Chapter 2 The External Environment and Organizational Culture Flashcards Preview

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Flashcards in Chapter 2 The External Environment and Organizational Culture Deck (21):

LO1 Describe how environmental forces influence organizations and how organizations can influence their environments.

Organizations are open systems that are affected by, and in turn affect, their external environments. Organizations receive financial, human, material, and information resources from the environment; transform those resources into finished goods and services; and then send those outputs back into the environment.


LO2 Distinguish between the macroenvironment and the competitive environment.

The macroenvironment is composed of international, legal and political, economic, technological, and social forces that influence strategic decisions. The competitive environment is composed of forces closer to the organization, such as current competitors, new entrants, substitute and complementary products, suppliers, and customers. Perhaps the simplest distinction between the macroenvironment and the competitive environment is in the amount of control a firm can exert on external forces. Macroenvironmental forces such as the economy and social trends are much less controllable than are forces in the competitive environment such as suppliers and customers.


LO3 Explain why managers and organizations should attend to economic and social developments.

Developments outside the organization can have a profound effect on the way managers and their companies operate. For example, higher energy costs or increased spending on security may make it harder for managers to keep their prices low. The growing diversity of the labor force gives managers access to a much broader range of talent but also requires them to make sure different types of employees are treated equally. The worldwide increase in free trade can open up overseas markets, but it may also encourage more foreign competition in the domestic market. Effective managers stay aware of trends like these and respond to them effectively.




LO4 Identify elements of the competitive environment.

Elements in the environment can range from favorable to unfavorable. To determine how favorable a competitive environment is, managers should consider the nature of the competitors, potential new entrants, threat of substitutes, opportunities from complements, and relationships with suppliers and customers. Analyzing how these forces influence the organization provides an indication of potential threats and opportunities. Effective management of the firm’s supply chain is one way to achieve a competitive advantage. Attractive environments tend to be those with high industry growth, few competitors, products that can be differentiated, few potential entrants, many barriers to entry, few substitutes, many suppliers (none with much power), and many customers. After identifying and analyzing competitive forces, managers must formulate a strategy that minimizes the power external forces have over the organization.


LO5 Summarize how organizations respond to environmental uncertainty.

Responding effectively to the environment often requires devising proactive strategies to change the environment. Strategic maneuvering involves changing the boundaries of the competitive environment through domain selection, diversification, mergers, and the like. Independent strategies do not require moving into a new environment but rather changing some aspect of the current environment through competitive aggression, public relations, legal action, and so on. Cooperative strategies, such as contracting, cooptation, and coalition building, involve the working together of two or more organizations.


LO6 Define elements of an organization’s culture.

An organization’s culture is its set of shared values and practices related to what is important and how the world works. The culture provides a framework that organizes and directs people’s behavior at work. Elements of the culture may be expressed in corporate mission statements and official goals, assuming these reflect how the organization actually operates. Business practices are a basic measure of culture. Symbols, rites, ceremonies, and the stories people tell express and reinforce their cultural values.


LO7 Discuss how an organization’s culture affects its response to its external environment.

A culture may be strong or weak and may be one of four types: group, hierarchical, rational, or adhocracy. These cultures shape whether they are flexible and whether the focus is on the external or internal environment. Managing and changing the culture to align it with the organization’s environment will require strong, long-term commitment by the CEO and other managers. Managers should espouse high ideals, pay constant attention to conveying values by communicating and modeling them, making decisions that are consistent with cultural values, and rewarding those who demonstrate the organization’s values.


  • Group culture. A group culture is internally oriented and flexible. It tends to be based on the values and norms associated with affiliation. An organizational member’s compliance with organizational directives flows from trust, tradition, and long-term commitment. It tends to emphasize member development and values participation in decision making. The strategic orientation associated with this cultural type is one of implementation through consensus building. Leaders tend to act as mentors and facilitators.


  • Hierarchical culture. The hierarchical culture is internally oriented by more focus on control and stability. It has the values and norms associated with a bureaucracy. It values stability and assumes that individuals will comply with organizational mandates when roles are stated formally and enforced through rules and procedures.


  • Rational culture. The rational culture is externally oriented and focused on control. Its primary objectives are productivity, planning, and efficiency. Organizational members are motivated by the belief that performance that leads to the desired organizational objectives will be rewarded.


  • Adhocracy. The adhocracy is externally oriented and flexible. This culture type emphasizes change in which growth, resource acquisition, and innovation are stressed. Organizational members are motivated by the importance or ideological appeal of the task. Leaders tend to be entrepreneurial and risk takers. Other members tend to have these characteristics as well.


open systems




open systems: Organizations that are affected by, and that affect, their environment.

For example, they take in inputs such as goods or services from their environment and use them to create products and services that are outputs to their environment.



inputs: Goods and services organizations take in and use to create products or services.


outputs: The products and services organizations create.


external environment

competitive environment


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.

例)firm and its rivals, suppliers, customers (buyers), new entrants, and substitute or complementary products

macroenvironment: The general environment; includes governments, economic conditions, and other fundamental factors that generally affect all organizations.

例)legal, political, economic, technological, demographic, and social and natural factors that generally affect all organizations.


New Entrants

barriers to entry: Conditions that prevent new companies from entering an industry.

例)government policy, capital requirements, brand identification, cost disadvantages, and distribution channels.



Cost is often a major barrier to entry.


Substitutes and Complements

Besides products that directly compete, other products can affect a company’s performance by being substitutes for or complements of the company’s offerings. 

A substitute is a potential threat; customers use it as an alternative, buying less of one kind of product but more of another. A complement(補完物) is a potential opportunity because customers buy more of a given product if they also demand more of the complementary product.


complementの例)ipodとiTune. 家と家具。ゲーム機とゲームソフト。



Organizations are at a disadvantage if they become overly dependent on any powerful supplier. A supplier is powerful if the buyer has few other sources of supply or if the supplier has many other buyers.


switching costs:Fixed costs buyers face when they change suppliers.

例) once a buyer learns how to operate a supplier’s equipment, such as computer software, the buyer faces both economic and psychological costs in changing to a new supplier.


supply chain management:The managing of the network of facilities and people that obtain materials from outside the organization, transform them into products, and distribute them to customers.

Today, 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.





final consumer

intermediate consumer


final consumer Those who purchase products in their finished form.


intermediate consumer A customer who purchases raw materials or wholesale products before selling them to final customers.



 Actions and attitudes that provide excellent customer service include the following:

  1. Speed of filling and delivering normal orders.
  2. Willingness to meet emergency needs.
  3. Merchandise delivered in good condition.
  4. Readiness to take back defective goods and resupply quickly.
  5. Availability of installation and repair services and parts.
  6. Service charges (that is, whether services are “free” or priced separately).

In all businesses—services as well as manufacturing— strategies that emphasize good customer service provide a critical competitive advantage. 


environmental uncertainty


Lack of information needed to understand or predict the future.


Uncertainty arises from two related factors:

(1) complexity

 (2) dynamism.

Environmental complexity refers to the number of issues to which a manager must attend as well as their interconnectedness.

例)industries that have many different firms that compete in vastly different ways tend to be more complex— and uncertain—than industries with only a few key competitors.


Similarly, environmental dynamism refers to the degree of discontinuous change that occurs within the industry. High-growth industries with products and technologies that change rapidly tend to be more uncertain than stable industries where change is less dramatic and more predictable.


As environmental uncertainty increases, managers must develop techniques and methods for collecting, sorting through, and interpreting information about the environment. 


environmental scanning

competetive intelligence

environmental scanning Searching for and sorting through information about the environment.

Who are our current competitors?

Are there few or many entry barriers to our industry?

What substitutes exist for our product or service?

Is the company too dependent on powerful suppliers?

Is the company too dependent on powerful customers?

Answers to these questions help managers develop competitive intelligence, the information necessary to decide how best to manage in the competitive environment they have identified.


Responding to the Environment

To respond to their environment, managers and companies have a number of options, which can be grouped into three categories:

(1) adapting to the environment

(2) influencing the environment

 (3) selecting a new environment




Responding to the Environment 

1)Adapting to the environment: Changing yourself

When uncertainty arises from environmental complexity, organizations tend to adapt by decentralizing decision making. 

例)if a company faces a growing number of competitors in various markets, if different customers want different things, if the characteristics of different products keep increasing, and if production facilities are being built in different regions of the world, it may be impossible for the chief executive (or a small group of top executives) to keep abreast of all activities and understand all the operational details of a business. In these cases, the top management team is likely to give authority to lower-level managers to make decisions that benefit the firm.


empowerment The process of sharing power with employees, thereby enhancing their confidence in their ability to perform their jobs and their belief that they are influential contributors to the organization.



bereaucratic organization 対 organic organization




Adapting at the Boundaries

buffering Creating supplies of excess resources in case of unpredictable needs.

Because they are open systems, organizations are exposed to uncertainties from both their inputs and outputs. To help them compete, they can create buffers on both the input and output boundaries with the environment.

smoothing Leveling normal fluctuations at the boundaries of the environment.



Adapting at the Core

flexible processes Methods for adapting the technical core to changes in the environment.

例)firms increasingly try to customize their goods and services to meet the varied and changing demands of customers.




Responding to the Environment 

2)Influencing Your Environment

independent strategies


Independent Action

independent strategies Strategies that an organization acting on its own uses to change some aspect of its current environment.

Competetive aggression: Wal-martみたいに自社の製品を他社のと比べる

Competetive pacification(和解): 競争相手との関係を築く

Public relations: 周りに良いイメージを与える。公衆イベント等をスポンサーしたりして自社のイメージアップ

Voluntary action: ボランティア

Legal action: 起訴したり

Political action: 政府関連にロビー


Responding to the Environment

2) Influencing your environment

cooperative strategies

cooperative strategies Strategies used by two or more organizations working together to manage the external environment.

  • Contraction-Negotiation of an agreement between the organization and another gropu to exchange goods, services, information, patents, and so on.
  • Cooptation - Absorbing new elements into the organization's leadership structure to avert threats to its stability or existence. 例)大学が裕福な卒業生を取り入れてboards of directorsに勤めてもらう。
  • Coalition(連合体)- Two or more groups that coalesce(結合する)and act jointly with respect to some set of issues for some period of time.



Responding to the Environment

3) Changing the Environment You Are In

strategic manuevering


strategic maneuvering An organization’s conscious efforts to change the boundaries of its task environment.

Managers can use several strategic maneuvers, including domain selection, diversification, merger and acquisition, and divestiture.

domain selection Entering a new market or industry with an existing expertise.


diversification A firm’s investment in a different product, business, or geographic area.

例)AppleがiPodでportable music playerでヒットして、そこからiPhoneで爆発的セラーを成し遂げる


merger One or more companies combining with another.

acquisition One firm buying another.



divestiture(奪うこと) A firm selling one or more businesses.


prospectors(試掘者) Companies that continually change the boundaries for their task environments by seeking new products and markets, diversifying and merging, or acquiring new enterprises.

defenders Companies that stay within a stable product domain as a strategic maneuver.