Chapter 3

Environmental Forces

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Learning Objectives
Describe how economic and cultural factors influence organizations. Identify the five competitive forces that affect organizations in an industry. Describe the principle political and legal strategies used by managers to cope with changes in the environment. Explain how technological forces influence changes in industries.
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The Environment
General Environment - sometimes called the macroenvironment, includes the external factors that usually affect all or most organizations.

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Forces Impacting Organizations

(adapted from Figure 3.1)

Macroenvironment
Demographics Technology

Politics

Competitors

Country Cultural Values

Organization
Economy
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The Economy
Economics is the discipline that focuses on understanding how people or people or nations produce, distribute, and consume various goods and services.
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Trends in the New Versus the Old Economy

(adapted from Table 3.1)

New Value matters information is key New markets distance vanished Customers buy activities not products a click away Human capital rise of knowledge worker
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Old Size of organization matters manufacturing is key Defined market segments demographics Customers for a lifetime loyalty, repeat business Physical and capital assets tangible assets
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Demographics
Demographics are the characteristics of a work group, an organization, a specific market, or various populations. Some current demographic changes include:
Increasing Diversity Education and Skills Managerial Challenges

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Cultural Forces
Culture refers to the unique pattern of shared characteristics, such as values, that distinguish the members of one group of people from those of another.
A value is a basic belief about a condition that has considerable importance and meaning to individuals and is relatively stable over time. A value system comprises multiple beliefs that are compatible and supportive of on another.
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Cultural Forces
Values can effect how a manager
Views other people and groups Perceives situations and problems Goes about solving problems Determines what is and is not ethical behavior Leads and controls employees

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Hofstedes Framework
Power Distance the degree to which less powerful members of society accept that influence is unequally divided. Uncertainty Avoidance the extent to which members of a culture feel threatened by risky or unknown situations. Individualism is a combination of the degree to which society expects to take care of themselves and their immediate family and the degree to which people believe they are masters of their own destinies. Masculinity the degree to which assertiveness and the acquisition of money and material things are valued. Long-Term/Short-Term Orientation reflects the extent to which a culture stresses that its members accept delayed gratification of material, social, and emotional needs.
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Hofstedes Ranking
(adapted from Figure 3.2)
Importance of Cultural Orientation
100 90 80 70 60 50 40 30 20 10 0

Japan USA Canada France

Power Distance

Uncertainty Avoidance

Individualism

Masculinity

Short-term/ Long-term Orientation

Cultural Value Dimension

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Competitive Forces in the Task Environment

(adapted from Figure 3.3)

Supplier bargaining power

Threat of substitute goods or services

Threat of new competitors

Customer bargaining power

Rivalry among existing firms in industry

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Managerial Political Strategies

(adapted from Figure 3.4)

Political Strategies

Political-Legal Forces

Negotiation
Lobbying Alliance Representation Socialization

Political action
committees (PACs) Laws Government Labor unions Others

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