Management
Second Canadian Edition
Chuck Williams
Alex Z. Kondra
Conor Vibert
Slides Prepared by:
Kerry Rempel, Okanagan College
©2008 by Nelson, a division of Thomson Canada Limited
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Chapter 2
Organizational Environments
and Cultures
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What Would You Do?
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Tim Hortons is an icon of Canadian fast
food
Public focus on the problem of obesity,
healthy eating, and carb-reduced diets
Increase in competition from the south
with Krispy Kreme entering the market
What Would You Do?
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Learning Objectives:
External Environments
After reading the next four sections, you should
be able to:
1. discuss how changing environments affect
organizations
2. describe the four components of the general
environment
3. explain the five components of the specific
environment
4. describe the process that companies use to make
sense of their changing environments
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Changing Environments
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Environmental
complexity and
munificence
Environmental
change
Uncertainty
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Environmental Change
The rate at which a company’s
general and specific
environments change
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stable environments
dynamic environments
Punctuated equilibrium theory
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Companies cycle through stable and
dynamic environments
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Environmental Complexity
and Munificence
Environmental complexity
 The number of external factors in the
environment that affect organizations
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Simple environments
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have few environmental factors
Complex environments
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have many environmental factors
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Environmental Munificence
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The degree to which an organization’s
environment has an abundance or
scarcity of critical organizational
resources
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Environmental Change,
Complexity, and Munificence
Exhibit 2.1
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Uncertainty

How well managers can
understand or predict the
external changes and trends
affecting their businesses
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General Environment
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Economy
Technological Component
Sociocultural Component
Political/Legal Component
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General and Specific
Environments
Exhibit 2.2
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Economy
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Growing versus shrinking economies
Future economic activity is difficult to
predict
Business confidence indices
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managers’ confidence in the growth of the
economy
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Technological Component
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Technology is the knowledge, tools, and
techniques used to transform inputs
(raw materials, information, etc.) into
outputs (products and services)
Technological changes can benefit or
threaten businesses
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Sociocultural Component
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Refers to the demographic
characteristics and general behaviour,
attitudes and beliefs of people in a
particular society
Two important components
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Demographic changes
Changes in behaviour, attitudes, and beliefs
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Political/Legal Component
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Includes the legislation, regulation, and
court decisions that govern and
regulate business behaviour
Managers must be aware of relevant
laws and regulations
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Education is a key component
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Specific Environment
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Customer Component
Competitor Component
Supplier Component
Industry Regulation Component
Advocacy Groups
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Customer Component
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Companies cannot exist without
customers
Managers must monitor customer wants
and needs
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reactive
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responding after the fact
proactive
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anticipating problems
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Competitor Component
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Companies in the same industry that
sell similar products or services to
customers
Competitive analysis
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deciding who your competitors are
anticipating competitors’ moves
determining competitors’ strengths and
weaknesses
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Supplier Component
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Companies that provide material,
human, financial, and informational
resources to other companies
Supplier & buyer dependence
Opportunistic vs. relationship behaviour
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Industry Regulation
Component
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Consists of regulations and rules that
govern the business practices and
procedures of specific industries,
businesses, and professions
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Advocacy Groups
Groups of concerned citizens who band
together to try to influence the business
practices of specific industries,
businesses, and professions.
Influence techniques:
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public communications
media advocacy
product boycott
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Making Sense of Changing
Environments
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Environmental scanning
Interpreting environmental factors
Acting on threats and opportunities
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Environmental Scanning
Searching the environment for important
events or issues that might affect an
organization.
Scanning:
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Stay up to date on important factors in
their industry
reduces uncertainty
alters organizational strategies
contributes to organizational performance
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Interpreting
Environmental Factors
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Managers determine what
environmental events and issues mean
to the organization
Opportunities versus threats
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Acting on Threats
and Opportunities
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Managers have to decide how to
respond to these environmental factors
Cognitive maps
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simplified models of external environments
depicts how managers believe
environmental factors relate to possible
organizational actions
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Cognitive Maps
Exhibit 2.4
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Learning Objectives:
Internal Environments
After reading the next section, you
should be able to:
5. explain how organizational cultures are
created and how they can help
companies be successful
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Organizational Cultures:
Creation, Success, and Change
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Creation and maintenance of
organizational cultures
Successful organizational cultures
Changing organizational cultures
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Creation and Maintenance
of Organizational Cultures
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Visible artifacts
Company founders help create culture
Cultures are maintained through:
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stories
organizational heroes
rituals, ceremonies, and symbols
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Successful Organizational
Cultures
Exhibit 2.5
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Changing
Organizational Cultures
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Behavioural addition
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Behavioural substitution
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is the process of having managers and employees
perform a new behaviour
is having managers and employees perform a new
behaviour in place of another behaviour
Change visible artifacts
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Such as the office design and layout, company
dress codes, etc.
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What Really Happened?
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Tim Hortons has gradually made
changes to its menu and advertising.
Krispy Kreme was unable to successfully
penetrate the Canadian market and has
not evolved into a significant threat.
Tim Hortons has begun its expansion
into the US market.
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