3-1 王青 - 管理学院 - 上海交通大学 2000-1 3 3 the organizational environment *...

3-1 王青 - 管理学院 - 上海交通大学 2000-1

33The Organizational EnvironmentThe Organizational Environment

* Organization-Environment Theory

* Organizational Environment

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Organization-Environment Theory

Organization-Environment Theory

Considers relationships inside and outside the organization.

An open system interacts with the environment.

A closed system is self-contained.

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The Organization as an Open SystemThe Organization as an Open System

InputInput StageStage ConversionConversionStageStage

OutputOutputStageStage

Sales of outputsSales of outputsFirm can then buy inputsFirm can then buy inputs

Figure 2.4

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Systems between org. n env.Inputs Transformation Outputs

Raw materials

Human resources

Capital

Technology

Information

Products & services

Financial results

Information

Human results

Employees` work activities

Management activities

Technology and operations methods

System

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Organizational EnvironmentOrganizational EnvironmentThose forces outside its boundaries that can

impact it with :

Opportunities: openings for managers to enhance revenues or open markets.

Threats: issues that can harm an organization.

Managers must seek opportunities and avoid threats.

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Environment Range

Task Environment: forces from suppliers, distributors, customers, and competitors.

General Environment: Consists of the wide economic, technological, demographic and similar issues.

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Chart of environmentChart of environment

Figure 3.1

Distributors

FirmFirmSuppliers

Competitors

CustomersEconomicForces

GlobalForces

Socio-culturalForces

DemographicForces

TechnologicalForces

Political &Legal Forces

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SuppliersSuppliers provide raw materials, components, and even labor.

Working with suppliers can be hard due to : shortages, unions, lack of substitutes.

Managers need to secure reliable input sources. So managers prefer to have many, similar suppliers of each item.

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DistributorsOrganizations that help others to sell goods.

Some distributors like Wall-Mart have strong bargaining power.

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Customers people who buy the goods.Usually, there are several groups of customers. Business buyers, Home buyers, government buyers.

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CompetitorsOrganizations that produce similar goods.High levels of rivalry often means lower prices.Barriers to entry keep new competitors out and result from: Economies of scale Brand loyalty Capital need

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Economic forcesAffect the national economy and the organization.

Includes: interest rates, unemployment rates, economic growth.

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Skills & equipment used in design, production and distribution.

Result in new opportunities or threats to managers.

Often make products obsolete very quickly.

Technological forces

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The Industry Life CycleThe Industry Life CycleFigure 3.3

Birth Growth Shakeout Maturity Decline

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In the stage firms seek to develop a winning technology.

Birth stage

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Growth stageProduct gains customer acceptance and grows rapidly.

New firms enter industry, production improves, distributors emerge.

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At end of growth, there is a slowing customer demand. Competitor rivalry increases, prices fall. Least efficient firms fail and leave industry.

Shakeout stage

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Maturity stageMost customers have bought the product, growth is slow.

Relationships between suppliers, distributors more stable.

Usually, industry dominated by a few, large firms.

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Decline stageFalling demand for the product.

Prices fall, weaker firms leave the industry.

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Result from changes in the social or national culture of society. values, norms, knowledge, beliefs, practices that unite a country.

Social-cultural forces

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Result from changes in the nature, composition and diversity of a population. gender age ethnic origin

Currently, most industrial countries are aging.

Demographic forcesDemographic forces

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Political-legal forces: result from changes in the political arena. These are often seen in the laws of a society. Today, there is increasing deregulation of many

state-run firms.

Political-legal forcesPolitical-legal forces

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Global forcesResult from changes in international relationships between countries. Tariff Barriers Economic Systems Distance barriers culture barriers International Expansion

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Economic SystemsEconomic SystemsFree market economy: production of goods and services is in private ownership.

Command economy: decisions on what to produce, how much, done by the government.

Mixed economy: certain economic sectors controlled by private business, others are government controlled.

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*Changing Political and Economic Forces

*Changing Political and Economic Forces

Russia1985

Russia1995

Democratic

PoliticalFreedom

TotalitarianChina1985

China1995

Command MarketMixedEconomic Freedom

Britain1985

Britain1995

Hungary1985

Hungary1995

Figure 4.4

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* Free-trade agreementsGATT: General Agreement on Tariff and Trade

NAFTA: North American Free Trade Agreement. No tariffs on goods traded between Mexico, Canada

and the U.S. Allows unrestricted cross-border flows of resources.

EU:European Union

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* International Expansion* International Expansion

ImportingExporting

LicensingFranchising

Joint VenturesJoint VenturesStrat. AlliancesStrat. Alliances

Wholly-owned For. Subsidiary

Low HighLevel of Foreign involvement and investment needed by a global organization

Figure 4.6

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Importing and ExportingImporting and Exporting

the least complex method of expansion.

Exporting: firm makes products and sells abroad. Importing: firm sells products made abroad.

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LicensingFirm allows foreign organization to make and distribute goods for a fee.

Helps the home firm since it does not have to set up a complete production and distribution network.

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FranchisingCompany sells a foreign organization the rights to use brand name and know-how in return for payment and profit percentage.

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Strategic AlliancesStrategic AlliancesManagers pool resources with a foreign firm and both organizations share the rewards and risks.

Allows firm to maintain control which is a problem with exporting, licensing, and franchising.

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Wholly-owned foreign subsidiaryFirm invests in production operations in a foreign country.

This is very expensive but can yield high returns.