Chapter3ManagingEnvironmentalChange&InnovationTheChangingEnvironmentofOrganizationsandManagersAcertainamountofstabilityoftheenvironmentisessentialAdaptingtochangehelpsmanagersmeetorganizationalgoalsDealingsuccessfullywithchangecanincreaseefficiencyandeffectivenessEnvironmentalfactorsplayamajorroleindetermininganorganization’ssuccessorfailureGeneralEnvironment:composedofthenonspecificelementsoftheorganization’ssurroundingsthatmightaffecttheactivitiesoftheorganization.Theeffectsofthesedimensionsontheorganizationarebroadandgradual.Taskenvironment:Consistofspecificelementsoftheorganization’ssurroundingsthatareverylikelytoinfluencetheorganization(specifictoorganization,effectsarelikelytobedirect)NewEconomyNationalbordersnolongerdefineanorganization’soperatingboundariesTechnologyopensuporganizationsandmakesinformationmoreaccessibleJobopportunitiesareforknowledgeworkersPopulationischaracterizedbyculturaldiversityBusinessacceptsitsocialresponsibilitiesEconomyisdrivenbysmallentrepreneurialfirmsCustomerneedsdrivebusinessThreeWavesChangedtheWorldFirstly,Agriculture.Untilthelatenineteenthcentury,alleconomieswereagrarian.Secondly,Industrialization.Fromthelate1800suntil1960s,mostdevelopedcountriesmovedfromagrariansocietiestoindustrialsocieties.Third,Information.InformationtechnologyistransformingsocietyfromitsmanufacturingfocustooneofserviceTheOrganizationandItsEnvironment

Environmentisofcriticalimportancetothesuccessandfailureofanyorganization.Managersneedtohaveakeenunderstandingoftheirenvironment—howitaffectsthemandhowtheycanaffectitExternalenvironment:theforcesandinstitutionsoutsidetheorganizationthepotentiallycanaffecttheorganization’sperformance.ItcomposesGeneralenvironmentandTaskenvironmentGeneralEnvironment:Everythingoutsideanorganization’sboundaries.TheoverallcontextofgeneralenvironmentareEconomic,Legal,Political,Socio-culture,international,andtechnicalforces.Broadeconomic,socio-cultural,political-legal,demographic,technological,andglobalconditionsthatmayaffecttheorganization.TechnologicalOwnersEmployeesPhysicalEnvironmentBoardofDirectorsCultureEconomicInternationalPolitical-legalSocioculturalSuppliersStrategicRegulatorsCompetitorsCustomersFigure3-1Organization’sGeneralEnvironmentDimensionsDimensionsofGEAffectingOnOrganizationEconomicDimension:theoverallhealthandvitalityoftheeconomicsysteminwhichtheorganizationoperates;TechnologicalDimension:methodsthatavailableforconvertingresourcesintoproductsorservices;SocioculturalDimension:includesthecustoms,mores,values,anddemographiccharacteristicsofthesocietyinwhichtheorganizationfunctionsPolitical—legalDimension:theextentofgovernmentregulationofbusinessandthegeneralrelationshipbetweenbusinessandgovernmentInternationalDimension:theextenttowhichtheorganizationisaffectedbybusinessinothercountriese.g.“ThegeneralenvironmentofMcDonald”onpp.34TaskEnvironment(specificenvironment):composedofspecificgroupsandorganizationsthataffectthefirm,externalforcesthathaveadirectandimmediateimpactontheorganization.DimensionsofTaskEnvironmentCompetitors:seekingthesameresourcesastheorganizationCustomers:acquireanorganization’sproductsorresourcesSuppliers:provideresourcesfortheorg.Regulators:control,legislate,orinfluencetheorganization’spoliciesorpractice,andregulatoryagenciesorinterestgroups,strategicpartnerswhoareajointventureorpartnershipwiththeorganization.McDoonald’sMcDonad’sRegulators-FoodandDrugadministration-Securitiesandexchangecommission-EnvironmentalProtectionagencyStrategicPartners-Wal-MartDisneyForeignpartnersSuppliers-Coca-cola-Wholesalefoodprocessors-PackagingmanufacturersCustomers-Individualconsumers-InstitutionalcustomersCompetitors-BurgerKingDecosSubwayDairyQueenThetaskenvironmentofMcDonald

InternalEnvironmentTaskEnvironmentInternalEnvironmentTheinternalenvironmentareconditionsandStakeholdersforcespresentandatworkwithinanorganization.Organizationalstakeholders:thatareanyconstituenciesintheorganization’sexternalenvironmentthatareaffectedbytheorganization’sdecisionsandactions,andtheyarepeopleanorganizationsthataredirectlyaffectedbythebehaviorsofanorganizationthathaveastakeinitsperformance.StakeholdersConditionsandForcesOwners,whoarepersonswithlegalpropertyrighttobusiness;Boardofdirectors,electedbythestockholdersandarechargedwithoverseeingthegeneralmanagementofthefirmtoensurethatitisruninawaythatbestservesthestockholders’interestEmployees,whoworkforthefirmandhaveavestedinterestinitscontinuedoperationandexistencePhysicalworkenvironment:theactualphysicalenvironmentoftheorganizationandtheworkthatpeopledo.WhyShouldWeManagingStakeholderRelationship?Managingitcanleadtoimprovedorganizationalperformance;It’sthe“right”thingtodogiventheinterdependenceoftheorganizationanditsexternalstakeholdersItcanidentifytheorganization’sexternalstakeholders,TodeterminetheparticularinterestandconcernsoftheexternalstakeholdersDecidehowcriticaleachexternalstakeholderistotheorganizationDeterminehowtomanageeachindividualexternalstakeholderrelationshipHowEnvironmentsaffectsorganizationsEnvironmentchangeoccursintwoways:ThedegreetowhichchangeinenvironmentisoccurringThedegreeofhomogeneityorcomplexityoftheenvironmentOrganizationCustomersUnionsSocialandPoliticalActionGroupsShareholdersCompetitorsCommunitiesTradeandIndustryAssociationSuppliersGovernmentsMediaEmployeesFigure3-2TheStakeholdersofanOrganizationEnvironmentUncertainty:Adrivingforcethatinfluencesorganizationaldecisions.Inotherwords,theextenttowhichmanagershaveknowledgeofandareabletopredictchangetheirorganization’sexternalenvironmentisaffectedbycomplexityoftheenvironment(thenumberofcomponentsinanorganization’sexternalenvironment),andthedegreeofchangeinenvironmentcomponents(Howdynamicorstabletheexternalenvironmentis)EnvironmentalUncertaintyMatrixCell(simple,stable)Stableandpredictableenvironment:fewcomponentsinenvironment,componentsaresomewhatsimilarandremainbasicallythesame,minimalneedforsophisticatedknowledgeofcomponents.Cell(Simple,Dynamic)Dynamicandunpredictableenvironment:fewcomponentsinenvironment,componentsaresomewhatsimilarbutareincontinualprocessofchange,minimalneedforsophisticatedknowledgeofcomponents.Cell(Complex,Stable)Stableandpredictableenvironment:manycomponentsarethereintheenvironment,componentsarenotsimilartooneanotherandremainbasicallythesame,andhighneedforsophisticatedknowledgeofcomponents.Cell(Complex,Dynamic)Dynamicandunpredictableenvironment:manycomponentsinenvironment,componentsarenotsimilartooneanotherandareincontinualprocessofchange,andhighneedforsophisticatedknowledgeofcomponentsModerateUncertaintyLeastUncertaintyMostUncertaintyModerateUncertaintyDegreeofChangeDynamicStableComplexSimpleFigure3-3EnvironmentChange,Complexity,andUncertaintyHowOrganizationsRespondtoTheirEnvironmentCansetaboundaryspannertoaccumulateinformationthroughcontactoutsideoftheorganization.Environmentscanningistheprocessofmonitoringtheenvironment.Establishinformationsummarizesystemanddeliverinformationinaformthatpertinenttoamanager’sneedsThroughStrategicresponsetomaintainthestatusquo,alteringthecurrentstrategy,oradoptinganewstrategy.Ifnecessary,firmscancombine,purchase,orformnewbusinesspartnershiporalliancewithanotherfirm.OrganizationcanincorporateflexibilityinitsstructuraldesigntoadapttoitsenvironmentalconditionAndalsocanchangethenatureofthecompetitiveconditionsinitsenvironmenttosuititsneeds.Throughpursuingneworchangedrelationshipwithsuppliers,customers,andregulatorscanaltertheorganization’senvironmentinawaythatfavorstheorganization.TheEnvironmentandOrganizationalEffectiveness

Systemsresourceapproach:AcquiringtheresourcesneededfromtheenvironmentInternalprocessesapproach:Combiningtheresourcesattainedfromenvironmentinanefficientandproductivemanner–focusesontransformationprocesses(productionefficiencies)Goalapproach:Facilitatestheattainmentoforganizationalgoals—focusesonoutputs

Strategicconstituenciesapproach:Satisfythestrategicconstituentsintheenvironment—focusesonfeedback(satisfyingstakeholders)Combinedapproach:tomakeiteasiertoacquirefutureresourcefromtheenvironment.OrganizationalEffectivenessrequiresthattheorganizationisdoagoodjobofprocuringresources,managingthemproperly,achievingitsgoals,andsatisfyingitsconstituencies.P.41-TheModelofOrganizationalEffectivenessLevelofInternationalBusinessActivityDomesticBusiness:theymostlyacquireallofitsresourcesandsellalloftheirproductsorserviceswithinasinglecountry.InternationalBusiness:theynormallybasedinasinglecountry,yetacquireameaningfulshareofitsresourcesand/orrevenuesfromothercountries.MultinationalCorporate(MNC):thebusinesshavetranscendednationalboundariesandbuysrawmaterials,finance,andmanufacturesandsellstheirproductsandservicesinaworld-widemarketplaceGlobalBusiness:thebusinessthathavetranscendednationalboundariesandarenotcommittedtoasinglehomecountryLevelofInternationalBusinessActivityLowestHighestDomesticBusinessInternationalBusinessMultinationalBusinessGlobalBusinessFigure3-3LevelofInternationalBusinessActivityOrganizations’GlobalPerspectiveEthnocentric:Istheparochialisticbeliefthatthebestworkapproachesandpracticesarethoseofthehomecountry;Polycentric:theattitudeviewthatthemanagersinthehostcountryknowthebestworkapproachesandpracticesforrunningtheirbusiness;Geocentric:isaworld-orientedviewthatfocusesonusingthebestapproachesandpeoplefromaroundtheglobeView:Figurev3-12onpage43OrganizationalDesignDifferencesThefollowingfactorsshouldbeconsidered:Thecomplexityoftheorganization;Authority,decisionmaking,evaluationandcontrolissuesaredifferent;Rewardsandpunishmentaredifferent;Identificationoftheorganizationdifference;Recruiting,Staffing,andDevelopmentofHR.TypesofGlobalOrganizationsTNC=TransnationalCorporationThebusinessthatmaintainssignificantoperationinmorethanonecountrysimultaneouslyanddecentralizesdecisionmakingineachoperationtothelocalcountryMNC=MultinationalCorporationThecorporatethathassignificantoperationsintwoormorecountriessimultaneouslybutmanagestheoperationsfromabasehomecountryTheInternationalEnvironmentforGlobalorganizationsEconomicsystemsmaydifferentPoliticalstructuresarevariableLegalcomplexitiesLocalcustomsandbeliefsEducationallevelsaredifferentManagementattitudesarevariableLanguagebarriersCulturaldifferencesTheStagesofGlobalizationStageIExportingIndirectExportingDirectExportingStageIIContractingHiringForeignAgenciesEstablishContractors/PartnersrelationshipLicensingandFranchisingStageIIIInvestingBuildingForeignsubsidiariesPurchasingandmergingDirectinvestmentViewpp45“howbusinessgoglobal”TheProsandConsofDifferentmethodsEnterintoForeignMarketImportingandExportingPros:(1)smallcashoutlay;(2)Lowrisks;(3)NoadaptationnecessaryonitsproductsCons:(1)Hightariffsandtaxes;(2)Highfreightcosts;(3)Governmentrestrictions/None-tariffsbarriers.2.LicensingandFranchisingPros:Increasedprofitability;Extendedprofitability;AvailableforinvestigationCons:InflexibilityNorightsonmanagementHelpscompetitors3.StrategicAllianceandJointVentureAdvantages:QuickmarketentryShareriskswithpartnersAccesstomaterialsandtechnologyEasytobeacceptedbyforeigncustomersDisadvantages:Maylosecorecompetition/technologySharedownershipLimitedcontrolonmanagementMayhelpforeigncompetitors4.DirectInvestmentAdvantages:EnhancedcontrolonoperatingandmanagementExistinginfrastructureRightstoreceiveanddistributetheprofitsDisadvantages:MostcomplexityLong-termtogetreturnsThehighestrisksGreateruncertaintyCha