mgmt 110 lecture 4 summer

© John Wiley & Sons Australia

MGMT 110 Introduction to Management

• Lecture 4

• The External Environment of Management

• The International Environment


Learning Objectives

• Learning Objectives:– Discuss the nature of the organizational

environment and identify the environments of interest to most organizations.

– Describe the external environment of organizations, identify the components of the general and task environments, and discuss their impact on organizations.


Learning Objectives

• Learning Objectives (Cont.):– Identify the components of the internal

environment and discuss their impact on organizations

– Identify and describe how the environment affects organizations and how organizations adapt to their environment.


The Organization's Environment

• External environment: Everything outside an organization that might affect it.– General environment: The set of broad

dimensions and forces in an organization's surroundings that create its overall context.

– Task environment: Specific organizations or groups that affect the organization.

• Internal environment: The conditions and forces within an organization.


The Organization and Its Environments


The General Environment

• Economic dimension• Technological dimension• Socio-cultural dimension• Political-legal dimension• International dimension• Impacts are often vague, imprecise and

long term.• On the whole organizations cannot

influence their general environment.


The Task Environment


The Task Environment

• The task environment is complex but can readily provide useful information

• Influences are more readily identifiable in the task environment

• Task environment influence include:– Competitors– Customers– Suppliers– Regulators– Strategic allies


Organisation-Environment Relationships

• Organizations are open systems and they interact with their environment in different ways. In years past, many were closed systems.

• Three perspectives describe the way that the environment influences organizations:– Environmental change and uncertainty– Competitive forces– Environmental turbulence


Environmental Change and Complexity

• Organizations can be described along two dimensions – their degree of change – their degree of homogeneity

• These two dimensions combine to create uncertainty

• Uncertainty – A driving force caused by change and complexity.


Stable vs uncertain environments

Little change

Manyelements

few elements

Much change

stable

turbulent

uncertain

uncertain


Environmental Change and Complexity

• There are four levels of uncertainty:– Organizations with stable, simple

environments face least environmental uncertainty

– Organizations with dynamic but simple environments face moderate degree of uncertainty

– Organizations of stability and complexity face a moderate amount of uncertainty.

– Highly dynamic and complex environmental conditions yield a high degree of uncertainty


Competitive Forces

• Michael Porter identified five competitive forces in the environment:– The threat of new entrants– Competitive rivalry– The threat of substitutes– The power of buyers– The power of suppliers


Environmental Turbulence

• Managers need to plan how to respond to their organization's external environment.

• The sophistication and effort involved in the planning will depend in part upon the relative uncertainty in the environment.

• Managers can utilize Porter’s five forces to better understand and react to the task environment.

• Crises can still happen arising from unpredictable events.


How Organizations Adapt to Their Environments



• Information management:– Recognise the importance of boundary

spanners– Environmental scanning– Management information systems

• Strategic response:– Maintain the status quo– Small, incremental change– Radical new strategy



• Mergers, takeovers, acquisitions and alliances are some strategic responses to the environment.– Mergers occur when two or more

companies combine– In an alliances a company undertakes a

new venture with another company.



• Organizational design and flexibility– Adapting organizational design to suit

environmental conditions• Direct influence

– Generating consumer demand– Lobbying– Bargaining


Organizational Effectiveness

• Effectiveness is doing the right things.• There is no consensus about what

amounts to organizational effectiveness.• Different models:

– Systems resource approach– Internal process approach– Goal approach– Strategic constituency approach


Model of Organization EffectivenessSee diagram p160 text

INPUTS PROCESSES OUTPUTS

Acquire resources Combine resourcesFacilitate goal achievement

Satisfy constituentsObtain future resources

feedback


Dinte Brothers Adapting to the external environment

(Wiley, 2008)

• 1 Have any elements of the general environment influenced the Dinte organisation in important ways? How did they do this?

• 2 Which dimensions of the task environment would be of most importance to the golf products manufactured by the Dinte Group? How can the group deal successfully with these dimensions?

• 3 What strategy does the group presently use to manage the process of internationalisation?


Learning Objectives Chapter 6

• Learning Objectives:– Describe the nature of international

business, including its meaning, recent trends, managing internationalization, and managing in an international market.

– Discuss the structure of the global economy and how it affects international management.

– Identify and discuss the environmental challenges inherent in international management.


Learning Objectives

• Learning Objectives (Cont.)– Describe the basic issues involved in

competing in a global economy, including organizational size and the management challenges in a global economy


The Nature of International Business

• Our daily lives are strongly influenced by business from around the world.

• No organisation is insulated from the effects of foreign markets and competition.

• There are opportunities that arise from new markets opening…there are also risks


Capilano expands internationally

Dial-Up Broadband


The Meaning of International Business


Origins of International Business

• There have been merchants since there have been:– Recognisable countries and frontiers;– Manufacturing or raw material

extraction technologies;– Transportation technologies; and– The means of communicating the need

for products between countries


Trends in International Business

• After WWII many countries needed to rebuild infrastructure and economies almost from scratch.

• Over the same period the US and to some extent Australia and New Zealand became complacent.

• 1980 – 1995 saw a rapid rise in the economies of South-East Asia.

• 1995 – 2000 saw the information technology boom.


Managing the Process of Internationalisation

• Two related but distinct sets of challenges:– When an organisation chooses to

change its level of international involvement it must manage the transition.

– When an organisation has achieved its desired level of international involvement it must function effectively at that level.


Increasing International Involvement

• Pure domestic• Importing/exporting• Licensing• Strategic alliances• Mergers and acquisitions• Direct investment• These approaches are not mutually

exclusive and most large corporations use them all when required.


Challenges of international franchising

Subway

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International expansion plans via franchising

Fernwood Women’s Health Clubs

Dial-Up Broadband


Advantages and Disadvantages of Internationalisation Approaches


Managing in an International Market

• Managers in domestic and international businesses undertake the same type of activities.

• Complexity of these activities is likely to be much greater for international businesses.

• The most important question is to focus globally or regionally.


Thinking globally — implications for a manager at Skyrail Rainforest Cableway

Footage courtesy John Campling

Dial-Up Broadband


The Technologically Super-empowered Company

• Technology, especially communication and data handling technology, allows efficient interaction within organisations and with global environments.

• Intranet technology is scalable and fast.• Internet technologies such as the web

pages, email and FTP (file transfer protocol) servers provide communication possibilities that have been particularly embraced for marketing purposes.


The Structure of the Global Economy

• Three different elements in the global environment:– Mature market economies and systems– Developing economies– Other economies


Mature Market Economies and Systems

• Market economy: An economy based on the private ownership of business, which allows market factors such as supply and demand to determine business strategy.

• Market systems: Clusters of countries that engage in high levels of trade with each other. – NAFTA– EU– Asia-Pacific region


Mature Market Economies and Systems


Developing Economies

• Developing economies: Underdeveloped, immature economies, characterised by weak industry, weak currency and poor consumers.

• Governments of developing countries actively seek to strengthen their economies by opening the door to foreign investment.

• A number of the members of the Asia-Pacific region are developing economies.


Other Economies

• Some systems cannot be classified as either mature markets or developing economies.

• Oil exporting regions of the Middle East• Countries troubled by political and/or

ethnic violence.


Environmental Challenges of International Management


The Economic Environment

• Economic system– Move to market economies– Mix of ownership (public and private)

• Natural resources– Countries vary in their supply of natural

resources– Restrictions for some on use

• Infrastructure– Countries differ in their hard and soft

infrastructure


The Political-legal Environment

• Government stability– Stability of government can affect business

• Incentives for international trade– Countries, states and often cities offer

incentives• Controls on international trade

– Countries may protect their own industries • Economic communities

– Different countries have trade agreements with some others that facilitate trade between them


The Cultural Environment

• A country’s culture affects an individual’s behaviour.

• Culture is less likely to cause problems for international managers when the home culture and foreign culture are similar.

• Culture encompasses:– Values– Symbols– Beliefs– Language


Competing in a Global Economy-Globalisation and Organisation Size

• Multinational organisations (MNEs).• Medium-sized organisations• Small organisations.


Managing Challenges in a Global Economy

• Planning in a global economy– Managers need to understand the differences in

environments• Organising in a global economy

– Managers need to determine how they will structure their operations and allocate resources

• Leading in a global economy– Managers need competence in managing people in

different cultures • Controlling in a global economy

– Distance, time and culture all play a role in control


Economic challenges of conducting international business as an importer in

SME manufacturing

Simon Bottomley, General Manager, HaveStock Manufacturing

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Next Lecture

Tuesday 22/12/09

35G-45 10.30am – 12.30pm

Last one before the session break

mgmt 110 lecture 4 summer

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