2

Chapter

The
Management
Environment

Copyright ©2013 Pearson Education 2-1

Learning Objectives
• Explain what the external environment is and why
it’s important.
• How much difference does a manager make on
organization’s performance.
• Discuss how the external environment affects
managers.
• Define what organizational culture is and explain
why it’s important.
• Describe how organizational culture affects
managers.
Copyright ©2013 Pearson Education 2-2
Copyright ©2013 Pearson Education 2-3
What Is External Environment?
External environment is
the factors, forces,
situations, and events
outside the organization
that affect its
performance.

Copyright ©2013 Pearson Education 2-4

 Components of External Environment
Encompasses issues associated with
Factors such as interest rates, inflation,
changes in disposable income, stock globalization and a world economy
market fluctuations, and business cycle
stages

Trends in population charact-

eristics such as age, race, Federal, state, and local laws, as
gender, education level, well as other countries’ laws and
geographic location, income, global laws. It also includes a
and family composition country’s political conditions and
stability

Societal and cultural factors such as values,

Focuses on scientific and industrial attitudes, trends, traditions, lifestyles, beliefs,
innovations tastes, and patterns of behavior

Copyright ©2013 Pearson Education 2-5

Copyright ©2013 Pearson Education 2-6
 How much difference does a manager
make on organization’s performance?
Omnipotent view of
Management
Managers are directly
responsible for an organization’s
success or failure.
Difference in performance are
due to decisions and actions of
managers.
Good managers: anticipate
change, exploit opportunities,
correct poor performance and
lead.
Copyright ©2013 Pearson Education
Symbolic view of
Management
Manager’s ability to affect
performance is constrained by
external factors.
Managers don’t have a significant
effect on performance.
Managers symbolize control and
influence by developing plans,
making decisions and engage in
other management issues.
2-7
How Does External Environment
Affect Managers?
• Jobs and employment
• Assessing
environmental
uncertainty
• Managing stakeholder
relationships

Copyright ©2013 Pearson Education 2-8

 Jobs and employment
• As external environmental conditions change, managers face
the impact of these changes on jobs and employment.

• Changes create challenges for managers who must balance

work demands with having enough people with the right skills
to do the organization’s work.

Copyright ©2013 Pearson Education 2-9

Assessing Environmental Uncertainty
Environmental uncertainty refers to the degree of change
and complexity in an organization’s environment.

degree of unpredictable change

degree of environmental complexity

Copyright ©2013 Pearson Education 2-10

Managing Stakeholder Relationships

Stakeholders are any

constituencies in an
organization’s
environment that are
affected by the
decisions and actions
of that organization.

The more obvious and secure these relationships, the more

influence managers will have over organizational outcomes.

Copyright ©2013 Pearson Education 2-11

Why Manage Stakeholder Relationships?
• Good stakeholder relationships can:
– Positively affect organizational performance
– Be recognized as “doing the right thing” and show
corporate social responsibility
– Create and reinforce a positive image of the
organization among its stakeholders and
community

Copyright ©2013 Pearson Education 2-12

Organizational Stakeholders

Stronger relationships can improve the predictability of environmental changes, lead

to more successful innovations, foster a greater degree of trust among stakeholders,
and increase organizational flexibility to reduce the impact of change.
Copyright ©2013 Pearson Education 2-13
Copyright ©2013 Pearson Education 2-14
What Is Organizational Culture?
Organizational culture is
the shared values,
principles, traditions, and
ways of doing things that
influence the way
organizational members
act.

Copyright ©2013 Pearson Education 2-15

Defining Culture and Its Impact
• Culture is perception that
cannot be physically touched or
seen, but is perceived based on
what employees experience within
the organization.
• Organizational culture isn’t concerned with whether
members like it, but with how members perceive it.
• Employees describe the culture in similar terms despite
their diversity.

Copyright ©2013 Pearson Education 2-16

Strong Corporate Culture = Success

For China
Zhongwang (Alum
company), the key
has been to
transform a
corporate slogan
into a corporate
reality

Copyright ©2013 Pearson Education 2-17

How Can Culture Be Assessed?

Copyright ©2013 Pearson Education 2-18

 How Do Employees Learn the
Culture?
• Stories
Recount significant events or people
• Rituals
Are repetitive activities that express and reinforce the
important values and goals of the organization.
• Material symbols
Such as the layout of organizations facilities, how employees
dress, work environment is formal or casual, fun or serious,
and the kinds of behavior that are rewarded
• Language
Copyright ©2013 Pearson Education 2-19
Where Does an Organization’s Culture
Come From?

• Organizational culture derives from:

– The founder’s biases and assumptions about what
the organization and its values should be
– What the first employees learned from their own
experiences

Copyright ©2013 Pearson Education 2-20

How Does Organizational Culture
Affect Managers?

• Through its effect on what employees do and

how they behave

• Through its effect on what managers do as

they plan, organize, lead, and control

Copyright ©2013 Pearson Education 2-21

Acclimating to Corporate Culture

Copyright ©2013 Pearson Education 2-22

How Does Culture Affect What
Employees Do?
• A strong culture reflects employee acceptance
of, and commitment to, the organization’s key
values.
• The stronger the culture, the more it affects
employee and manager actions.
• A strong culture preempts the need for formal
rules and regulations.

Copyright ©2013 Pearson Education 2-23

Copyright ©2013 Pearson Education 2-24
How Does Culture Affect What
Managers Do?

Copyright ©2013 Pearson Education 2-25

Managerial Decisions Affected by
Culture

Copyright ©2013 Pearson Education 2-26

Case Study: Honest Tea Company

Copyright ©2013 Pearson Education 2-27

Copyright ©2013 Pearson Education 2-28