Chapter 2 - The external and internal environments. After completing this unit, you should be able to: Describe how environmental forces influence organizations and how organizations can influence their environments, distinguish between the macroenvironment and the competitive environment, explain why managers and organizations should attend to economic and social developments,. | The External and Internal Environments Chapter Two Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Learning Objectives LO 1 Describe how environmental forces influence organizations and how organizations can influence their environments. LO 2 Distinguish between the macroenvironment and the competitive environment. LO 3 Explain why managers and organizations should attend to economic and social developments. LO 4 Identify elements of the competitive environment. Learning Objectives (cont.) LO 5 Summarize how organizations respond to environmental uncertainty. LO 6 Define elements of an organization’s culture. LO 7 Discuss how an organization’s culture and climate affects its response to its external environment. Open Systems External environment All relevant forces outside a firm’s boundaries, such as competitors, customers, the government, and the economy. Competitive environment The immediate environment surrounding a firm; includes suppliers, customers, rivals, and the like. Open Systems Macroenvironment The general environment; includes governments, economic conditions, and other fundamental factors that generally affect all organizations. The External Environment Figure 6 Demographics Demographics Measures of various characteristics of the people who make up groups or other social units 7 The Competitive Environment Figure 8 Competitors Competition is most intense when: There are many direct competitors Industry growth is slow Product/service is not easily differentiated New Entrants Barriers to entry conditions that prevent new companies from entering an industry government policy, capital requirements, brand identification, cost disadvantages, and distribution channels. 10 Suppliers Suppliers provide resources or inputs needed for production Switching costs fixed costs buyer face if they change suppliers 11 Suppliers Supply chain management managing the network of facilities and people that obtain materials from outside the organization, transform them into products, and distribute them to customers The goal of effective supply chain management is to have the right product in the right quantity available at the right place at the right cost. 12 Environmental Analysis Benchmarking The process of comparing an organization’s practices and technologies with those of other companies. Changing the Environment You are In Strategic maneuvering An organization’s conscious efforts to change the boundaries of its task environment Domain selection Entrance to a new market or industry with an existing expertise Diversification Occurs when a firm invests in a different product, business, or geographic area 14 Organization Culture Organizational culture The set of important assumptions about the organization and its goals and practices that members of the company share In strong cultures, the majority of people within the organization agree on organizational goals In weak cultures, different people hold different values and there is confusion about corporate goals 15
