INTRODUCTION TO MANAGEMENT
LECTURE #3
The Environment of Management
Source: Daft, R. (2005). Management. 7th ed. Thomson, South-western
OBJECTIVES
1. Differentiate between the External and Internal environments; the General and Task
Environment, and describe the dimensions of each.
2. Define Corporate Culture.
3. Explain the use of Symbols, Stories, Heroes, Slogans and Ceremonies and their importance to
management and Corporate Culture.
4. Distinguish between different types of Culture.
The Organization Environment
 The organization environment consists of all elements existing outside the organization’s
boundaries that have the potential to affect the organization
 It does not include those events so far removed from the organization that their impact is not
perceived
Dimensions of the Organization Environment
There are three layers:
 Internal
 Task
 General
Diagram Of The Organizational Environment
General
Environment
Technological
Labor Market
Task Environment
Competitors
Customers
Management
Suppliers
Internal
Environment
The Internal Environment
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 The Internal Environment includes the elements within the organization’s boundaries. It is
composed of:
 Current employees
 Management
 Corporate culture, which defines employee behaviour and how well the organization will
adapt to the external environment
 The components of the environment are inter-related. They form an open system, whereby the
organization draws resources from the external environment and releases goods and services
back to it.
The External Environment
The Task Environment is that layer that is closer to the organization and includes the sectors that
conduct day-to-day transactions with the organization and directly influence its basic operations and
performance. It consists of:
 Competitors
 Suppliers
 Customers
 Labour Market
The GENERAL ENVIRONMENT
The General Environment is the outer layer that is widely dispersed and affects organizations indirectly.
 These dimensions influence the organization over time, but often are not involved in day-to-day
transactions with it. They are factors that influence all organizations more or less equally:
 International
 Technological
 Socio-cultural
 Economic
 Legal-political
The International Environment
 This dimension :
 represents events originating in foreign countries as well as opportunities for local
companies in foreign countries.
 Represents a context that influences all other aspects of the external environment.
 Provides new competitors; customers and suppliers
 Shapes social, technological and economic trends
 When a domestic firm has saturated the local market, the most natural direction for growth is
overseas.
 All the factors in the environment that affect the local market, will also influence the
international market, plus more
The Technological Environment
 The technological environment includes scientific and technological advancements in a specific
industry as well as in society at large.
 Technological advancements that make the Internet accessible to nearly everyone have changed
the nature of competition and of organizations’ relationships to customers.
 Many companies are adopting sophisticated e-business methods that use private networks or
the Internet to handle practically all their operations.
The Socio-cultural Environment
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Represents the demographic characteristics as well as the norms, customs and values of the general
population.
Important socio-cultural characteristics are:
 Geographical distribution
 Population density
 Age
 Education levels
Today’s demographic profiles are the foundation for tomorrow’s workforce and consumers.
The Economic Environment
 The economic environment represents the general economic health of the country or region in
which the organization operates.
 Consumer purchasing power, the unemployment rate, and interest rates are part of an
organization’s economic environment.
 Because organizations today are operating in a global environment, the economic dimension
has become exceedingly complex and creates enormous uncertainty for managers.
 One significant recent trend in the economic environment is the frequency of mergers and
acquisitions.
o
o The legal/political environment includes government regulations at the local, state and
parliamentary (U.S. Federal) levels, as well as the political activities designed to influence
company behaviour.
o Managers must recognize a variety of pressure groups that work within the legal-political
framework to influence companies to behave in socially responsible ways. For e.g.
 Automobile manufacturers
 Toy makers
 Airlines
 Tobacco companies
The TASK ENVIRONMENT
Customers – people and organizations in the environment who acquire goods and services from the
organization.
Competitors – other organizations in the same industry or type of business that provide goods or
services to the same set of customers
Suppliers – people and organizations who provide the raw materials the organization uses to produce its
output.
Labour Market – the people available for hire by the organization.
The Labour Market
Labour market forces affecting organizations right now include:
1) The growing need for computer-literate information technology workers
2) The necessity for continuous investment in human resources through recruitment,
education and training to meet the competitive demands of the borderless world
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3) The effects of international trading blocs, automation, outsourcing and shifting facility
location upon labour dislocations, creating unused labour pools in some areas and
labour shortages in others.
CORPORATE CULTURE
The internal environment within which managers work includes:
 Corporate culture
 Production technology
 Organization structure
 Physical facilities
Of these, CORPORATE CULTURE has emerged as extremely important to competitive advantage.
Corporate Culture
The internal culture must fit the needs of the external environment and company strategy.
When this fit occurs, highly committed employees create a high-performance organization that is tough
to beat
Organization Culture is defined as the set of key values, beliefs, understandings, and norms shared by
members of an organization.
The concept of culture helps managers understand hidden, complex aspects of organizational life.
Corporate Culture
DEFINITION: Culture is a pattern of shared values and assumptions about how things are done within
the organization.
 Culture can be analyzed at three levels:
 At the surface level are visual artifacts – dress code, patterns of behaviour, physical symbols
organization members use to represent them. Stories, language, symbols, organizational
ceremonies and office layout are examples. They are things that are seen, heard and observed
by employees of the organization.
 At a deeper level, are expressed values and beliefs, which are not observed but can be
discerned from how people explain and justify what they do. These are values that members of
the organization hold at a conscious level.
 Some values are so deeply embedded in a culture that members are no longer consciously
aware of them. These basic, underlying assumptions and beliefs are the essence of culture and
subconsciously guide behaviour and decisions.
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Levels of Corporate Culture
Culture that can
be seen at the
surface level
Visible
1. Artifacts, such as
dress, office
layout,
symbols,
slogans, ceremonies
Invisible
2. Expressed values, such as “The
Penney Idea” or “JMMB, your
goals full-stop”.
3. Underlying assumptions and deep
beliefs, such as “people here care
about one another like a family”.
Deeper values
and shared
understanding
s held by
organization
members
Elements of Corporate Culture
 The fundamental values that characterize an organization’s culture can be understood
through the visible manifestations of Symbols, Stories, Heroes, Slogans and Ceremonies.




Symbols – an object, act or event that conveys meaning to others.
Stories – a narrative based on true events that is repeated frequently and shared among
organizational employees.
Hero – a figure who exemplifies the deeds, character and attributes of a strong corporate
culture. Heroes are role models for employees to follow. The deeds of heroes are out of
the ordinary, but not so far out as to be unattainable by other employees.
Slogans – a phrase or sentence that succinctly expresses a key corporate value. Many
companies use a slogan or saying to convey special meaning to employees.
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
Ceremonies – a ceremony is a planned activity that makes up a special event and is
conducted for the benefit of an audience. Managers hold ceremonies to provide dramatic
examples of company values.
ADAPTIVE CULTURES
Adaptive Cultures – research has shown that there is a critical relationship between corporate culture
and the external environment.
The study found that a strong corporate culture alone did not ensure business success unless the culture
encouraged healthy adaptation to the external environment.
Adaptive corporate cultures have different values and behaviour than unadaptive orporate cultures.
Adaptive and Unadaptive cultures
 In adaptive cultures managers are concerned about customers and those internal people and
processes that bring about useful change.
 In the unadaptive corporate cultures, managers are concerned about themselves, and their
values tend to discourage risk taking and change.
 Thus a strong culture alone is not enough, because an unhealthy culture may encourage the
organization to march resolutely in the wrong direction. Healthy cultures help companies adapt
to the environment.
TYPES OF CULTURE
 Adaptability Culture – defined as a culture characterized by values that support the company’s
ability to interpret and translate signals from the environment into new behaviour responses.
It emerges in an environment that requires fast response and high-risk decision-making.
Managers encourage values that support the company’s ability to rapidly detect, interpret, and
translate signals from the environment into new behaviour responses. Employees have
autonomy to make decisions and act freely to meet new needs, and responsiveness to
customers is highly valued. Managers also actively create change by encouraging and rewarding
creativity, experimentation, and risk taking.
 Achievement Culture – defined as a results-oriented culture that values competitiveness,
personal initiative, and achievement. It is suited to organizations that are concerned with
serving specific customers in the external environment but without the intense need for
flexibility and rapid change. This is a results-oriented culture that values competitiveness,
aggressiveness, personal initiative, and willingness to work long and hard to achieve results.
There is emphasis on winning and achieving specific ambitious goals is the glue that holds the
organization together.
 Involvement Culture - defined as a culture that places high value on meeting the needs of
employees and values cooperation and equality. It has an internal focus on the involvement
and participation of employees to rapidly meet changing needs from the environment. This
culture places high value on meeting the needs of employees, and the organization may be
characterized by a caring, family-like atmosphere. Managers emphasize values such as
cooperation, consideration of both employees and customers, and avoiding status differences.
 Consistency Culture – defined as a culture that values and rewards a methodical, rational,
orderly way of doing things. Has an internal focus and a consistency orientation for a stable
environment. Following the rules and being thrifty are valued, and the culture supports and
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rewards a methodical, rational, orderly way of doing things. In today’s fast-changing world, few
companies operate in a stable environment, and most managers are shifting toward cultures
that are more flexible and in tune with changes in the environment.
END OF NOTES
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