.2 – Laws and Regulations here
D. Demographics
a. Demographics measures of various characteristics of the people comprising

groups or other social units.
b. Work groups, organizations, countries, markets, or societies can be described
statistically by referring to their members‘ age, gender, family size, income,
education, occupation, and so forth.
Multiple Generations at Work
In order to address pending labor shortages over the next decade, organizations will need to find ways to
retain and fully use the talents of their experienced, older workers while competing for qualified
entrylevel workers. There are many reasons why organizations will want to hire or retain seasoned
employees. Experienced employees can coach younger employees, maintain relationships with key
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Education.
customers, or fill in during busy seasons. Research suggests that many of older employees are willing to
work past the traditional retirement age of 65; one reason being a lack of pensions and adequate savings
will make retirement unaffordable for many of today‘s Baby Boomers.
LO 3: Explain why managers and organizations should attend to economic and social
developments
E. Social Issues
a. Societal trends regarding how people think and behave have major implications
for management of the labor force, corporate social actions, and strategic
decisions about products and markets.
b. Companies have introduced more supportive policies, including family leave,
flexible working hours, and childcare assistance.
F. Sustainability and the Natural Environment
a. Prominent issues in today‘s press pertain to natural resources.

b. The protection of the natural environment is important to managerial decisions.
II. THE COMPETITIVE ENVIRONMENT
LO 4: Identify elements of the competitive environment
A. Competitors
a. As a first step in understanding their competitive environment, organizations must

identify their competitors, which may include: i. small domestic firms ii. overseas
firms
iii. new domestic companies exploring new markets iv.
strong regional competitors
v. unusual entries, such as Internet shopping
b. The next step is to analyze how they compete.
B. New Entrants
a. Barriers to entry are conditions that prevent new companies from entering an
industry.
b. Some major barriers to entry are government policy, capital requirements, brand
identification, cost disadvantages, and distribution channels.
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Education.
C. Substitutes and Complements (Exhibit 2.5)
a. Technological advances and economic efficiencies are among the ways that firms
can develop substitutes for existing products.
D. Suppliers
a. Suppliers provide the resources needed for production and may come in the form
of people, raw materials, information, and financial capital.
b. Suppliers can raise their prices or provide poor quality goods and services.
c. Labor unions can go on strike or demand higher wages.
d. Workers may produce defective work.
E. Customers
a. Customers purchase the products or services the organization offers.

b. Final consumers are those who purchase products in their finished form.
c. Intermediate consumers are customers who purchase raw materials or wholesale
products before selling them to final customers.
i. Customer service means giving customers what they want or need, the way
they want it, the first time.
ii. Actions and attitudes that mean excellent customer service include:
a.) Speed of filling and delivering normal orders.
b.) Willingness to meet emergency needs.
c.) Merchandise delivered in good condition.
d.) Readiness to take back defective goods and re-supply quickly.
e.) Availability of installation and repair services and parts.
f.) Service charges (that is, whether services are ―free‖ or priced separately).
Management in Action –
Progress Report
Facebook‘s seemingly dominant position among social media is under constant challenge. Increasingly,
Facebook is competing to provide services that overlap with other leading players—Amazon, Apple, and
Google. To gain an edge, Facebook relies heavily on the data it collects from its users.
• Are Amazon, Apple, and Google competitors in Facebook’s competitive environment or sellers of
complements? Explain.
The case describes these companies as offering some similar and some complementary services. Students
may have different opinions but should demonstrate that they understand the meaning of competing and
complementary products. For example, Google dominates search, while Facebook is launching search
tools; Amazon suggests products to buy, and Facebook suggests gifts to buy when a user congratulates a
friend; Apple sells entertainment, and using Facebook (especially to view friends‘ pictures, videos, and so
on) is a form of entertainment.
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Education.
• Facebook has two major kinds of customers: the users of its site and the advertisers on its site. What
challenges does Facebook face from Google in serving each customer group?
In serving the users of its site, Facebook is challenged by Google‘s offering of an alternative social-media
site, Google+. In serving advertisers, both companies want to promise these customers the most value for
their ad spending. For example, Google might point out to advertisers that someone searching for
information about cars is more likely to be shopping for cars than someone commenting about cars on
Facebook; Facebook might say the conversation about cars will do more to influence a purchase decision.
Teaching Tip:
Have students review and give feedback on each others‘ responses to the pre-class assignment
(Experiential Exercise 2.1) at this point in the lecture. The best way to do this is in pairs. Each student
reads the other‘s paper, and then both students talk about environmental factors that have been
misclassified, and other environmental factors that could be added. Students should correct their own
papers before turning them in, and if possible, students should get feedback from the professor or teaching
assistant about both the paper and the corrections.
III. ENVIRONMENTAL ANALYSIS
LO 5: Summarize how organizations respond to environmental uncertainty
a. Developments outside the organization can have a profound impact on the way
managers operate.
b. Example: if little is known about customer likes and dislikes, organizations will have
a difficult time designing new products, scheduling production, or developing market
plans.
c. Environmental uncertainty means that managers do not have enough information
about the environment to understand or predict the future.
d. Uncertainty arises from two related factors:
1. Environmental complexity, or the number of issues to which a manager must
attend, as well as their interconnectedness.
2. Dynamism, or the degree of discontinuous change that occurs within the
industry.
A. Environmental scanning
a. A process that involves searching out information that is unavailable to most people
and sorting through that information in order to interpret what is important and what
is not.
b. Competitive intelligence is the information necessary to decide how best to manage
in the competitive environment they have identified. (Exhibit 2.6)
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Education.
E.G.
Use Example 2.3 – Environmental Complexity here
B. Scenario Development
a. Scenario is a narrative that describes a particular set of future conditions.

b. Best-case scenario--events occur that are favorable to the firm.
c. Worst-case scenario--events are all unfavorable.
d. Scenario development helps managers develop contingency plans for what they might
do given different outcomes.
E.G.
Use Example 2.4 – Competitive Intelligence here
C. Forecasting
a. Used to predict exactly how some variable or variables will change in the future.
b. The best advice for using forecasts might include the following:
1. Use multiple forecasts
2. Accuracy decreases the farther into the future you are trying to predict.
3. Forecasts are no better than the data used to construct them
4. Use simple forecasts
5. Important events often are surprises and represent a departure from predictions
Teaching Tip:
Ask students to imagine different scenarios that might impact your school, and to develop contingency
plans that might address those scenarios. This can either be done as a discussion question with the entire
class, or students can work in groups to answer the question, and report back. For example, a possible
scenario might center around a population boom or bust. In a population boom, universities might
respond by setting up satellite campuses, whereas in a bust, universities might look for additional students
by setting up international programs and/or programs targeted to meet the needs of working professionals.
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Education.
D. Benchmarking
a. Benchmarking is the process of comparing the organization‘s practices and

technologies with those of other companies.
b. Benchmarking means identifying the best-in-class performance by a company in a
given area.
IV. RESPONDING TO THE ENVIRONMENT
A. Changing the Environment You Are In
1. Strategic maneuvering is the organization‘s conscious efforts to change the

boundaries of its task environment. It can take four basic forms:
a. Domain selection is the entrance by a company into another suitable market or
industry.
b. Diversification occurs when a firm invests in different types of businesses or
products, or when it expands geographically to reduce its dependence on a single
market or technology.
c. A merger or acquisition takes place when two or more firms combine, or one
firm buys another, to form a single company.
d. Divestiture occurs when a company sells one or more businesses.
2. Prospectors are companies that continuously change the boundaries of their task
environments by seeking new products and markets, diversifying and merging, or
acquiring new enterprises.
3. Defenders are companies that stay within a more limited, stable product domain
E.G.
Use Example 2.5 Independent Strategies here
B. Influencing your environment
1. Independent strategies are strategies that an organization acting on its own uses to
change some aspect of its current environment. (Exhibit 2.7)
2. Cooperative strategies are strategies used by two or more organizations working
together to manage the external environment. (Exhibit 2.8)
1. Adapting to the Environment: Changing Yourself
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Education.
1. Four different approaches that organizations can take in adapting to environmental

uncertainty are: (Exhibit 2.9)
a. Decentralized bureaucratic (stable, complex environment)
b. Centralized bureaucratic (stable, simple environment)
c. Decentralized organic (dynamic, complex environment)
d. Centralized organic (dynamic, simple environment)
2. Adapting at the boundaries.

a. Buffering is creating supplies of excess resources in case of unpredictable needs.
b. Smoothing is leveling normal fluctuations at the boundaries of the environment.
3. Adapting at the core.
a. Flexible process allows for adaptation in the technical core to meet the varied and
changing demands of customers.
E.G.
Use Example 2.6 Corporate Culture here
C. Choosing a Response Approach
1. Three general considerations help guide management‘s response to the environment.

a. Change appropriate elements of the environment.
b. Choose responses that focus on pertinent elements of the environment.
c. Choose responses that offer the most benefit at the lowest cost.
V. THE INTERNAL ENVIRONMENT OF

ORGANIZATIONS: CULTURE AND CLIMATE
LO 6: Define elements of an organization’s culture
A. Organization culture is the set of important assumptions about the organization and its
goals and practices that members of the company share.
1. Strong cultures
a. Everyone understands and believes in firm‘s goals, priorities, and practices.
b. An advantage if appropriate behaviors are supported.
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Education.
2. Weak cultures
a. Different people hold different values
b. Confusion about corporate goals
c. Not clear what principles should guide decisions
LO 7: Discuss how an organization’s culture affects its response to its external environment
B. Diagnosing Culture
1. Culture can be diagnosed through the following:

a. Corporate mission statements and official goals. (Exhibit 2.9)
b. Business practices.
c. Symbols, rites, and ceremonies.
d. The stories people tell.
2. Four types of organizational culture (Exhibit 2.10)
a. Group culture - flexible, internal focus
b. Hierarchical structure - controlling, internal focus
c. Rational culture - controlling, external focus
d. Adhocracy - flexible, external focus
C. Managing Culture
1. Espouse lofty ideals and visions for the company

2. Give constant attention to mundane, daily details
3. CEO‘s need to embody the vision of the company
D. Organizational Climate
Management in Action – Onward

During the recent Facebook–sponsored F8 conference for developers, Mark Zuckerberg made it clear that
Facebook will be developing tools for developers to grow and make more revenue from their apps on the
social networking site. In turn, this goal will ―make users happier and marketers smarter, so business
owners will be able to more easily reach large audiences.‖
• How well do you think Facebook has been responding to its fast-changing environment? Identify risks it
is taking that could negatively impact its future growth.
Facebook is responding well to its fast-changing environment by offering concepts such as the FBStart
program and mobile applications. However, targeted ad placement may pose a risk as users may protest
at having advertisers using their information to target them for specific ads. We have already seen these
privacy concerns brought up with other organizations.
• How can Mark Zuckerberg strengthen Facebook’s culture to help the company fulfill its missions?
Methods by which managers can reinforce Facebook‘s culture include espousing a vision for Facebook
that continues the company‘s mission and values, setting an example of adhering to those values,
communicating concern for those values, and rewarding employees for acting on those values. Elements
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Education.
BOTTOM LINE
of Facebook‘s culture should be evident in the company‘s celebrations, the types of employees hired, and
the content of employee orientation and training.
p. 47: Does low-cost mean low-quality? Why or why not?

Not necessarily. Efforts to save money can improve processes—for example, simplifying a process in a
way that reduces errors along with costs. It can involve reducing waste. It can involve locating in parts of
the world where equally skilled people accept lower rates of pay. Of course, cost cutting can also involve
using inferior material or untrained labor, so decisions about saving money should be made with concern
for the organization‘s overall strategy.
p. 47: What are some technologies that have given managers fast access to information?
Two obvious answers are the Internet and portable computers such as laptops. Students may also be
familiar with other information technologies, such as wireless computing, databases, and decision-support
systems.
p. 51: In which of these areas would you say PepsiCo tried to create a competitive advantage? (If you
aren't sure, come back to this question after you've studied this section.)
PepsiCo sought to innovate by creating snacks that are more healthful, which could also be seen as
competing in terms of quality. It has spent less than Coca-Cola on advertising, which is in a sense a low-
cost strategy that PepsiCo has tried to move away from.
p. 53: Would cost be a bigger barrier for someone who opens a new bicycle shop or a developer of mobile
game apps? Why?
Cost would be a bigger barrier for a mobile game app, because a tremendous investment in research is
required to develop a competitive product. In contrast, once the software for a mobile app has been
written, producing many copies is simple and fast, and the app can be distributed readily by offering
downloads online, even if the app developer doesn‘t have much shelf space in stores.
p. 55: To meet this requirement, what qualities would a company need in its employees?
A company that can manufacture customized products quickly will need employees who are themselves
flexible—skilled in performing more than one process and willing to make adjustments to satisfy
customers. The company would especially benefit from employees who are able to understand work
processes and think creatively about how to adapt them to meet customer needs efficiently.
p. 57: Name a company that has delivered good customer service to you.
Answers will vary. This is a chance for students to think about what ―service‖ means in concrete,
practical terms.
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Education.
p. 65: What might "flexible processes" mean for a fast-food restaurant? For an auto company? For a
fast-food restaurant, a flexible process is any part of food production that enables the restaurant to
customize its offerings, such as a selection of cheeses and condiments on sandwiches or special
decorations for a children‘s party in the restaurant. For an auto company, flexible processes would
likely entail building cars with various options selected by customers, such as colors, entertainment
systems, engine sizes, and so on.
p. 71: To be aligned with its environment, what values should an organic grocery store chain company
have?
Answers will vary. Examples might be a high value placed on sustainable practices, strategies for
managing waste, and monitoring of suppliers to make sure they are implementing sound farming
practices.
SOCIAL ENTERPRISE
Terracycle Wants to Eliminate All Waste
1. To what extent do you agree with Szaky that organizations can be profitable while
making a positive impact on the environment and society?
You can surely be profitable while making a positive impact on the environment and
society. These two concepts are not mutually exclusive. For example, Terracycle
converts its waste to products that can be sold by Walmart and other large retailers. It is
important to pursue a triple bottom line strategy in order to make a profit and still make
a positive impact on the environment.
2. Can you envision a world that doesn't produce waste? If so, what changes would need to
be made before that could happen?
There would need to be a lot of new procedures put into place in order to do this;
however, it would be following the Terracycle approach of always converting waste to
another product – just on a much larger scale. Countries would need to invest in such a
conversion infrastructure. These investments would be slightly offset by the savings in
waste management, but such expenditures would be quite costly and not all nations may
follow such a “green” route.
LECTURETTE 2.1
Operations and Human Resources: IBM’s Workforce Management Initiative
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Education.
LECTURETTES
As the book explains, one way in which an organization can manage its competitive environment is through
becoming a globally integrated enterprise. IBM has adopted a human capital management approach to
better utilize its talented workforce. Considering labor as an input and IBM products as an output, the
company launched its Workforce Management Initiative (WMI) to capture and effectively leverage every
employee‘s skill set and training. All of IBM‘s approximately 330,000 employees are captured in this
database. Having this database allows managers to search for employee talent within the company---around
the world---rather than having to look outside to recruit talent and fill current needs. The company estimates
that this initiative has saved over $500 million. In addition to saving the company money, applying this
supply chain approach allows the company to estimate its talent capacity for future anticipated needs as
well, and to train individuals in a proactive fashion. In 2007, the IBM Institute for Business Value published
seven keys to succeed in a globally integrated world of business, written by Eric Lesser, Tim Ringo, and
Andrea Blumberg. The seven principles are:
1. Understanding the demographics and capabilities of the workforce.
2. Predicting the future labor supply and demand.
3. Utilizing social networks to increase visibility and application of knowledge across the
organization.
4. Enabling individuals to perform work regardless of location.
5. Facilitating collaboration across traditional organizational boundaries.
6. Driving the rapid development of skills and capabilities to meet changing business conditions.
7. Evaluating employee performance and providing appropriate feedback.
Sources:
http://intelligententerprise.informationweek.com/showArticle.jhtml;jsessionid=FRFIJGEA3BMIXQE1G
HPSKHWATMY32JVN?articleID=175002433 (accessed on December 22, 2009)
http://www.shrm.org/Education/hreducation/Documents/Boudreau_IBM%20Case%20Study%20with%20
Teaching%20Notes_FINAL.pdf (accessed on July 29, 2015)
DISCUSSION QUESTIONS
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Education.
1. This chapter’s opening quote by Peter Drucker said, “The essence of a business is outside
itself.” What do you think this means? Do you agree?
Students may ask: What is meant by the word ―essence?‖ It has a number of meanings. However,
according to the dictionary, it means ―that which makes something what it is.‖ It is important to
remember that the purpose of a successful business is to get customers and to retain customers.
Using the definition above, Drucker‘s statement can be interpreted to mean that it is the outside
environments that determine the nature of business. This can be illustrated through the use of an example.
A new automobile manufacturer entering the U.S. market is faced with three large domestic companies
and a number of well-established foreign firms. The newcomer‘s strategy has to take this external
environment into consideration. This can be contrasted with a new company entering a business in which
the competition is limited to three or four small firms.
However, one can argue that even though the external environments can have a dramatic impact on a
business, it is still management‘s responsibility to develop a strategy to enable the organization to grow
and prosper.
2. What are the most important forces in the macroenvironment facing companies today?
In order to answer this question, the student probably needs to recognize that different companies operate
in different industries and a critical macroenvironment force facing one company may be a minor factor
for another. Three examples are given below:
Economy. The economy is always a factor. A booming economy may allow a new business to grow and
prosper while a depressed economy would cause it to fail. Some businesses do very well in booming
economies whereas others (notably the entertainment industry) seem to flourish during times when the
economy is weak.
Technology. Consider the impact of rapidly changing technology on the computer industry. Most of the
early innovators are no longer in business, and many of the current leaders might not survive another
dramatic change in technology. And yet, in other industries (such as candy making), the technology has
been unchanged for many years.
Political/legal. This factor is having a major impact on the television/telephone/computer interface.

Political efforts to increase competition in the cable television industry will probably be a major factor for
many years to come.
Students should be able to identify industries in which each of the forces in the macroenvironment is
playing a major role or, at least, have done so in the past.
3. What are the main differences between the macroenvironment and the competitive
environment?
The macroenvironment consists of the major forces (international, economic, social and natural,
demographic, technological, and political/legal) which affect all businesses to some degree.
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Education.
While the competitive environment is also part of the external environment, it is viewed
separately from the macroenvironment in that it focuses on the competitive forces that are
specific to each business.
4. What kinds of changes do companies make in response to environmental uncertainty?
Organizations may adapt to the environment by altering their work structures and work processes
in order to reduce uncertainty. When uncertainty arises due to environmental complexity, many
organizations adopt more decentralized decision-making structures. This allows people with the
most direct knowledge of a particular product or operation to make important decisions rather
than a centralized unit that may be more removed from the daily business activities.
When uncertainty arises due to changes in the environment, many organizations adopt more
flexible structures. When technologies, customers, and competitors change rapidly, a highly
rigid, bureaucratized organization is less able to respond effectively, thus responsiveness and
innovation become priorities
Organizations can adapt to uncertainty by buffering at both the input and output sides of their
boundaries. They may do this by hiring temporary workers during rush periods on the input side,
and by maintaining adequate inventory in order to manage a rush of orders on the output side.
Organizations may also adapt at their core by establishing flexible processes such as mass
customization which allows an organization to produce large quantities at low cost, yet still offer
individual customization.
5. We outlined several proactive responses organization can make to the environment. What
examples have you seen recently of an organization responding effectively to its environment?
Did the effectiveness of the response depend upon whether the organization was facing a
threat or an opportunity?
A number of proactive responses to the environment are identified in the text:
Independent strategies: The firm acts on its own to change some aspect of the current
environment through competitive aggression, competitive pacification, public relations, voluntary
action, legal action, or political action.
Cooperative strategies: The firm collaborates with another organization to either reduce their
costs and risks or increase their power relative to the environment.
Strategic maneuvering: The firm attempts to change the boundaries of its competitive
environment through domain selection (entering new markets with limited competition or
regulation), diversification (investing in different types of business), mergers and acquisitions, or
divestiture.
Challenge students to identify firms that are adopting each of these strategies and whether or not
they are doing so in response to a threat or an opportunity.
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Education.
6. Select two organizations that you are interested in. Research information about the firms or
talk with an employee if possible. What types of cultures do they have? Write a paragraph
that describes each culture.
EXAMPLE: ―Company X seems to really care about their new employees. The employee I
spoke to told me that the company actively encourages employees to move from job to job within
the organization - that sounded great to me. In addition, I found out that people have a lot of
flexibility to work on their terms - for example, being in the office at 9am doesn‘t matter as much
as whether or not you get the job done. To me, this company looks like it has a group culture.‖
7. When you were visiting colleges to decide where to attend, were there cultural differences in
the campuses that made a difference in your choice? How did these differences impact your
decision on which college to attend?
Student responses to this question will differ widely, but if they understand the concept of culture,
they should talk about the ―feeling‖ a place has - organized, productive, friendly, etc. If students
have visited several college campuses, they should definitely be able to talk about difference in
culture for each campus. For example, in California, one might have perceive USC as being very
sports-oriented, Occidental as being very arts-oriented and exclusive, UCSD as a school that
produced ―renaissance people‖, CalTech as being a place for brains and geeks, and San Diego
State as a party school. Note that all of these perceptions of culture have value judgments
attached to them, and they may or may not be accurate.
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Education.
EXPERIENTIAL EXERCISES
EXERCISE 2.1: EXTERNAL ENVIRONMENT ANALYSIS
Objective: To give students the experience of performing an analysis of a company‘s external

environment.
Responses to the external environment questions will vary depending on the companies and
industries the students discuss.
Suggested Responses to Discussion Questions
1. What has the company done to adapt to its environment?
Using the music industry as an example, explain how in order adapt to the environment, music
companies are taking over more of the supply chain, manufacturing their own CDs and managing
their own music clubs. They are making deals with on-line music distributors to sell individual
songs. They are also increasing their on-line marketing efforts, as in letting AOL offer its customers
music video and song samples.
2. How does the company attempt to influence its environment?
Continuing with the music industry example, students might indicate that in order to influence the
environment, music companies pay slotting fees to retailers to gain shelf space, and pay fees to ensure
play time on radio stations. They heavily market new releases. They are aggressively seeking to
enforce copyright laws forbidding illegal copying - their success in shutting down Napster is an
example of that. They are also enlisting the artists themselves in an effort to educate and influence
the public on the illegal copying issue. In the U.S., they are also asking the government to pressure
China to reduce the widespread music piracy in that country.
EXERCISE 2.2 - CORPORATE CULTURE PREFERENCE SCALE

Objectives
• To expose students to different types of corporate cultures.
• To help students identify the kind of organization in which they would most
like to work.
• To help students see how classroom cultures can differ along the same lines
as corporate cultures.
Case Discussion Questions:
1. Review the four types of corporate cultures outlined in the exercise. Working in small
groups, give examples of classes you have taken that correspond to each of the different
types of corporate culture dimensions.
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Education.
Student responses will vary, but in general, you can expect to see the following differences
across different types of classrooms:
Control Culture - These classes have professors that are firmly in charge of the class and they
let students know it. Typically, professors in a control culture will take roll, have large
amounts of homework (which may or may not be meaningful to the students), and will give
difficult tests that may or may not be related to the work done previously in class. Control
culture classes often place a lot of emphasis on memorization as a learning tool.
Performance Culture - These classes have professors that are interested in learning and who
foster a learning environment with their students. Class assignments are typically relevant
and give students new skills, and although tests may be difficult, they are clearly related to
what has been presented in class. Students often describe these classes as challenging, but
fair and interesting. In a performance culture, the primary emphasis is on learning and
growth.
Relationship Culture - These classes have professors that become ‗friends‘ with students.
Students feel that their opinions count, that their voices are heard, and that they contribute to
learning, along with the professor.
Responsive Culture - This class is constantly changing to keep up with the latest changes in
the field. It may be taught online or it may evolve as students bring in additional information.
2. How do you know what kind of culture a class has? What do you look for that tells you
how the class is going to be?
Again, student responses will vary, but students are likely to talk about professor behavior
(business practices), the class syllabus (corporate mission statement and official goals),
ritualized behaviors such as distributing paperwork and taking roll (symbol, rites, and
ceremonies), and student reviews of the class (the stories people tell.)
Tata Motors: From Cheap to Awesome?
Case Summary:
This case reveals how important it is to organizations of all sizes to be prepared and ready to
change both marketing and manufacturing strategies. When Tata introduced the Nano, it stated
that the car would be sold for $2,000 to $2,500, but it was later found out that this price could not
be sustained. Moreover, there were numerous safety issues with the car. This led to a change in
the features of the Nano, and the entire pricing model, in order to stay competitive with
competitors such as Suzuki.
Chapter Topics Related to the Case:
• Discuss how environmental forces impact organizations

• Describe the purpose of an environmental analysis
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Education.
CONCLUDING CASE
• Discuss how organizations like the Tata operation can conduct environmental analyses
• Discuss how organizations such as Tata change culture
Case Discussion Questions:
1. Which barriers to entry contributed most to Tata Motors lack of success with the original
Nano?
Tata Motors suffered from a cost analysis mistake in the way it priced its model. It was not able to
enter the market in a competitive fashion against Suzuki. There was also an issue with the brand
as there were numerous safety issues reported.
2. Which macroenvironment factors did Tata Motors consider when adjusting the marketing
and manufacturing strategies to achieve success with the more recent Twist and LX models?
Tato focused on technology and demographics in revamping the Nano. It focused on young urban
customers instead of first time rural buyers. There were also technological upgrades such as
power steering, Bluetooth connectivity and other enhanced interior and exterior features.
3. To what degree of you believe Tata Motors will succeed in delivering a successful low cost
vehicle to consumers in India and other developing economies?
The new focus on a different set of demographics, as well as technological advances, puts Tata
Motors in good shape for competing with companies like Suzuki. The car is a bit more expensive,
but the market focus is a bit different, and there are some advancements that may justify the higher
price. The buying power of this demographic is a bit more, and the technological advancements
are what this set of demographics also demands.
Example 2.1 – Environment Influences: In August of 2013, Jeff Bezos, Amazon founder and
CEO, purchased the Washington Post. The newspaper industry has been suffering over the past
decade due to customers increasingly relying on the Internet for news coverage. The Post‘s
newspaper division‘s revenue declined by 44% in the preceding six years. Some are optimistic,
while others remain skeptical about Bezos‘ ability to turn the newspaper or its industry around.
Bezos stated, ―I don‘t want to imply that I have a worked out plan. This will be unchartered
terrain, and it will require experimentation.‖ 1
Example 2.2 – Laws and Regulations: The macroenvironment is composed of international,

legal and political, economic, technological and social forces that influence strategic decisions.
Many of these factors affect a manager‘s ability to function effectively and influence their
strategic choices – interest and inflation rates, unemployment rates, rising energy costs, rising
health care costs and changes in the value of the dollar to name a few. In Malaysia when the cost
of doing business is artificially inflated, the customer bears the charge without any real gain in
value. One such example was The Private Healthcare Facilities and Services Act (1998) and
1
Farhi, Paul. “Washington Post to be sold to Jeff Bezos, the founder of Amazon.” The Washington Post, August 5, 2013. Retrieved
from http://articles.washingtonpost.com/2013-08-05/national/41085661_1_washington-post-co-jeff-bezos-graham
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Education.
EXAMPLES
Regulations (2006). This act stipulate higher charges by private medical practitioners to which
must be added the cost of registration. 2
Example 2.3 – Environmental Complexity: Recently, more and more Americans are becoming
aware of the environment - specifically the air that they breathe. With concerns about global
warming and pollution at an all-time high, people want to be sure that they and their companies
are acting in environmentally responsible ways. Americans spend 90% of their time indoors and
much of that at work. According to the EPA, air pollution is up to five times worse inside than
outside. Harsh cleaning chemicals contribute to the problem. Approximately 37 million
Americans suffer from chemical sensitivity, leading to increased absenteeism and health costs.
Managers who promote the use of eco-cleaners, which do not evaporate harmful materials into
the air, can reduce their costs, make the workplace safer for their workers, and improve their
reputation as part of the ―green movement‖. 3
Example 2.4 – Competitive Intelligence: Faced with declining customer-service ratings and
prices higher than competitors, Michael Dell recently resumed the role of chief executive at the
company he founded. His initial steps to be more competitive focused on eliminating
redundancies throughout the business. He began by eliminating eight senior executives,
suspending bonuses and providing limited discretionary awards to exceptional performers. Dell
urged employees to work quickly to turnaround the company. He said ―There is no luxury of
time. The competitors are fierce.‖ 3
Example 2.5 – Independent Strategies: As global warming is threatening the viability of

Aspen‘s famed ski resort, companies there are responding by becoming pioneers in corporate
environmentalism. Aspen uses biodiesel fuel in its bulldozer-sized snowcats, uses a speck of dust
to seed artificial snowflake which consumes less water and energy, vehicle shop is partly heated
with used motor oil, Coke machines run on motion sensors, toilets have two different flush
settings—half flush and full flush, and resorts add $2 a day to the bill of every hotel guest
donating it to the Aspen Valley Land Trust to preserve open space. Aspen managers must
complete an environmental impact assessment for each request for capital spending. Auden
Schendler, Aspen‘s director of environmental affairs, wants ―Aspen to be a thought leader – not
just to be doing it, but talking about how we do it.‖ 4
This is a good example of both the public relations and voluntary action approaches to changing
the environment. (Table 2.4)
Example 2.6 – Corporate Culture: Tony Hsieh, CEO of shoe retailer, Zappos, is passionate
about corporate culture, ―The original idea was to add a little fun.‖ Now companies around the
world are attempting to model Zappos‘ renowned corporate culture and customer service model.
Zappos employees are given the freedom to decide how best to satisfy their cutomers, whether
that means staying on phone calls for hours at a time, sending flowers, or even redirecting a
2
Singh, Beldev. “Keep cost of doing business low.” New Straits Times (Malaysia). August 21, 2006, pg. 25.
3
Boulden, Jennifer. “The air in there.” Fast Company, September 2007, Iss. 118, pg. 64.
3
Techweb Newswire. “Dell suspends bonuses, streamlines management.” February 5, 2007
4
Fishman, Charles. “Degree of difficulty.” Fast Company, February 2007, Issue 112, pg. 94
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Education.
customer to a rival website with a better price. Hsieh observes, ―They may only call once in
their life, but that is our chance to wow them.‖5
5
Palmeri, Christopher. “Zappos retails its culture.” Bloomberg Businessweek. December 2009. Retrieved from
http://www.businessweek.com/magazine/content/10_02/b4162057120453.htm
2-24
Education.
SUPPLEMENTAL FEATURES
Please see the following additional materials in Connect.
CHAPTER VIDEO
Opportunity International
For over 25 years, Opportunity International has provided microloans to help impoverished people in
underdeveloped nations improve their lives and work their way out of poverty. Opportunity International
recognizes that poverty is multidimensional, and relies on principles of microeconomics to foster
economic development. As just one example, Opportunity International was involved in helping an
individual begin a small mushroom farming and production business that began as a way to feed one
family but expands to affect over 100 local individuals trained as the business grows and becomes more
sustainable. Opportunity International is effective at growing a free market economy. The key to
successful economies is freedom and the result is the opportunity for all to have a better life. Opportunity
International is in the midst of an effort to expand in Africa and benefit 100 million working families on
that continent.
MANAGER’S HOT SEAT (MHS)
There are no Manager‘s Hot Seat clips for this chapter
SELF -ASSESSMENT
Corporate Culture Preference Scale
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Education.
The External
and Internal
Environments
Chapter Two
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education
Quote
“The essence of a business is outside itself.”

Peter Drucker
2
Learning Objectives
LO 1 Describe how environmental forces influence
organizations and how organizations can
influence their environments.
LO 2 Distinguish between the macroenvironment and
the competitive environment.
LO 3 Explain why managers and organizations should
attend to economic and social developments. LO 4
Identify elements of the competitive environment.
3
Learning Objectives (cont.)
LO 5 Summarize how organizations respond to
environmental uncertainty.
LO 6 Define elements of an organization’s culture.
LO 7 Discuss how an organization’s culture and climate
affects its response to its external environment.
Open Systems
4
Inputs- Goods and
services organizations
Organizations that take in and use to create products

or services. are affected by, and that affect, their
environment. Outputs- The products
and services
organizations create.
5
Open-System Perspective of an
Organization
Exhibit 2.1
6
7
Open Systems
• External environment
– All relevant forces outside a firm’s boundaries, such as
competitors, customers, the government, and the
economy.
– Competitive environment
• The immediate environment surrounding a firm;
includes suppliers, customers, rivals, and the like.
8
– Macroenvironment
• The general environment; includes governments,
economic conditions, and other fundamental factors
that generally affect all organizations.
The External and Internal Environments
9
Another random document with
no related content on Scribd:
mettle by pretending to doubt his prowess with sword and rapier, and
his skill generally in the noble art of fencing. She challenged him to
measure weapons with her, and piqued at the idea of one younger
than himself pretending to martial superiority, he cast aside his
shyness, and the two falling on guard, clashed and clattered their
steel in the galleries and chambers of the house, from morning till
night, until the noise grew intolerable, and their weapons were taken
away from them, in the fond hope of securing peace and quietness.
It was, however, only partially realised; since the enforced idleness
of Ninon’s hands suggested the surreptitious annexing of the head
forester’s gun, with which she took aim at the blackbirds in the park
avenues, and the young does in the forest: and then, seeking further
variety, the two manned the pleasure-boat on the lake, and fared into
such perilous places, that the voyages became strictly tabooed, and
the boat was hidden away.
The constant tintamarre of the pair frequently brought its
punishment; and one day, on the occasion of a too outrageous
disturbance, they were locked into the library. Books they had no
particular mind for that glorious sunshiny morning; still less enjoyable
was the prospect of the promised dinner of dry bread and water, and
they sat gloomily gazing upon the softly-waving boughs of the trees,
and up through the open window into the free blue sky. Being some
eighteen feet from the ground, it had not been thought necessary to
bar the casement beyond possibility of their trying to escape. The
feat would assuredly not so much as suggest itself. Nevertheless,
the temptation crept into the soul of Ninon, and she quickly imparted
it to Marsillac.
Looking down, they saw that soft green turf belted the base of the
wall, and taking hurried counsel, they climbed to the window-sill, and
at the risk of their necks, clutching by the carved stonework, and the
stout old ivy trails with which it was mantled, they dropped to the
ground, and then away they hied by the clipped yew alleys,
mercilessly trampling the parterres—away till they found themselves
in the forest. Free now as the sweet breeze playing in their hair, they
ran on, pranking and shouting, now following the little beaten tracks,
now bounding over the brushwood, heedless of the rents and
scratches of the thorny tangles; until after some hours, Marsillac’s
pace began to drag, and very soon he said he was tired.
“That is no matter,” said Ninon, “we will hire a carriage at the first
place we come to”; but the name of that place was not even to be
guessed at; inasmuch as they had not the least notion which way
they had taken. The great thing was to arrive at last at Tours, where
Ninon said they could at once enlist as soldiers. Marsillac was,
however, tired—very tired; his legs ached, and he sat down for a little
rest, observing rather crossly, in the cynical way which sometimes he
had, that talking was all very well; but for one thing they were not big
enough for soldiers, and for another, you could not have a carriage
without paying for it.
“Of course not,” acquiesced Ninon, proudly producing her double
louis. “Can I not pay?” But the hours passed, the sun declined, and
not so much as a solitary cottage had presented itself to their eyes,
into which a shade of anxiety had crept; and ere long they began to
feel certain they saw wolves and lions and bandits lurking in all
directions behind the huge black forest tree-trunks, and young
Monsieur de la Rochefoucauld had now grown so tired that, he
wanted nothing so much as to go to bed. Even supper was a
secondary consideration. Still, desperately hungry as they both were,
liberty is such a glorious thing; and were they not free?—free as the
air that was growing so chilly, and the pale moonlight rays as they
broke through some darkening clouds, seemed to make it almost
shuddery. These, however, suddenly crossed something white, and
though terrifying for the moment, the second glance to which they
schooled themselves brought reassurance. The white patch they
saw was a bit of a cottage wall pierced by a little lattice, through
which gleamed the yellow light of a tallow candle; for the two,
creeping close to the panes, peeped in. But noiselessly as they
strove to render their movements, the attention of a couple of big
dogs of the boule-dogue breed was aroused, to the extent of one of
them fastening upon Marsillac’s haut-de-chausses, and he was only
induced to forbear and drop off, under the knotty, chastising stick of
a man, apparently the master of the house, who turned upon the
trembling truants, and bade them clear off for the vagabonds they
were. Their mud-stained and torn apparel, rendered more
dilapidated in Marsillac’s case, by the dog’s teeth, justified to a great
extent the man’s conclusions; but on their asseverating that they
were not good-for-nothing at all; but two very well-born young
gentlemen who had lost their way, and would be glad to pay
generously for a supper, he called his wife, and committing them to
her care, bade her entertain them with the best her larder afforded,
and to put a bottle of good wine on the table. Then he went out,
while an excellent little piece of a haunch of roe-deer—cooking
apparently for the supper of the worthy couple themselves—which
Dame Jacqueline set before the hungry wanderers, was heartily
appreciated by both. Washed down by a glass or two of the fairly
good wine, Marsillac grew hopelessly drowsy. Tired out, he wanted
to go to bed. “And why not?” said the dame, not without a gleam of
malice in her eyes, which had been keenly measuring the two—“but I
have only one bed to offer you, our own, and you must make the
best of it.” She smiled on.
“Not I,” said Ninon, rising from the settle like a giant refreshed—“I
am going on to Tours. The moon is lovely. It will be delightful. How
much to pay, dame? And a thousand thanks for your hospitality.
Come, Marsillac,” and Ninon strode to the door. But the glimpses of
the pillows within the shadow of the alcove had been too much for
Marsillac, and he had already divested himself of his justaucorps,
and jumped into bed.
“And now, my young gentleman, what about you?” inquired
Jacqueline of the embarrassed Ninon, who seated herself
disconsolately on a little three-legged stool. “Come, quick, to bed
with you!”
“No!” said Ninon, “I prefer this stool.”
“Oh, ta! ta! that will never do,” said Jacqueline, who was beginning
to heap up a broad old settle with a cushion or two, and some wraps.
“Sooner than that, I would sit on that stool myself all night, and give
you up my place here beside my—Ah! à la bonne heure! There he
is,” she cried, as the heavy footsteps of the master of the house,
crunching up the garden path, amid the barking of the dogs, grew
audible—“and, as I say, give you up my own place—”
“Ah, mon Dieu! no,” distractedly cried Ninon, tearing off her cloak;
and bounding into the alcove, to the side of the already fast asleep
Marsillac, she dragged the coverings over her head.
“Well, good-night! Sweet repose, you charming little couple,”
laughed on Dame Jacqueline, as she drew the curtains to. “But I’d
not go to sleep yet awhile, look you. Some friends of yours are
coming here to see you. Ah yes, here they are! This way, ladies.”
And the next moment, Madame de Montaigu and the Duchesse de
la Rochefoucauld stood within the alcove, gazing down with glances
beyond power of words to describe.
Dragged by the two ladies from their refuge, Marsillac was hustled
into his garments, but Ninon was bidden to leave hers alone, and to
don the petticoats and bodice which the baroness had brought for
the purpose. “No more masquerading, if you please,” said her aunt,
in tones terrible with indignation and severity, “while I have you under
my charge. Now, quick, home with you!”
And home they were conducted, disconsolate, crestfallen, arriving
there in an extraordinarily short space of time; for the château lay not
half a league off, and the two runaways, who had imagined that the
best part of Touraine had been covered by them that fine summer
day, discovered that the mazes of the forest paths had merely led
them round and about within hail of Loches, and Dame Jacqueline
and her husband had at once recognised them. The man had then
hastened immediately to the château, and informed the ladies, to
their indescribable relief, about the two good-for-nothings; for the
hue and cry after Mademoiselle Ninon and young Monsieur de la
Rochefoucauld had grown to desperation as the sun westered lower
and lower.
Ninon wept tears of chagrin and humiliation at the penalty she had
to pay of being a girl again; but Marsillac’s spirits revived with
astonishing rapidity. He even seemed to be glad at the idea of his
fellow-scapegrace being merely one of the weaker and gentler sex,
and in her dejection he was for ever seeking to console her. “I love
you ever so much better this way, dear one,” he was constantly
saying. “Ah, Ninon, you are beautiful as an angel!”
But alas! for the approach of Black Monday, and the holidays
ended, Marsillac had to go back to school.
CHAPTER II
Troublesome Huguenots—Madame de L’Enclos—An Escapade, and Nurse

Madeleine—Their Majesties—The Hôtel Bourgogne—The End of the
Adventure—St Vincent de Paul and his Charities—Dying Paternal Counsel—
Ninon’s New Home—Duelling—Richelieu and the Times.
The attack upon La Rochelle, and the incessant Huguenot

disturbances generally, detained Monsieur de L’Enclos almost
entirely away from Ninon, who remained at Loches in the care of her
aunt. From time to time he paid flying visits to Loches—one stay,
however, lasting many months, enforced by a severe wound he had
received. This period he spent in continuing the instruction of his
daughter, on the plan originally mapped out, of fitting her to shine in
society. The course included philosophy, languages, music, with his
special objections to the matrimonial state—engendered, or at least
aggravated by his own failure in the search after happiness along
that path. Far better, undesirable as he held the alternative, to be
wedded to cloistered seclusion than any man’s bride; and well
knowing Ninon’s horror of a nun’s life, he left her to argue out the
rest for herself in her own logical fashion; and there is no doubt that
the whole of her future was influenced by the views he then
inculcated. A modest decorum and sobriety of bearing were indeed
indispensable to good breeding; but carpe diem was the motto of
Monsieur de L’Enclos, as he desired it to be hers; and every
pleasure afforded by this one life, certainly to be called ours, ought to
be enjoyed while it lasted; and unswervingly, to the final page of her
long record, Ninon carried out the comfortable doctrine.
At seventeen years of age, she was perfectly equipped. Beautiful
and highly accomplished, amiable and winning, and though always
well dressed, troubling vastly little over the petty fripperies and
vanities ordinarily engrossing the female mind, she appears to have
gained the commendation and affection of her aunt, who parted from
her with great regret, when the failing health of Madame de L’Enclos
necessitated Ninon’s departure from Loches, to go to Paris, where
the invalid was residing.
Monsieur de L’Enclos fetched Ninon himself from Loches, and in a
day or two she was by her mother’s couch. Madame de L’Enclos
received her with affection, and affectionately Ninon tended her,
going unmurmuringly through the old courses of religious reading
and observance, even to renewing acquaintance with the gouty
canon in Notre-Dame; but the invalid’s chamber was triste and
monotonous, and now and again Ninon effected a few hours’ escape
from it, ostensibly for the purpose of attending Mass or Benediction,
or some service at one or other of the neighbouring churches. One
of them, St Germain l’Auxerrois, was of special interest to Ninon, by
reason of neighbouring the hotel of Madame de la Rochefoucauld;
and she one day interrogated the guardian of the porte cochère, in
the hope of learning some news of Marsillac, whom Time’s chances
and changes had entirely removed from her ken; but whose memory
endured in her heart; for she had been very sincerely attached to
him. The Suisse informing her that he very rarely came to Paris, the
philosophical mind of Ninon soon turned for consolation elsewhere.
On this plea of devout attendance at church, Ninon was freely
permitted leave of absence from the sick room, duennaed by her old
nurse, Madeleine, who, however, frequently permitted herself to be
dropped by the way, at a small house of public entertainment, above
whose door ran the following invitation to step inside:—
“If of dyspepsia you’ve a touch,
Ache of tooth, or head, or such,
There’s nothing like a nip, you see,
Of my delicious Eau de Vie.”
On one of these occasions, her charge went off in the company of

a fairly good-looking and agreeable young gentleman who
addressed her, as she halted for an instant at the corner of the Pont
Neuf, in terms of mingled respect and admiration. Under his escort,
she gathered some conception of the manners and mode of
existence in the gay city, and in the course of their first walk together,
they ran against two of her cavalier’s friends, who were to be
associated intimately with her future—Gondi, the future Cardinal de
Retz, and the young Abbé Scarron—Abbé by courtesy, since he
never went beyond the introductory degree of an ecclesiastical
career. In the company of these three merry companions, she visited
the Hôtel Bourgogne, a place which may be described as answering
more to the music-halls, than to the theatres of the present time. Its
frequenters could dine or sup at its tables, take a turn at tarot or
thimblerig, and enjoy a variety entertainment carried out on lines
mainly popular. It was a vast edifice, built in the Renaissance style,
by Francis I., on the site of the gloomy, fortress-like mansion of Jean
Sans Peur; and for a time it had been devoted to the representation
of the Passion and Mystery plays, and the performances of the
clerks of the Basoche, but grown decadent in these days of Louis
XIII. Ninon obtained on her way a passing glimpse of His Majesty as
he drove by, describing him “as a man of twenty-five; but looking
much older, on account of his morose and taciturn expression,
responding to the acclamations of the people only by a cold and
ceremonious acknowledgment; while Anne of Austria, who followed
in a coach preceded by other carriages, saluted the crowd with
gracious smiles and wavings of her white hand.”
Having partaken of a light collation at one of the tables, the party
gave attention for a while to the actors on the stage, whose
performances were coarse, and not much to Ninon’s taste. Then
Gondi and Scarron took leave of the two, and the sequel of the
adventure proved a warning to young women endowed with any
measure of self-respect, to refrain from making acquaintance with
gallants in the street. Fortunately she escaped the too ardent
attentions of the man, through the intervention and protection of one
of more delicacy and honour. Though this one was quickly equally
enthralled, he went about his wooing of the beautiful girl in more
circumspect fashion, a wooing nipped in the bud by his death from a
wound received a short time later.
In the sombre calm of the invalid’s room stands out the grand
figure of St Vincent de Paul, bringing to her, as to all the afflicted and
heavy-laden, the message of Divine love and pity, and impressing
Ninon with a lasting memory of reverence for the serene, pure face
and gentle utterances of a heart filled with devotion for the Master he
served. Never weary in well-doing, seeming ever to see God, his life
was one long self-sacrifice and work of charity. Moved to such
compassion for the poor convict of the galleys, who wept for the
thought of his wife and children, that the good priest took the fetters
from the man’s limbs, and bidding him go free and sin no more,
wound them upon his own wrists: a heart so thrilled with love and
sorrow for the lot of the miserable little forsaken children of the great
city, that he did not rest till he had effected the reforms so sorely-
needed for their protection.
Hitherto the small waifs and strays had been under the
superintendence of the Archbishop of Paris. The charge of them
was, however, delegated to venal nurses, who would frequently sell
them for twenty sous each. On fête and red-letter days, it had for
long been a custom to expose the little creatures on huge bedsteads
chained to the pavement of Notre-Dame, in order to excite the pity of
the people, and draw money for their maintenance. St Vincent de
Paul was stirred to the endeavour of putting a stop to these
scandals; and instituted a hospital for the foundlings. It was situated
by the Gate of St Victor, and the work of it was carried on by
charitable ladies. The Hospital of Jesus, for eighty poor old men, was
another of his good works; while he ministered to the lunatics of the
Salpétrière, and to the lepers of St Lazare, within whose church
walls he was laid to rest when at last he rendered up his life to the
Master he had served; until the all-destroying Terror disturbed his
remains: but “his works do follow him.” His compassion alone for the
little ones will keep his memory green for all time.
Kneeling at his feet, at her mother’s bidding, the good priest bade
Ninon rise, saying that to God alone the knee should be bent. Then
he laid his hand on her head, calling down a benediction on her, and
praying that she should be protected from the temptations of a sinful
world. His words thrilled her powerfully for the time being. She felt
moved to pour out all her heart to him, but “Satan,” she says, “held
me fast, and would not let me approach God,” and the spell of the
saintly man’s influence passed with his presence.
A few days later, Madame de L’Enclos died, calmly, and tended by
her husband and her child, leaving at least affectionate respect for
her memory. A year later, Monsieur de L’Enclos died. True to the last
to his rule of life, the dying words he addressed to his daughter were
these—
“My child, you see that all that remains to me in these last
moments, is but the sad memory of pleasures that are past; I have
possessed them but for a little while, and that is the one complaint I
have to make of Nature. But alas! how useless are my regrets! You,
my daughter, who will doubtless survive me for so many years, profit
as quickly as you may of the precious time, and be ever less
scrupulous in the number of your pleasures, than in your choice of
them.”
The fortune of Mademoiselle de L’Enclos had been greatly
diminished by the reckless extravagances of her father; and
conscious, probably, of this error in himself, he was careful to protect
her best interests, by purchasing for her an annuity which brought
her 8,000 livres annual income. His prodigality was, however, one of
the few of his characteristics she did not inherit. On the contrary, she
displayed through life a conspicuous power of regulating the
business sides of it with a prudence which enabled her to be
generous to her friends in need, while not stinting herself, or the
ordering of her households, and the entertainment of the company
she delighted in; for the réunions and evenings of Mademoiselle de
L’Enclos were a proverb for all that was at once charming and
intellectual; varied as they were with sweet music, to which her own
singing contributed—more notably still, by her performances on the
lute, which were so skilful; though by these hangs the complaint that
she ordinarily needed a great deal of pressing before she would
indulge the company—a curious exception to the ruling of the ways
of Ninon, ordinarily so entirely innocent of affectation.
At this time her beauty and accomplishments, united with her
fortune, drew many suitors for her hand, and of these there would
probably have been many more, but for the certainty she made no
secret of, that marriage was not in the picture of the life she had
sketched out for herself. Her passion for liberty of thought and action
in every aspect, fostered ever by her father, was dominant in her,
and not to be sacrificed for the most brilliant matrimonial yoke.
One of her first proceedings was the establishment of a home for
herself. It consisted of a handsome suite of rooms in the rue des
Tournelles, in the quarter of the Marais, then one of the most
fashionable in Paris, and distinguished for the many intellectual and
gifted men and women congregating in the stately, red-bricked, lofty-
roofed houses surrounding the planted space in whose centre, a little
later, was to stand the equestrian statue of Louis XIII. The square
had been planned by Mansard, and Ninon’s home—Number 23—
had been occupied by the famous architect himself.
A few doors off was the residence of Cardinal Richelieu, and
within the convenient distance of a few houses—Number 6—lived
Marion Delorme. For years this Place Royale, as it is now called—at
one time Place des Vosges—had been, until Mansard transformed it,
held an accursed spot, and let go to ruin; for here it was stood the
palace of the Tournelles, a favourite residence of Henri II., and in its
courtyard took place the fatal encounter between him and the
Englishman Montgomery, whose lance pierced through the king’s
eye, to his brain, and caused his death. Catherine de Médicis, in her
grief and indignation at the tragic ending of that day’s tilt, caused the
palace to be razed to the ground; but the old associations clung to
the place, for it became the favourite spot for the countless duels
which the young bloods and others were constantly engaging in; until
Richelieu put an almost entire stop to them by his revival of the
summary law against the practice, whose penalty was death by
decapitation. The great cardinal’s ruling was not to be evaded, and
several men of rank suffered death upon the scaffold for disobeying
it.
Away beyond the St Antoine Gate at Picpus, Ninon established
another dwelling for herself, in which it was her custom to rusticate
during the autumn.
Beautiful—though in features not faultlessly so—she bore some
resemblance to Anne of Austria, the adored of Buckingham, a
likeness close enough to admit of the success of a freak played
years later, when she contrived to deceive Louis the Great into the
notion that the shade of his mother appeared to him, to chide him for
certain evil ways. Her nose, like the queen’s, was large, and her
beautiful teeth gleamed through lips somewhat full in their curves;
her hair was dark and luxuriant, while her intelligent and sympathetic
eyes expressed an indescribable mingling of reserve and voluptuous
languor, magnetising all, coupled as it was with the charm of her
gentle, courteous manner and conversation that sparkled with the wit
and sentiment of a mind enriched by careful training and study of the
literature of her own time, and of the past. It was her crowning grace
that she made no display of these really sterling acquirements, and
entertained a wholesome detestation of the pedantry and précieuse
taint of the learned ladies mocked at so mercilessly by that dear
friend of hers, Molière. Few could boast a complexion so delicately
fresh as hers. She stands sponsor to this day to toilette powders and
cosmetics. Bloom and poudre de Ninon boxes find place on
countless women’s dressing-tables to this hour; but in her own case
art rendered little assistance, possibly none at all; except for one
recipe she employed daily through her life. The secret of it,
sufficiently transparent, was equally in the possession of the
beautiful Diana of Poitiers, who also retained her beauty for such a
length of years.
For all who list to read, her letter-writing powers stand perpetuated
in her published correspondence, and while the theme is almost
unvarying—the philosophy of love and friendship—her wit and fancy
treat it in a thousand graceful ways. Fickle as she was in love, she
was constant in friendship, and the heat of the first, often so
startlingly transient, frequently settled down into life-long
camaraderie rarely destroyed. While not ungenerous to her rivals in
the tender passion, she could be dangerously jealous; but gifted with
the saving grace of humour, of which women are said to be destitute,
the anger and malice were oftentimes allowed to die down into
forgiveness, and perhaps also, forgetfulness. Rearing and
temperament set Ninon de L’Enclos apart; even among those many
notable women whose intimate she was. Essentially a product of her
century, she lived her own life in its fulness. Following ever her
father’s counsel, she was at once as boundlessly unrestricted in her
observance of that perfect law of liberty to which she yielded
obedience, as she was scrupulous in selection. Says Monsieur de St
Evrémond of her—“Kindly and indulgent Nature has moulded the
soul of Ninon from the voluptuousness of Epicurus and the virtue of
Cato.”
And at last, after an interval of six years, Ninon and Marsillac met
again. It was in the salon of the Hôtel de Rambouillet. Mademoiselle
de L’Enclos, beautiful, sought after, already the centre of an admiring
circle, the talk of Paris, and Monsieur le Capitaine de la
Rochefoucauld, already for two or three years a gallant soldier,
chivalrous, romantic, handsome with the beauty of intellect,
interesting from his air of gentle, cynical pensiveness, ardent in the
cause of the queen so mercilessly persecuted by Richelieu, and
therefore lacking the advancement his qualities merited, still,
however, finding opportunity to indulge in the gallantries of the
society he so adorned. Someone has said that few ever less
practically recognised the doctrines of Monsieur de la
Rochefoucauld’s maxims, than did Monsieur de la Rochefoucauld
himself, and the aphorisms have been criticised, and exception has
again and again been taken to them, not perhaps altogether
unreasonably; but in any case he justified himself of his dictum that
“love is the smallest part of gallantry”; for when at last—and it took
some time—Marsillac recognised his old scapegrace chum of the
Loches château, homage and admiration he yielded her indeed; but
it was far from undivided, and shared in conspicuously by her rival,
Marion Delorme, a woman of very different mould from Ninon. Like
her, beautiful exceedingly, but more impulsive, softer-natured, more
easily apt to give herself away and to regret later on. Intellectually
greatly Ninon’s inferior, she was yet often a thorn in the side of the
jealous Mademoiselle de L’Enclos.
ARMAND JEAN DU PLESSIS
Cardinal Duc de Richelieu
Né à Paris le 5e 7bre 1585. Mort le 4 Décembre 1642.
Paris chez Odieuvre Md d’Estampes Quai de l’Ecole
vis à vis la Samarite à la belle Image; C.P.R.
To face page 24.
The times, as a great commentator has defined them, were indeed

peculiar. The air, full of intrigue, was maintained by Richelieu at
fever-heat, and wheel worked fast and furiously within wheel. There
was the king’s party, though the king was little of it, or in it. The iron
hand of the Cardinal Prime-Minister was upon the helm. Richelieu,
who never stayed in resistance to the encroaching efforts of Spain—
in his policy of crushing the feudal strength of the nobility of the
provinces—or in annihilating Huguenot power as a political element
in the State—saw in every man and woman not his violent partisan,
an enemy to France and to the Crown. How far he was justified, how
far he could have demanded “Is there not a cause?” stands an open
question; but the effect was terrible. The relentless hounding down of
the suspected, forms a page of history stained with the blood of
noble and gallant men. Richelieu’s crafty playing with his marked
victims, chills the soul. They were as ninepins in his hands, lured to
their destruction, sprung upon, crushed often when most they
believed themselves secure.
Sending de Thou to the scaffold for his supposed complicity in the
crime Richelieu fixed on Cinq-Mars, the handsome, insouciant,
brilliant young fellow he had himself provided for the king’s
amusement, and when the time was ripe, having done him to death
by the Lyons headsman upon a superficially-based accusation.
Richelieu was dying then. The consciousness of Death’s hand upon
his harassed, worn-out frame was fully with him; but no pity was in
his heart for Cinq-Mars. It might have been the old rankling jealousy
that urged him on, for the stern, inflexible Armand de Richelieu was
a poor, weak tool of a creature where women were concerned.
“There is no such word as fail,” he was wont to say; yet in his
relations with women, and in his gallantries he failed egregiously. No
fear of him held back Marion Delorme from the arms of Cinq-Mars,
when she yielded to his persuasions to fly with him; and self-love
must have been bitterly wounded, when Anne of Austria laughed his
advances to scorn. Richelieu was not a lady’s man. Nature had
given him a brain rarely equalled, a stupendous capacity and
penetration, but she had neglected him personally—meagre, sharp-
featured, cadaverous, scantily furnished as to beard and moustache,
and lean as to those red-stockinged legs. True, or the mere fruit of
cruel scandal, that saraband pas seul he was said to have been
duped into performing for the delectation of the queen, will hang ever
by the memory of the great Lord Cardinal.
CHAPTER III
A Life-long Friend—St Evrémond’s Courtly Mot—Rabelais v. Petronius—Society

and the Salons—The Golden Days—The Man in Black.
Scarcely was acquaintance renewed with her still quite youthful old
friend, Monsieur de la Rochefoucauld, than Ninon met for the first
time St Evrémond—Charles de St Denys, born 1613, at St Denys le
Guast near Coutances in Normandy—the man with whom her name
is so indissolubly connected, traversing nearly all the decades of the
seventeenth century into the early years of the eighteenth, his span
of life about equalling her own, and though for half of it absent from
her and from his country, maintaining the links of their intimacy in
their world-famed correspondence.
Like Ninon’s, his individuality was exceptional. A born wit, for even
in his childhood, the soubriquet of “Esprit” was bestowed upon him,
his three brothers being severally styled—“The Honest Man,” “The
Soldier,” and “The Abbé.” Charles de St Evrémond was distinguished
by a brilliant and singularly amiable intelligence. As a man of letters
he was rarely gifted; though he evaded, more than sought, the
celebrity attaching to the profession of literature, writing only, it may
be truly said of him—
“... in numbers
For the numbers came.”
He never put forward his own works for publication, and it was only
towards the close of his life that his consent was obtained for such
publication. During his lifetime, many of his pieces in prose and in
verse were printed and circulated in Paris and in London, where, at
the Courts of Charles II. and of William III., forty years of his life were
spent; but these were pirated productions, surreptitiously issued by
his “friends,” to whom he occasionally confided his compositions,
and they, for their own gain, sold them to the booksellers, who
eagerly sought them. These pieces were altogether unfaithful to their
originals, being altered to suit the particular sentiments of readers,
and added to, in order to increase the bulk of the volumes. The style
of St Evrémond’s writings has been the subject of encomium and
warm appreciation from numerous learned critics and litterateurs,
notably St Beuve and Dryden.
One contemporary editor, withholding his name, content with
styling himself merely “A Person of Honour,” has, at all events,
yielded due homage to St Evrémond’s character and genius.
Commenting on the essays which have come within his ken, he
writes—
“Their fineness of expression, delicacy of thought are united with the

ease of a gentleman, the exactness of a scholar, and the good sense of
a man of business. It is certain,” he adds, “that the author is thoroughly
acquainted with the world, and has conversed with the best sort of men
to be found in it.”
To this may be added the praise of Dryden—
“There is not only a justness in his conceptions, which is the foundation

of good writing, but also a purity of language, and a beautiful turn of
words, so little understood by modern writers.”
Agreeable, witty, an excellent conversationalist, and of real

amiability of character and disposition, St Evrémond’s aim in life was
to enjoy it. Indolently inclined, he accepted the ills and contrarieties
of existence, finding even in them some soul of good. Always fond of
animals, he surrounded himself in later years with cats and dogs,
holding them eminently sympathetic and amusing; and he was wont
to say that in order to divert the uneasinesses of old age, it was
desirable to have before one’s eyes something alive and animated.
He possessed enough money for comfortable maintenance from
several sources. Both Charles II. and William III. settled
“gratifications” on him. His creed was a formless one, but he was no
atheist, for all the charge of it laid to him. He was, on the contrary,
quick to rebuke the profanity and laxity of mockers. He himself sums
up his religion in these lines—
“Justice and Charity supply the place
Of rigid penance and a formal face.
His piety without inflicted pains
Flows easy, and austerity disdains.
God only is the object of his care,
Whose goodness leaves no room for black despair.
Within the bosom of His providence
He places his repose, his bliss and sure defence.”
His writings were voluminous, flowing from his pen as a labour he

delighted in. Their themes were varied, brought from the rich stores
of his mind, his most enduring and favourite subjects being classical
Latin lore, and the drama of his own day, lustrous with great names
in France, as in the country of his adoption.
Such, and much more, was St Evrémond the man of letters, and
besides, he was a skilful and gallant soldier, distinguished for his
brilliant sword-play, when he entered upon the exercises preparatory
for his military career. In that capacity he won the approval and
friendship of the Duke d’Enghien, fighting by the prince’s side at
Rocroi and Nordlingen; though later a breach occurred in their
relations, when St Evrémond indulged in some raillery at his
expense. The great man vastly enjoyed persiflage of the sort where
the shafts were levelled at others; but he brooked none of them
aimed at himself, and St Evrémond was deprived of his lieutenancy.
Sometimes the wit carried a more flattering note, and once when
disgrace shadowed him at Court for having appeared in the Sun-
King’s presence in a pourpoint of a fashion not quite up to latest
date, he said to His Majesty—“Sire, away from you, one is not
merely unhappy: one also becomes ridiculous.” The conceit wiped
away St Evrémond’s disfavour. He was a friend of several of the
other renowned soldiers of his time, Turenne among them. It was
one of Condé’s great delights to be read to by St Evrémond. The
duke took pleasure in the lighter classics. Petronius had its
attractions for him, as it had for the society generally of the time; but
he would have none of Rabelais, finding the grossness of the Curé
of Meudon intensely distasteful, and refusing to listen to the
adventures of Gargantua and Pantagruel and Grandgousier, and all
their tribe, he insisted on the book being thrown aside. The merry
romances of Petronius, or, at least, attributed to that “Elegantiæ
Arbiter” of a pagan court, while ill adapted as milk for babes, as
perhaps even for the more advanced in years, were not soiled with
the lowermost grossness of the Christian man’s pen, and they were
not without appeal to the students of the classic literature opened up
by the Renaissance, even as the milder licence of Boccaccio
charmed.
Truly, if the times were peculiar, it cannot be said of them that they
were stagnant; and in movement and activity, the present century
bears them some sort of comparison; though beyond this the parallel
fails, to the winning of the days of Ninon. Autres temps, autres
mœurs, and while there may be more veneer of morality in these
present years of grace than then, the question remains whether the
sense of it is deeper and more widely observed. It is one, however,
outside the limits of these pages. Only that the aroma and delicacy
of educated social intercourse do not permeate society as in that
time is undoubted. Of course the impression existing in some minds
of the widespread canker of profligacy and licentiousness then
openly prevailing, is perverting of facts, since punctilio and the Court
etiquette of the most punctilious of monarchs would not, and could
not, have countenanced it. Such licence was indulged in by, and
confined, as it is now, to a certain section of the “smart” community,
and this possibly no such narrow one; but at least it was veiled then
by certain elements of good taste, and some womanly graces now
far to seek. Not then, as now, the motor craze made existence uglier;
then as not now, the bold, inane stares and painted faces of many of
the gentler sex frequenting the highways and byways, were mostly
screened by masks, and an awkward gait was mantled. Some
cultivation of expression, and a little more sense, if not wit, graced

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Solution Manual for Management Leading and

The External and Internal

Key Student Questions 3

Manager‘s Hot Seat 24

1 Describe how environmental forces influence organizations and

3 Explain why managers and organizations should pay attention to

4 Identify elements of the competitive environment.

5 Summarize how organizations respond to environmental

6 Define elements of an organization’s culture.

7 Discuss how an organization’s culture and climate affect its

KEY STUDENT QUESTIONS

A. Organizations are open systems (Figure 2.1)

B. External Environment Influences

1. When resources change, environment influences the organization 2. When outputs

1. Macroenvironment is defined by the most general elements in the external

LO 2: Distinguish between the macroenvironment and the competitive environment

A. The Economy (Exhibit 2.3)

C. Laws and Regulations

3. Regulators are specific government organizations in a firm‘s environment.

i. Securities & Exchange Commission (SEC) ii.

a. Demographics measures of various characteristics of the people comprising

Multiple Generations at Work

F. Sustainability and the Natural Environment

a. Prominent issues in today‘s press pertain to natural resources.

II. THE COMPETITIVE ENVIRONMENT

LO 4: Identify elements of the competitive environment

a. As a first step in understanding their competitive environment, organizations must

C. Substitutes and Complements (Exhibit 2.5)

a. Customers purchase the products or services the organization offers.

III. ENVIRONMENTAL ANALYSIS

LO 5: Summarize how organizations respond to environmental uncertainty

a. Scenario is a narrative that describes a particular set of future conditions.

a. Benchmarking is the process of comparing the organization‘s practices and

IV. RESPONDING TO THE ENVIRONMENT

A. Changing the Environment You Are In

1. Strategic maneuvering is the organization‘s conscious efforts to change the

B. Influencing your environment

1. Adapting to the Environment: Changing Yourself

1. Four different approaches that organizations can take in adapting to environmental

2. Adapting at the boundaries.

3. Adapting at the core.

C. Choosing a Response Approach

1. Three general considerations help guide management‘s response to the environment.

V. THE INTERNAL ENVIRONMENT OF

LO 6: Define elements of an organization’s culture

1. Culture can be diagnosed through the following:

1. Espouse lofty ideals and visions for the company

Management in Action – Onward

p. 47: Does low-cost mean low-quality? Why or why not?