Management

Fifth Canadian Edition

John R. Schermerhorn, Bachrach, Jr. Barry Wright

Chapter 4
Environment, Innovation, and Sustainability

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Learning Objectives
4.1 Summarize key trends in the external environment of
organizations.
4.2 Discuss value creation and competitive advantage in
complex environments.
4.3 Describe how organizations embrace technology and
pursue innovation.
4.4 Explain the challenges of sustainability as an
environmental priority.

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External Environment of Organizations (1 of 2)

• Economic – overall health of the economy

• Legal-political – current and proposed laws, regulations,
philosophy/objectives of political parties
• Socio-cultural – demographics, norms, customs, social
values
• Technological – development, use, and availability of
technology
• Natural environment – status and preservation of our
natural resources and environmental conditions

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External Environment of Organizations (2 of 2)

Sample elements in the general environments of organizations

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The External Environment (1 of 5)

Economic conditions
• Financial markets, inflation, income levels, and job
creation
• Consumer spending patterns and prospects for companies
• Tax incentives for companies, offshoring and reshoring

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The External Environment (2 of 5)

Legal-political conditions
• Regulation of banks and the financial services industry
• Foreign trade agreements, protection of Canadian jobs
and industries, and the minimum wage
• International copyright and intellectual property
protection, freedom of expression, and internet
censorship

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The External Environment (3 of 5)

Sociocultural conditions
• Social issues relating to educational opportunity, social network
connections, access to technology, mentoring, job options
• Income inequality, employment discrimination, and racial
injustice
• Norms, human rights, demographics, and social values
• Gender identity, expression, and inclusion of visible minorities
• Generational cohorts – people born within a few years of one
another and who experience somewhat similar life events
during their formative years
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The External Environment (4 of 5)

Technological conditions
• Social media spending on product promotions
• Reputation management and internal communication
• Employee networking and data sharing, virtual meetings,
and the remote office
• The continual penetration of technology into every day life

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The External Environment (5 of 5)

Natural environment conditions

• Nuclear plant failure, major oil spill, enormous hurricane
• “carbon neutral,” ”green,” “sustainable” concerns
• Protecting natural resources and preserving them for
future generations
• Toxic waste, global warming, and fossil fuel consumption

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Environment and Value Creation (1 of 4)
The specific (task) environment – actual organizations, groups,
and persons with whom an organization interacts and
conducts business
• Includes important stakeholders such as:
o Customers
o Employees
o Suppliers
o Competitors
o Regulators
o Owners

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Environment and Value Creation (2 of 4)

The multiple stakeholders of an organization

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Environment and Value Creation (3 of 4)
Competitive advantage
• Something an organization does extremely well, is difficult
to copy, and gives it an advantage over competitors in the
marketplace
• Companies may achieve competitive advantage in many
ways, including:
o Costs
o Quality
o Delivery
o Flexibility
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Environment and Value Creation (4 of 4)
Environmental uncertainty
• A lack of complete information regarding what exists and
what developments may occur in the environment
Two dimensions of the environmental uncertainty
• Degree of complexity – the number of factors present in
the environment
• Rate of change – are these factors stable or dynamic?

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External Environments

Dimensions of uncertainty in the external environments of

organizations
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Environment and Innovation (1 of 4)
Innovation – process of putting new ideas into practice
Business innovations
• Product innovation – creation of new or improved
products
• Process innovation – better ways of ding things
• Business model innovation – new ways of making money

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Environment and Innovation (2 of 4)
Social business innovations – find ways to use business
models to address important social problems; focus on critical
social issues

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Environment and Innovation (3 of 4)
The innovation process:
• Step 1: Imagining – thinking about new possibilities
• Step 2: Designing – building initial models, prototypes,
samples
• Step 3: Experimenting – examining practicality
• Step 4: Assessing – identifying strengths/weaknesses
• Step 5: Scaling – implementing what’s learned
Reverse innovation – innovation can come from lower levels
in the organization and from diverse settings or locations

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Environment and Innovation (4 of 4)
Disruptive innovation – creates products/ services that
become so widely used that they largely replace prior
practices and competitors
• Cellular phones that disrupted traditional landlines
• MP3 players that disrupted CDs and cassettes

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Environment and Sustainability (1 of 6)
Sustainability – commitment to protect the rights of present
and future generations as co-stakeholders of the world’s
resources

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Environment and Sustainability (2 of 6)
Sustainable development
• makes use of environmental resources to support societal
needs today while also preserving and protecting them for
future generations

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Environment and Sustainability (3 of 6)
Environmental capital – natural resources used to sustain life
and produce goods and services for society
• Atmosphere
• Land
• Water
• Minerals

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Environment and Sustainability (4 of 6)
Triple Bottom Line: Three P’s of organizational performance
• Profit
• People
• Planet

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Environment and Sustainability (5 of 6)
Sustainable business – operates in ways that meet the needs
of consumers while protecting and preserving the
environment
Sustainable/ green innovations – help reduce an
organization’s negative impact; enhance positive impact on
the natural environment

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Environment and Sustainability (6 of 6)
Human Sustainability – concern for the effect of management
practices on employee physical and psychological well-being
• Health and wellness programs
• Stress management
• Minimizing work-family conflict
• Providing control over work
• Fair wages and equal opportunities

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Copyright
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