The Environments of

Organizations and
Managers
CHAPTER 2
 THE ORGANIZATION’S
ENVIRONMENTS
 EXTERNAL ENVIRONMENT – is everything OUTSIDE an
organization’s boundaries
that might affect
it.
(Ex.
Customers, competition, economy,
technology, and resources)
 INTERNAL ENVIRONMENT - consists of conditions and
forces WITHIN the organization.
(Ex. Organization’s culture, product
2 SEPARATE EXTERNAL ENVIRONMENTS:

1. General Environment – the set of BROAD dimensions

and forces in an organization’s surroundings
that determines its overall context.
(Ex. Technology,
economic conditions,
demographics, and political or legal factors)

2. Task Environment – SPECIFIC organizations or groups

that affect the organization.
(Ex. Competitors,
customers, and suppliers)
The General Environment
 The Economic Dimension – is the overall health and
vitality of the economic system in which the
organization operates.
 The Technological Dimension – is made up of the
methods available for converting
resources into products or services.
 The Political-legal Dimension – consists of government
regulation of business and the relationship
between business and government.
The Task Environment
 Competitors – are organizations that competes
with other organizations for
resources.
 Customers – are those who pays money to
acquire an organization’s
products or services.
 Suppliers– are organizations that provide
resources for other
organizations.
 Regulators – are bodies that has the potential to
control, legislate, or otherwise influence the
organization’s policies and practices.

Kinds:

1. Regulatory Agency – are agencies created by the

government to regulate
business activities.
2. Interest Group – are groups organized by its
members to attempt to influence
organizations.
Strategic partners(or ally) – are
organizations or companies
working together in joint ventures or similar
arrangement.
THE INTERNAL
ENVIRONMENT
Owners – are the people who can
claim property rights to an
 Board of Directors – governing body that is elected by
a corporation’s stockholders and charged with
overseeing the general management of the firm
to ensure that it is being run in a way that best
serves the stockholders’ interests.

 Employees – are also a major element of the internal

environment.

 Physical Work Environment – is the final part of the

internal environment.
 THE ETHICAL AND SOCIAL
ENVIRONMENT OF MANAGEMENT
Individual Ethics in Organizations
 Ethics – refers to an individual’s personal beliefs about whether
a behavior, action, or decision is right or wrong.
 Ethical Behavior – are behaviors that conforms to generally
accepted norms. (Ex. Obeying the company’s rules;
being a whistleblower)
 Unethical Behavior – are those behaviors that does not
conform to generally accepted norms. (Ex.
Exploiting workers; dumping toxins)
Managerial Ethics – consists of the
standards of behavior
that guide individual managers
in their work.

Conflict of Interest – occurs when

an employee’s decision

potentially benefits the individual

to the possible detriment of the
Managing Ethical Behavior

Codes of Ethics – are written

statements of the
values and ethical
standards that guide the firms’
actions.
Emerging Ethical Issues
Ethical Leadership has taken on increased
importance in recent years.

 Sarbanes-Oxley Act of 2002 - is a

law that requires CEOs
and CFOs to vouch
personally for the
truthfulness and fairness of their
firms’ financial
 Corporate Governance – is the system by
which companies are directed and
controlled.

Ethics and Information Technology –

is primarily concerned with the
phenomenological approach
to interpreting information
technology.
Social Responsibility in
Organizations


Social Responsibility – is the set of obligations an
organization has to protect and enhance the societal
context in which it functions.
Arguments for Social
Responsibility
 Organizations should play a major role in solving
problems that need to be addressed (Ex. Air and
water pollution; resource depletion)
Arguments Against Social
Responsibility
 People argue that widening the interpretation of social
responsibility will undermine the U.S. economy by
detracting from the basic mission of business: to earn
profits for owners. (Ex.
Managing Social Responsibility
 Formal Organizational Dimensions includes the
following:

Legal Compliance – is the extent to which the

organization conforms to local, state, federal, and
international laws.
 Ethical Compliance – is the extent to which the
organization’s members follow basic ethical (and legal)
standards of behavior.

 Philanthropic Giving – is the awarding of funds or gifts to

charities or other worthy causes.
Informal Organizational
Dimensions
(Ex. Leadership, organizational culture, and the
organization’s response to whistle-blowers)

 Whistle-blowing – is an employees disclosure of illegal or

unethical conduct by others within the organization.
 THE INTERNATIONAL
ENVIRONMENT OF
MANAGEMENT
Trends in International Business

Levels of International Business

Activity
Exporting (or making a product in the firm’s
domestic marketplace ad selling it in another
country)
and…
Importing (or bringing a good, service, or
capital into the home country from abroad)
Licensing – is an arrangement whereby a
firm allows another company to use its brand
name, trademark, patent, copyright, or other
assets.
Strategic Alliances – is when two or more
firms jointly cooperate for mutual gain.
Strategic Alliances – is when two or more
firms jointly cooperate for mutual gain.
Joint Venture – is a special type of
strategic alliance in which the partners
actually share ownership of a new enterprise.
Direct Investment – occurs when a firm
headquartered in one country builds or purchases
operating facilities or subsidiaries in a foreign
country.
Maquiladoras – are light assembly
plants built in Northern Mexico close to the
U.S. border.