CHAPTER 2:THE ORGANIZATION’S ENVIRONMENTS External Environment It is everything outside an organization’s boundaries that might affect it Two separate external environment are the General environment and task environment General Environment The set of broad dimensions and forces in an organization’s surroundings that determines its overall context Dimensions of the general environment 1. Economic Dimension 2. Technological Dimension 3. Political-Legal Dimension Economic Dimension It is the overall health and vitality of the economic system in which the organization operate Particularly important economic factors for business are general economic growth, inflation, interest rates, and unemployment Political-Legal Dimension consists of government regulation of business and the relationship between business and government the legal system partially defines what an organization can and cannot do pro- or anti-business sentiment in government influences business activity. political stability has ramifications for planning Task Environment Specific organizations or groups that affect the organization it provides useful information more readily than the general environment because the manager can identify environmental factors of specific interest to the organization, rather than deal with the more abstract dimensions of the general environment Includes: Competitors o An organization that competes with other organization for resources Customers o Whoever pays money to acquire an organization’s products or services Supplier o Organizations that provide resources for other organizations Technological Dimension It is made up of the methods available for converting resources into products or services Although technology is applied within the organization, the forms and availability of that technology come from the general environment Regulator Agency o Regulators created by the government to protect the public from certain business practices or to protect organizations from one another Interest Group o A group organized by its members to attempt to influence organizations Regulator o Elements of the task environment that have the potential to control, legislate, or otherwise influence an organization’s policies and practices Strategic Partners o Also called strategic allies o An organization working together with one or more other organizations in a joint venture or similar arrangement Board of Directors o a governing body that is elected by the stockholders and charged with overseeing a firm’s general management to ensure that it is run to best serve the stockholders’ interests Employees Physical Work environment The Ethical and Social Environment of Management Ethics An individual’s personal beliefs about whether a behavior, action, or decision is right or wrong Likewise, what constitutes ethical behavior varies from one person to another Ethical Behavior Behavior that conforms to generally accepted social norms Unethical Behavior Behavior that does not conform to generally accepted social norms Managerial Ethics Internal Environment The conditions and forces within an organization Includes the: Owners o Whoever can claim property rights or legal property to an organization Consists of the standards of behavior that guide individual managers in their work Managing Ethical Behavior any effort to enhance ethical behavior must begin with top management Code of Ethics A formal, written statement of the values and ethical standards that guide a firm’s action Sarbanes-Oxley Act of 2002 A law that requires CEOs and CFOs to vouch personally for the truthfulness and fairness of their firms’ financial disclosures imposes tough new measures to deter and punish corporate and accounting fraud and corruption Managing Social Responsibility Has both formal and informal dimensions of managing social responsibility Formal Organizational Dimensions Formal and planned activities on the part of the organization Includes Legal Compliance o Extent to which the organization conforms to local, state, federal, and international laws Social Responsibility in Organizations o The task of managing legal compliance is generally assigned to the appropriate functional managers Social Responsibility The set of obligations that an organization has to protect and enhance the societal context in which it functions Ethical Compliance o the extent to which the organization’s members follow basic ethical (and legal) standards of behavior Philanthropic Giving o Awarding funds or gifts to charities or other worthy causes Informal Organizational Dimensions Leadership, organizational culture, and how the organization responds to whistle-blowers all help shape and define people’s perceptions of the organization’s stance on social responsibility Whistle-blowing The disclosure, by an employee, of illegal or unethical conduct on the part of others within the organization Strategic Alliance A cooperative arrangement between two or more firms for mutual gain Joint Venture A special type of strategic alliance in The International Environment of Management which the partners share in the ownership of an operation on an equity basis Direct Investment When a firm builds or purchases operating facilities or subsidiaries in a different country from the one where it has its headquarters Tariff A tax collected on goods shipped across national boundaries Import tariffs, which are the most common, can be levied to protect domestic companies by increasing the cost of foreign goods Quotas Exporting Making a product in the firm’s domestic marketplace and selling it in another country Importing is bringing a good, service, or capital into the home country from abroad Limit on the number or value of goods that can be traced the most common form of trade restriction The quota amount is typically designed to ensure that domestic competitors will be able to maintain a certain market share Export Restraint Agreements Licensing An arrangement whereby one company allows another company to use its brand name, trademark, technology, patent, copyright, or other assets in exchange for a royalty based on sales Accords reached by governments in which countries voluntarily limit the volume or value of goods they export to or import from one another Economic Communities A set of countries that agree to markedly reduce or eliminate trade barriers among member nations (a formalized market system) European Union (EU) The first and most important international market system North American Free Trade Agreement (NAFTA) An agreement among the United States, Canada, and Mexico to promote trade with one another General Agreement on Tariffs and Trade (GATT) A trade agreement intended to promote international trade by reducing trade barriers and making it easier for all nations to compete in international markets Most Favored Nation Principle This provision stipulates that if a country extends preferential treatment to any other nation that has signed the agreement, then that preferential treatment must be extended to all signatories to the agreement World Trade Organization An organization, which currently includes 140 member nations and 32 observer countries, that requires members to open their markets to international trade and to follow WTO rules Goals of the World Trade Organization 1. To promote trade flows by encouraging nations to adopt nondiscriminatory and predictable trade policies 2. To reduce remaining trade barriers through multilateral negotiations 3. To establish impartial procedures for resolving trade disputes among its members The Organization’s Culture It is the set of values, beliefs, behaviors, customs, and attitudes that helps the organization’s members understand what it stands for, how it does things, and what it considers important Culture determines the organization’s “feel.” Its starting point is often the organization’s founder Managers must walk a fine line, however, between maintaining a culture that still works effectively and changing a culture that has become dysfunctional Culture problems sometimes arise from mergers or the growth of rival factions within an organization.