UNIVERSITI KUALA LUMPUR

MALAYSIAN INSTITUTE OF INDUSTRIAL

TECHNOLOGY

CHAPTER 2:
THE ENVIRONMENT OF
MANAGEMENT
PREPARED BY:
MISS NURFAZIRA BINTI ROSNAN
MSCM
BIL (HONS)
nurfazira.rosnan@t.unikl.edu.my
 OBJECTIVE OUTLINE
 Organizational Culture and Environment
 Organizational Culture
 Types of factor/environment affect management
 Macroenvironment
 Microenvironment
 Environmental and Innovation
 Environmental and Sustainability
 Management: The Global Dimensions
 Global Trade Mechanism
 Challenges in Global Management in Today’s World
ORGANIZATIONAL CULTURE

 Definition of organizational culture

 Principles of organizational culture

 Strong Versus Weak Organizational Cultures

 Establishing and maintaining organizational culture

 Organizational values
ORGANIZATIONAL CULTURE

Organizational Culture is an organization’s believes and

values that represent its personality.
Just as each person has a distinct personality, so does each
organization.
The culture of an organization distinguishes it from others
and shapes the actions of its members.
ORGANIZATIONAL CULTURE
Culture is a perception. It’s not something that can be physically touched or
seen, but employees perceive it on the basis of what they experience within the
organization.

Second, organizational culture is descriptive. It’s concerned with how

members perceive the culture and describe it, not with whether they like it.

Finally, even though individuals may have different backgrounds or work at

different organizational levels, they tend to describe the organization’s culture
in similar terms.
 PRINCIPLES OF ORGANIZATIONAL
CULTURE
Four basic principles of organizational
culture articulated by company founder
Bill Gore:

Freedom to encourage, Consulting other

The ability to make
Fairness to one help, and allow other associates before
your own
another and everyone associates to grow in taking actions that
commitments and
you come in contact knowledge, skill, and could affect the
keep them
scope of responsibility company’s reputation
STRONG VERSUS WEAK CULTURES
Those in which the key values are deeply held and widely shared - have a greater
influence on employees than do weaker cultures.

The more employees accept the organization’s key values and the greater their
commitment to those values, the stronger the culture is.
STRONG
CULTURES Most organizations have moderate to strong cultures; that is, there is relatively high
agreement on what’s important, what defines “good” employee behavior, what it
takes to get ahead, and so forth.

The stronger a culture becomes, the more it affects the way managers plan, organize, lead,
and control.
STRONG VERSUS WEAK CULTURES
 ESTABLISHING AND MAINTAINING
ORGANIZATIONAL CULTURE

TOP MANAGEMENT

PHILOSOPHY OF
SELECTION ORGANIZATION’S
ORGANIZATION’S
CRITERIA CULTURE
FOUNDERS

SOCIALIZATION
ESTABLISHING AND MAINTAINING ORGANIZATIONAL
CULTURE
How is an organization’s culture established and maintained?

1. The original source of the culture usually reflects the vision of the founders.
 Company founders are not constrained by previous customs or approaches and can establish the early culture by articulating a
vision of what they want the organization to be. Also, the small size of most new organizations makes it easier to instill that
vision with all organizational members.

2. Once the culture is in place, organizational practices help maintain it.

 For instance, during the employee selection process, managers typically judge job candidates not only on the job
requirements, but also on how well they might fit into the organization. At the same time, job candidates find out information
about the organization and determine whether they are comfortable with what they see.

3. The actions of top managers is a major impact on the organization’s culture.

 The company’s chief marketing officer would take groups of employees for regular tours. Just think of the powerful message
such a display would have on employees and their work. Through what they say and how they behave, top managers establish
norms that filter down through the organization and can have a positive effect on employees’ behaviors.

4. Finally, organizations help employees adapt to the culture through socialization

 They learn company philosophy, company jargon, and even how to assist customers with decisions.
 ESTABLISHING AND MAINTAINING
ORGANIZATIONAL CULTURE
What is socialization?
A process that helps new employees learn the organization’s way of doing things.

Another benefit is that it minimizes

One benefit of socialization is that
the chance that new employees who BENEFITS ON
employees understand the culture
are unfamiliar with the
and are enthusiastic and SOCIALIZATION
organization’s culture might disrupt
knowledgeable with customers.
current beliefs and customs.
 VALUE

Value are the basic beliefs that define employees’ successes in an

organization.
A hero is an exemplary person who reflects the image, attitudes, or
values of the organization and serves as a role model to other
employees.
A hero is sometimes the founder of the organization (think Bill
Gates of Microsoft).
An organization’s values can be defined as the moral guide for its
business practices.
 CORE VALUES

Every company, big or small, has its core values which forms the basis over which the
members of a company make decisions, plan strategies, and interact with each other and
their stakeholders. Core values reflect the core behaviors or guiding principles that guide
the actions of employees as they execute plans to achieve the mission and vision.

 Core values reflect what is important to the organization and its members.
 Core values are intrinsic - they come from leaders inside of the company.
 Core values are not necessarily dependent on the type of company or industry and
may vary widely, even among organizations that do similar types of work.
TYPES OF FACTOR/ENVIRONMENT
AFFECT MANAGEMENT
• Factors that indirectly impact the organization, its
Macroenvironment / operation and working condition is known as the outer
environment or macro environment.
general factors • These external factors cannot be controlled by the
organization.

Microenvironment / • These are the factors within an organization that can be

controlled and affect the immediate area of an
specific / task factors organization’s operations.
 MACROENVIRONMENT
Politic
Social
Economic Philosophy/objectives of
Norms, customs, social
Health of the economy political party running the
values
government

Technology Environment
Development and Nature and conditions of EXTERNAL
availability of technology environment
FACTORS
 MACROENVIRONMENT

 Things like the overall health of the economy in terms of

financial markets, inflation, income levels, and job outlook
are always important.
 All such economic conditions affect the prospects for
individual companies, the spending patterns and lifestyles
of consumers, and even a nation’s priorities.
 They must be assessed, forecasted, and considered when
executives make decisions about the strategies and
operations of their organizations.
ECONOMIC
CONDITION
 MACROENVIRONMENT

 Laws and regulations, government policies, and the

objectives of political parties.
 Vary from one country to the next.
 Not all countries stand up for international copyright
and intellectual property.
 The effects of this are quite visible. For e.g.: The effect
of changing taxes or raising interest rates.
 Protection
 Internet censorship - deliberate blockage of public access to
information posted on the Internet.
LEGAL -
POLITICAL
CONDITION
 MACROENVIRONMENT

 Diversity issues relating to educational opportunity,

access to technology, housing / job options

 Norms, customs, demographics, and societal values.

 Generational cohorts -- people born within a few years of

one another and who experience somewhat similar life
events during their formative years.
SOCIOCULTUR
AL CONDITION
• Greatest Generation: Born 1901-1924.
• Silent Generation: Born 1925-1945.
• Baby Boomers: Born 1946-1964.
• Generation X: Born 1965-1980.
• Millennials: Born 1981-1996.
• Generation Z: Born 1997-2012.
• Generation Alpha: Born 2013-2025.

7 GENERATIONS
 MACROENVIRONMENT

 Social media, features and “apps” on smart phones

 Brings both opportunities new product development and
advertising to employee networking and data sharing to virtual
meetings and always-available chats.
 Between new applications and fast-developing mobile and
smart device technologies and problems many employees
spend a lot of time doing personal things online.
 Some employers call this loss of productive time “social
notworking.”
 Work-life balance ““never free from the job”” TECHNOLOGICA
L CONDITION
 MACROENVIRONMENT

 Nuclear plant failure, oil spill, hurricane

 “carbon neutral,” “green”, “sustainability”

 Sustainable business – meets both the needs of

customers and protects the natural environment

NATURAL
ENVIRONMENT
CONDITION
MACROENVIRONMENT
 MICROENVIRONMENT

 Stakeholders and value creation These are the factors within an

organization that can be controlled and
 Competitive advantage affect the immediate area of an
organization’s operations.
 Environmental uncertainty
 MICROENVIRONMENT
The specific (task) environment - actual organizations, groups, and
persons with whom an organization interacts and conducts business.

Customers Suppliers Competitors Regulators Owners

Includes important stakeholders such as:

 MICROENVIRONMENT
 Stakeholders are the persons, groups, and institutions directly
affected by an organization.

The important stakeholders for most organizations include

customers, suppliers, competitors, regulators, advocacy
groups, investors or owners, and employees.
“Society at large” and “future generations” are also part of
the stakeholder map; they introduce, in particular, concerns
for sustainability and the natural environment.

 Organizations should create value and satisfy the needs of their STAKEHOLDE
multiple stakeholders. RS
MICROENVIRONMENT
STAKEHOLDE
RS

Multiples Stakeholders In
Environmental Organization
 MICROENVIRONMENT
• Employees exert great influence on the
organization. STAKEHOLDE
• It is imperative to find the right people RS
Employees for each job.
• Organizations need to motivate
employees positively and retain
specialized talent.

Owners and • Investors are major influencers on a

company’s revenue and operations. Multiples Stakeholders In
The • It is important that the owners are
Environmental Organization
Managemen satisfied with the company.
• It is the manager's job to balance the
t aims of the company and the owners.
 MICROENVIRONMENT
• Competition and consumerism has
rendered multiple alternatives for the STAKEHOLDE
same product in different brands. RS
Consumers
• Organizations recognize that it is in
their own interest to keep consumers
happy.

• Competitors affect profits by trying to

divert business.
Competition
• A capable manager will need to
Multiples Stakeholders In
constantly study and analyze its
competition if the company wants to Environmental Organization
maintain its position in the market.
 MICROENVIRONMENT
Suppliers STAKEHOLDE
RS

 The suppliers or contractors manage the inputs of

organizations and provide products or services that a
company needs directly or need it to add value to the
company’s own products or services.

 It is important to keep suppliers happy to ensure a smooth Multiples Stakeholders In

input supply system. Environmental Organization
 MICROENVIRONMENT

 A core competency that clearly sets an organization apart

from competitors and gives it an advantage over them in
the marketplace

 Companies may achieve competitive advantage in many

ways, including:
 Costs
 Quality
 Delivery
 Flexibility COMPETITIVE
ADVANTAGE
 MICROENVIRONMENT
• finding ways and using technology to operate with lower
Costs costs than one’s competitors and thus earn profits with
prices that one’s competitors have difficulty matching.

• finding ways and using technology to create products

Quality and services that are of consistently higher quality for
customers than what is offered by one’s competitors.

• finding ways and using technology to outperform

competitors by delivering products and services to
Delivery customers faster and on time, and by developing timely
new products.

COMPETITIVE
• finding ways and using technology to adjust and tailor
ADVANTAGE
Flexibility products and services to fit customer needs in ways that
are difficult for one’s competitor to match.
 MICROENVIRONMENT
 Refers to the degree of change and complexity in an organization’s
environment.

 A lack of complete information regarding what exists and what

developments may occur in the external environment
 The more uncertain the environment, the harder it is to analyze
environmental conditions and predict future states of affairs.

 Two dimensions of environmental uncertainty:

 Degree of complexity: or the number of different factors in the
environment. An environment is typically classified as relatively
simple or complex
 Rate of change: An environment is typically classified as stable or ENVIRONMENTA
dynamic L UNCERTAINTY
 MICROENVIRONMENT

 Which looks at the number of components in an organization’s

environment and the extent of the knowledge that the organization The degree of
has about those components.
environmental
 An organization with fewer competitors, customers, suppliers, complexity
government agencies, and so forth faces a less complex and
uncertain environment. Organizations deal with environmental
complexity in various way.

 Complexity is also measured in terms of the knowledge an

organization needs about its environment. ENVIRONMENTA
L UNCERTAINTY
 MICROENVIRONMENT

 If the components in an organization’s environment

change frequently, it’s a dynamic environment. The rate or
 If change is minimal, it’s a stable one. degree of change

 A stable environment might be one with no new

competitors, few technological breakthroughs by
current competitors, little activity by pressure groups to
influence the organization, and so forth. ENVIRONMENTA
L UNCERTAINTY
MICROENVIRONMENT

ENVIRONMENTA
L UNCERTAINTY
MATRIX
ENVIRONMENTAL AND INNOVATION
What is innovations

Types of innovations

The innovation process

ENVIRONMENTAL AND INNOVATION

 Process of putting new ideas into practice

WHAT IS
 Innovation is often a high priority when INNOVATION
executives and leaders try to steer organizations
through complex and uncertain environments
ENVIRONMENTAL AND INNOVATION
Business Innovation

Social Business Innovation

TYPES OF
INNOVATIONS

Disruptive Innovation

Reverse Innovation
ENVIRONMENTAL AND INNOVATION
• Product innovation: result in the
creation of new or improved goods and
services
Business • Process innovation: result in better
Innovations ways of doing things
• Business model innovation: result in
new ways of making money for the
firm.
TYPES OF
INNOVATIONS

Social • Find ways to use business models to

Business address important social problems
• Ex. “microcredit”
Innovations
ENVIRONMENTAL AND INNOVATION

• Creates products / services that

Disruptive become so widely used that they
Innovations largely replace prior practices and
competitors

TYPES OF
INNOVATIONS

Reverse • Innovation can come from any level

Innovations in the organization or location
ENVIRONMENTAL AND INNOVATION
Step 1: Step 2:
Imagining Designing

Step 4: Step 3: INNOVATIONS

Assessing Experimenting PROCESS

Step 5: Scaling
ENVIRONMENTAL AND INNOVATION

Imagining Designing Experimenting

Find ideas
through
motivation or INNOVATIONS
observing from Do preparation PROCESS
Put ideas into
the market, and development
practice,
organization so new product
constantly
crisis, changes of or process can
improve and
business stands a chance
iterate
environment, of success.
users or
customers'
feedback etc.
ENVIRONMENTAL AND INNOVATION

Assessing
• Push the product to the market and spread it though INNOVATIONS
marketing PROCESS

Scaling
• Learning and adjusting the process for better results
 ENVIRONMENTAL AND
SUSTAINABILITY

 What is sustainability

 Sustainable development

 Sustainable business

 Human sustainability

 Managerial decision affected by culture

 ENVIRONMENTAL AND
SUSTAINABILITY

Sustainability is a commitment to
protect the rights of present and
future generations as co-
stakeholders of present-day natural
resources.

WHAT IS
SUSTAINABILI
TY
 ENVIRONMENTAL AND
SUSTAINABILITY

Makes use of environmental

resources to support societal needs
today while also preserving and
protecting them for future
generations.

SUSTAINABLE
DEVELOPMEN
T
 ENVIRONMENTAL AND
SUSTAINABILITY

Environmental capital or resources

SUSTAINABLE
DEVELOPMEN
 Natural resources used to sustain life and produce
T
goods and services for society
 Land
 Atmosphere
 Water
 Minerals
ENVIRONMENTAL AND
SUSTAINABILITY

SUSTAINABLE
Profit DEVELOPMEN
T

Triple Bottom Line:

Planet People Three P’s of
organizational
performance
 ENVIRONMENTAL AND
SUSTAINABILITY

 Sustainable business
 Operates in ways that meets the needs of
consumers while protecting the environment. SUSTAINABLE
BUSINESS
 Sustainable/green innovations
 help reduce an organization’s negative
impact; enhance positive impact.
 ENVIRONMENTAL AND
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

HUMAN
Control over work SUSTAINABILI
TY
Fair wages and opportunities
ENVIRONMENTAL AND
SUSTAINABILITY

MANAGERIAL
DECISION
AFFECTED
BY CULTURE
GLOBAL TRADE MECHANISMS

Global Perspective

Types of International Organizations

How Organizations Go International

 GLOBAL TRADE MECHANISMS
Ethnocentric
attitude
• the leadership of a
company is located in the
company’s national
headquarters. All decision-
making and control are
centralized there, rather
than in the country of
operations.
• Belief that the best work
approaches and practices
are those of the home
country
Polycentric
attitude
• executives from a
company’s headquarters
set strategy but defer
decision-making to
nationals running the
subsidiaries in foreign
countries.
• The view that employees
in the host country (the
foreign country in which
the organization is doing
business) know the best
work approaches and
practices for running their
business.
Geocentric
attitude
• managers are appointment
to international offices
Three Possible
regardless of their Global
nationality or cultural
experience or knowledge Perspective
• A world-oriented view that
focuses on using the best Attitudes.
approaches and people
from around the globe.
GLOBAL
PERSPECTIVE
 GLOBAL TRADE MECHANISMS
World Trade Organization • A global organization of 153 countries that deals
(WTO) with the rules of trade among nations

• An organization of 185 countries that promotes Four Important

International Monetary
Fund (IMF)
international monetary cooperation and provides Global Trade
advice, loans, and technical assistance.
Mechanisms
• A group of five closely associated institutions
World Bank Group
that provides financial and technical assistance
(WBG) to developing countries.

Organization For
Economic Cooperation
• An international economic organization that GLOBAL
helps its 30 member countries achieve PERSPECTIVE
And Development sustainable economic growth and employment.
(OECD)
GLOBAL TRADE MECHANISMS
Multinational Corporation (MNC)

Multidomestic Corporation

Global Company
TYPES OF
INTERNATIONA
Transnational or Borderless L
ORGANIZATION
S
 GLOBAL TRADE MECHANISMS
• Any type of international company
Multinational Corporation
that maintains operations in
(MNC)
multiple countries

• Decentralizes management and other decisions to

the local country.
• This type of globalization reflects the polycentric
Multidomestic
attitude. TYPES OF
Corporation • A multidomestic corporation doesn’t attempt to
replicate its domestic successes by managing
INTERNATIONA
foreign operations from its home country. L
ORGANIZATION
S
GLOBAL TRADE MECHANISMS
• Centralizes its management and other
decisions in the home country.
• This approach to globalization reflects the
Global ethnocentric attitude.
Company • Global companies treat the world market as
an integrated whole and focus on the need for
global efficiency and cost savings.

• An arrangement that eliminates TYPES OF

Transnational or artificial geographical barriers or it’s INTERNATIONA
Borderless reflected a geocentric attitude L
ORGANIZATION
S
GLOBAL TRADE MECHANISMS
Global
Exporting
Sourcing

Importing Licensing

HOW
ORGANIZATION
Strategic S GO
Franchising INTERNATIONA
Alliance L
GLOBAL TRADE MECHANISMS

 Which is purchasing materials or labor from around the

world wherever it is cheapest.

 The goal: take advantage of lower costs in order to be more

Global Sourcing
competitive.

 Company often continue to use this approach because of

the competitive advantages it offers.

 Each successive stage of going international beyond global HOW

sourcing, however, requires more investment and thus ORGANIZATION
entails more risk for the organization. S GO
INTERNATIONA
L
 GLOBAL TRADE MECHANISMS
Exporting
• The organization’s products to other countries - that is, making
products domestically and selling them abroad.
• Minimal investment and risk, which is why many small businesses
often use these approaches to doing business globally.

Importing
• Which involves acquiring products made abroad and selling them HOW
domestically. ORGANIZATION
• Minimal investment and risk, which is why many small businesses S GO
often use these approaches to doing business globally. INTERNATIONA
L
 GLOBAL TRADE MECHANISMS
• An organization gives another organization
Licensing the right to make or sell its products using its
technology or product specifications.

• An organization gives another organization

Franchising the right to use its name and operating
methods.

• A partnership between an organization and a

foreign company partners in which both HOW
Strategic
share resources and knowledge in developing ORGANIZATION
Alliance new products or building production
S GO
facilities.
INTERNATIONA
L
 CHALLENGES IN GLOBAL
MANAGEMENT IN TODAY’S WORLD

The Challenge
Of Openness

Challenges Of
Managing A
Global Workforce
 CHALLENGES IN GLOBAL
MANAGEMENT IN TODAY’S WORLD
Increased threat of terrorism by a truly global
terror network. The push to go global has been
widespread.
Advocates praise the economic and
social benefits that come from
globalization, but globalization also
Economic interdependence of trading creates challenges because of the
openness that’s necessary for it to
countries. work.

Underlying and fundamental cultural THE

differences CHALLENGE OF
OPENNESS
 CHALLENGES IN GLOBAL
MANAGEMENT IN TODAY’S WORLD

 Globalization is meant to open up trade and to break Increased

Increased Threat
Threat
down the geographical barriers separating countries. of
of Terrorism
Terrorism by
by A
A
Truly
Truly Global
Global
 Yet, opening up means just that being open to the bad
Terror
Terror Network
Network
as well as the good.

 From the Philippines and the United Kingdom to

Israel and Pakistan, organizations and employees face
the risk of terrorist attacks.
THE
CHALLENGE OF
OPENNESS
 CHALLENGES IN GLOBAL
MANAGEMENT IN TODAY’S WORLD

 As we saw over the last couple of years, the faltering of

one country’s economy can have a domino effect on other Economic
countries with which it does business. Interdependence of
Trading Countries
 So far, however, the world economy has proved to be quite
resilient.

 Structures that are currently in place, such as the World

Trade Organization and the International Monetary Fund,
help to isolate and address potential problems.
THE
CHALLENGE OF
OPENNESS
 CHALLENGES IN GLOBAL
MANAGEMENT IN TODAY’S WORLD

Underlying and
 Differences that encompass traditions, history, Fundamental Cultural
religious beliefs, and deep-seated values. Differences

 Managing in such an environment can be

extremely complicated.

THE
CHALLENGE OF
OPENNESS
 CHALLENGES IN GLOBAL
MANAGEMENT IN TODAY’S WORLD
Cultural intelligence or As globalization continues to be
cultural awareness and important for businesses, it’s
sensitivity skills. obvious that managers need to
understand how to best manage
that global workforce
Skill’s that
managers
need THE
Global mind-set, CHALLENGE OF
attributes that allow a MANAGING A
leader to be effective in
cross-cultural GLOBAL
environments. WORKFORCE
 CHALLENGES IN GLOBAL
MANAGEMENT IN TODAY’S WORLD
Knowledge of • How cultures vary and how they affect Three main dimensions
Culture behavior

• The ability to pay attention to signals and Cultural awareness

Mindfulness reactions in different cross-cultural and sensitivity skills
situations

THE
Behavioral • Using one’s knowledge and mindfulness
to choose appropriate behaviors in those
CHALLENGE OF
MANAGING A
Skill situations GLOBAL
WORKFORCE
 CHALLENGES IN GLOBAL
MANAGEMENT IN TODAY’S WORLD
• Knowledge of international business and the
Intellectual capacity to understand how business works
Three components
Capital on a global scale

Global mind-set, attributes that

allow a leader to be effective in
Psychological • Openness to new ideas and experiences cross-cultural environments
Capital

THE
• Ability to form connections and build CHALLENGE OF
Social Capital trusting relationships with people who are MANAGING A
different from you GLOBAL
WORKFORCE