Chapter 2: Organizational Environments and Cultures
Pedagogy Map
This chapter begins with the learning outcome summaries and terms covered in the chapter,
followed by a set of lesson plans for you to use to deliver the content in Chapter 2.
 Learning Outcomes on page 24.
 Terms on page 25.
 Lesson Plan for Lecture (for large sections) on page 25.
 Lesson Plan for Group Work (for smaller classes) on page 27.
 Lesson Plan for Biz Flix (video) on page 29
 Lesson Plan for Management Workplace (video) on page 30.
Assignment Teaching Tips and Solutions begin on page 32.
Additional Materials begin on page 39.
 Review Questions
 Additional Assignments and Internet Activities
Highlighted Assignments
What Would You Do?
What Really Works
Management Team Decision
Practice Being a Manager
(Experiential Exercise)
Self-Assessment
Take Two – Biz Flix
Take Two – Management Workplace
Additional Assignments
Management Decision
Develop Your Career Potential
Supplemental Resources
Course Assessments
PowerPoint slides with lecture notes
PowerPoint slides with video and
notes
Test Bank
Key Points
Sirius XM is competing with new personal music devices,
like the iPod, HD radio, Internet radio, and in-car DVD
players. Sirius XM investigates strategies to remain unique
and successful relative to its new competitors (including the
iPod).
None in this chapter.
The team must decide whether to continue allowing
employees to bring pets to work, or change its policy and
prohibit animals in the workplace.
Students will learn about the importance of organizational
cultures through this exercise in cultural affinities as they
influence investment choices for a music recording label.
Students gain insights into their own tolerance for ambiguity
(or lack thereof).
A clip from Brazil parodies the strictures of a formal work
environment.
Lonely Planet, publisher of guides for adventure travelers,
has a culture that inspires its employees to think up reference
books for new and exciting destinations.
Key Points
Students do an environmental scan for Cedar Point, the
amusement park in Sandusky, Ohio.
Dealing with the press is an important skill for managers to
have. Students are confronted with a reporter doing a story
on unsanitary conditions in a fast-food restaurant.
Where to Find Them
IRCD
IRCD and online
IRCD
IRCD for ExamView and Word; and online for Word only
Chapter 2: Organizational Environments and Cultures
23
Learning Outcomes
1
Discuss how changing environments affect organizations.
Environmental change, complexity, and resource scarcity are the basic components of external
environments. Environmental change is the rate at which conditions or events affecting a business change.
Environmental complexity is the number of external factors in an external environment. Resource scarcity
is the scarcity or abundance of resources available in the external environment. The greater the rate of
environmental change, environmental complexity, and resource scarcity, the less confident managers are
that they can understand, predict, and effectively react to the trends affecting their businesses. According
to punctuated equilibrium theory, companies experience periods of stability followed by short periods of
dynamic, fundamental change, followed by a return to periods of stability.
2
Describe the four components of the general environment.
The general environment consists of events and trends that affect all organizations. Because the economy
influences basic business decisions, managers often use economic statistics and business confidence
indices to predict future economic activity. Changes in technology, which transforms inputs into outputs,
can be a benefit or a threat to a business. Sociocultural trends, like changing demographic characteristics,
affect how companies run their businesses. Similarly, sociocultural changes in behavior, attitudes, and
beliefs affect the demand for a business’s products and services. Court decisions and new federal and
state laws have imposed much greater political/legal responsibilities on companies. The best way to
manage legal responsibilities is to educate managers and employees about laws and regulations and
potential lawsuits that could affect a business.
3
Explain the five components of the specific environment.
The specific environment is made up of the five components shown here. Companies can monitor
customers’ needs by identifying customer problems after they occur or by anticipating problems before
they occur. Because they tend to focus on well-known competitors, managers often underestimate their
competition or do a poor job of identifying future competitors. Suppliers and buyers are very dependent
on each other, and that dependence sometimes leads to opportunistic behavior, in which one benefits at
the expense of the other. Regulatory agencies affect businesses by creating rules and then enforcing them.
Advocacy groups cannot regulate organizations’ practices. Nevertheless, through public communications,
media advocacy, and product boycotts, they try to convince companies to change their practices.
4
Describe the process that companies use to make sense of their changing environments.
Managers use a three-step process to make sense of external environments: environmental scanning,
interpreting information, and acting on it. Managers scan their environments based on their organizational
strategies, their need for up-to-date information, and their need to reduce uncertainty.
When managers identify environmental events as threats, they take steps to protect the company from
harm. When managers identify environmental events as opportunities, they formulate alternatives for
taking advantage of them to improve company performance. Using cognitive maps can help managers
visually summarize the relationships between environmental factors and the actions they might take to
deal with them.
24
Chapter 2: Organizational Environments and Cultures
5
Explain how organizational cultures are created and how they can help companies be
successful.
Organizational culture is the set of key values, beliefs, and attitudes shared by organizational members.
Organizational cultures are often created by company founders and then sustained through the telling of
organizational stories and the celebration of organizational heroes. Adaptable cultures that promote
employee involvement, make clear the organization’s strategic purpose and direction, and actively define
and teach organizational values and beliefs can help companies achieve higher sales growth, return on
assets, profits, quality, and employee satisfaction. Organizational cultures exist on three levels: the
surface level, where cultural artifacts and behaviors can be observed; just below the surface, where values
and beliefs are expressed; and deep below the surface, where unconsciously held assumptions and beliefs
exist. Managers can begin to change company cultures by focusing on the top two levels and by using
behavioral substitution and behavioral addition, changing visible artifacts, and selecting job applicants
with values and beliefs consistent with the desired company culture.
Terms
advocacy groups
behavioral addition
behavioral substitution
business confidence indices
buyer dependence
company vision
competitive analysis
competitors
complex environments
consistent organizational
cultures
dynamic environment
environmental change
environmental complexity
environmental scanning
external environments
general environment
industry regulation
internal environment
media advocacy
opportunistic behavior
organizational culture
organizational heroes
public communications
punctuated equilibrium theory
relationship behavior
resource scarcity
simple environment
specific environment
stable environments
supplier dependence
suppliers
technology
organizational stories
product boycott
uncertainty
visible artifacts
Lesson Plan for Lecture
Pre-Class Prep for You
 Review chapter and determine what points to
cover.
 Bring PPT slides.
Warm Up
Pre-Class Prep for Your Students
 Bring book.
Begin chapter 2 by asking students:
“How would you describe the business environment?” (If you have a blackboard, begin
to write their ideas on it so that a composite picture can be derived.)
Depending on their responses, you may need to rephrase the question into something
along these lines:
“What does a manager need to think about when doing business?”
Chapter 2: Organizational Environments and Cultures
25
or
“What forces determine how a company conducts its business?”
Content
Delivery
Lecture slides: Make note of where you stop so you can pick up at the next class
meeting. Slides have teaching notes on them to help you as you lecture.
Topics
EXTERNAL
ENVIRONMENTS
1 Changing
Environments
1.1 Environmental
Change
1.2 Environmental
Complexity
1.3 Resource Scarcity
1.4 Uncertainty
26
PowerPoint Slides
Activities
1: Organizational
Environ. & Cultures
2: What Would You Do?
3: External Environ.
4: Changing Environ.
5: Environ. Change
6: Punctuated
Equilibrium Theory
7: Environ. Complexity
8: Resource Scarcity
9: Uncertainty
2
General Environment
2.1 Economy
2.2 Technology
2.3 Sociocultural
2.4 Political Legal
10: General
Environment
11:External Environ.
12: Economy
13: Tech. Component
14: Sociocultural
15: Demographic Ex.
16: Political/Legal
3
Specific Environment
3.1 Customer
3.2 Competitor
3.3 Supplier
3.4 Industry
Regulation
3.5 Advocacy Group
17: Specific Environ.
18: Customer
19: Competitor
20: Supplier
21: Supplier
Dependence
22: Industry Regulation
23: Fed’l Regulatory
Agencies
24: Cost of Compliance
25: Doing the Right
Thing
26: Advocacy Groups
27: Advocacy Groups
Have students discuss how
each component of the
specific environment might
affect Wendy’s. Then select
companies in different
industries and have students
repeat the exercise. This will
give them an idea of the
variability of specific
environments.
4
Making Sense of
Changing
Environments
4.1 Environmental
Scanning
4.2 Interpreting
Environmental
Factors
4.3 Acting on Threats
& Opportunities
28: Changing Environ.
29: Environ. Scanning
30: Interpreting Environ.
Factors
Explain the three-step
process of “making sense of
changing environments.”
Chapter 2: Organizational Environments and Cultures
INTERNAL
ENVIRONMENT
5 Organizational
Cultures: Creation,
Success, and Change
5.1 Creation and
Maintenance
5.2 Successful
Cultures
5.3 Changing
Organizational
Cultures
31: Internal
Environment
32: Organizational
Cultures
33: Internal
Environment
34: Biz Flix : Brazil
35: Creation and
Maintenance of Org.
Culture
36: Successful Org.
Cultures
37:Levels of Org.
Culture
38: Changing Org.
Cultures
Define organizational
cultures.
Before discussing
maintenance, ask students to
describe the culture of the
places where they work (or
have worked). After
discussing heroes and stories,
ask if they can relate these
definitions to their
organization’s culture.
Adjust lecture to include the activities in the right column. *Some activities should be
done before introducing the concept, some after.
Special
Items
Use the Self-Assessment as a conclusion for the class. It will take approximately 12
minutes to complete: Allow students 5 minutes to do the actual inventory on page 49 of
their book. Allow yourself 6-7 minutes to have students raise their hands to indicate
their scores. Plug the numbers into the Excel spreadsheet embedded in the SelfAssessment PowerPoint slide for this chapter. Produce the distribution and push students
to think of what their scores mean in terms of how students feel about changing external
environments. Additional teaching notes for using the Self-Assessment appear on page
34.
Conclusion
and
Preview
Assignments:
1. Tell students to be ready at the next class to answer questions regarding the
Management Team Decision “Dog Day Blues”
2. If you have finished covering Chapter 2, assign students to review Chapter 2 and
read the next chapter on your syllabus.
Remind students about any upcoming events.
Lesson Plan for Group Work
Pre-Class Prep for You
 Review material to cover and modify
the lesson plan to meet your needs.
 Set up the classroom so that small
groups of 4-5 students can sit together.
Warm Up
Pre-Class Prep for Your Students
Bring book.
Begin Chapter 2 by asking students to describe the business environment.
If you have a blackboard, begin to write their ideas on it so that a composite picture can be
derived. Depending on their responses, you may need to rephrase the question into
Chapter 2: Organizational Environments and Cultures
27
something along these lines:
“What does a manager need to think about when doing business?”
or
“What forces determine how a company conducts its business?”
Content
Delivery
Lecture on Changing Environments (Section 1)
Break for group activity:
“Changing Environments”
Divide the class into small groups of 4 to 5 students.
Have each group propose one to two industries that operate in each of the following
environments: stable, dynamic, simple, and complex. Students will need to justify
their choices.
Have groups share their ideas with the whole class. Keep in mind that students may
be way off base. The important thing is to push them to think about what makes an
environment stable, dynamic, simple, or complex. They will probably be able to
identify numerous examples of “dynamic” but may struggle with the others.
Before lecturing on the next section, refer to the composite of the business environment
that students built at the beginning of the class session. Use it to segue into your lecture on
General Environment and Specific Environment (Sections 2 and 3)
Break for the following activity:
“General and Specific Environment.”
Put the class back into small groups. Ask if any have ever worked at an amusement
park. Ask students how uncertain they think the amusement industry is.
Handout supplement Management Decision “Environmental Roller Coaster.” Give
students 3 minutes to read it.
Tell students to concentrate on question 2 with an eye toward question 3. They will
need to identify the environmental factors that most influence the amusement industry
and how.
Create an overall picture of the amusement park industry by writing groups’ results on
the board. Then, as a class, answer question 3, or “How uncertain is the amusement
park industry?” When students propose answers, make sure they explain their
reasoning.
Ask students, “How can managers manage in the face of ever-changing external
environments?”
Lecture on Making Sense of Changing Environments (Section 4)
Break for the following activity:
“Crisis Management”
Divide the class into even-numbered groups of students. Further divide each group
evenly in to two subgroups: managers and reporters. Give students at most 3 minutes to
review the Develop Your Career Potential exercise on “Dealing with the Press.” When
the 3 minutes is up, have the reporters begin quizzing the mangers using the questions in
the exercise. When the exercise is over, ask students if they can think of some general
guidelines to follow when dealing with the press. Further teaching notes for this
exercise are below.
Segue into presenting the content on Internal Environments
(Section 5)
28
Chapter 2: Organizational Environments and Cultures
Special
Items
Use the Self-Assessment as a conclusion for the class. It will take approximately 12
minutes to complete: Allow students 5 minutes to do the actual inventory on page 49 of
their book. Allow yourself 6-7 minutes to have students raise their hands to indicate their
scores. Plug the numbers into the Excel spreadsheet embedded in the Self-Assessment
PowerPoint slide for this chapter. Produce the distribution and push students to think of
what their scores mean in terms of how students feel about changing external
environments. Additional teaching notes begin on page 34.
Conclusion Assignments:
Have students work as individuals or as groups to complete the Management Team
and
Decision “Dog Day Blues” about the effects of change on corporate cultures. You can also
Preview
ask students to identify ways that the external environment will potentially affect the
culture of the company in the case, MicroTek.
If you have finished covering Chapter 2, assign students to review Chapter 2 and read the
next chapter on your syllabus.
Remind students about any upcoming events.
Additional activity
Out-of-Class Activity: “Environmental Scanning.” Have students research the most recent annual
report of a well-known company and list all the factors in the external environment that have affected the
company. Students should focus on both the general and specific environments. Inform students that
most companies post their annual reports online in the “Investor Relations” section of their Web pages.
Require either a few paragraphs explaining what they found, or an oral summary a few-sentences long at
the beginning of the next class session.
Video Lesson Plan – Biz Flix
Because they are so short, the Biz Flix videos are best used to supplement another style lesson plan. They
are designed to illustrate the content rather than convey all the chapter concepts.
Segment Summary: Brazil
Set somewhere in the twentieth century, the retro-futuristic world of Brazil is a gritty, urban cesspool
patched over with cosmetic surgery and “designer ducts for your discriminating taste.” Automation
pervades every facet of life from the toaster and coffee machine to doorways, but paperwork, inefficiency,
and mechanical failures are the rule. Brazil stars Jonathan Pryce in the role of Sam, a low-level bureaucrat
whose primary interests in life are his vivid dream fantasies to the tune of “Brazil,” a 1940s big-band hit.
In this scene, Sam is starting a new job and is being assigned an office and employee identification
number. A cadre of executives swarms around the boss, who marches majestically through the drably
uniform office hallway barking out decisions to his “crack decision makers.”
Pre-Class Prep for You:
Pre-Class Prep for Your Students:




Preview the clip from Brazil.
Determine how you want to show the video.
The clip can be launched from PowerPoint
slide 34 in Chapter 2, or from the DVD that
goes with the book.
Make sure you have all of the equipment
needed to show the video to the class.
Chapter 2: Organizational Environments and Cultures
Bring book.
29
Warm Up
Review sections on organizational culture and Exhibit 2.4 on the three levels of
organizational culture.
Poll the class to see who has seen the movie Brazil. Ask a student who has seen it to
give a brief summary to the class. Consider asking students who have seen it to predict
which scene they think you will show. If no one has seen the movie, provide students a
context by reading them (or paraphrasing) the segment summary above.
View
While watching the clip, instruct students make a quick list of the elements of the clip
that correspond to the different levels of organizational culture.
Have students call out the elements they saw and the level of organizational culture those
elements represent. Challenge students to explain their reasoning.
Show the clip one last time. *Showing the clip 2 times enables students to understand
the action in the clip and how it relates to the chapter content.
Follow Up
Ask students, “So how easy do you think it would be to change this culture? Why so?”
Follow up by asking, “What kind of environment do you think this company operates in?
Why?”
Be sure to push students to explain their answers. They will probably give correct
answers intuitively, but pushing them to explain how they know forces them to “show
their work.”
Video Lesson Plan – Management Workplace
Management Workplace videos can support several in-class uses. In most cases you can build an entire
50-minute class around them. Alternatively, they can provide a springboard into a group lesson plan.
The Chapter 2 clip on Lonely Planet is 11:30 minutes long. Below are several activities from which you
can choose to teach the chapter’s concepts through the video.
Pre-Class Prep for You:




Preview segment on Lonely Planet. Topics covered
are learning outcomes 1, 2, 3, and 5.
Review lesson plan.
Make sure you have all of the equipment needed to
show the video to the class, including the DVD and a
way to project the video.
If possible, have dry-erase board or chalk board to
categorize student’s lists during discussion.
Intro
Warm Up
30
Pre-Class Prep for Your
Students:
 Bring book.
 Complete reading of Chapter 2
prior to class.
(Section 1.1) External environments are the forces and events outside a company
that have the potential to influence or affect it. Briefly review stable and dynamic
environment rate of change. Discuss general factors that may have contributed to
the Airline industry profit and loss graph.
The video today is on Lonely Planet, a global travel guide company. (Section 2)
Consider factors and issues that could influence business and write one example
Chapter 2: Organizational Environments and Cultures
and a brief explanation for each General Environment component that may cause
dynamic, fundamental change for a travel guide publishing company. (2 minutes)
For example: Current Political trends may cause travel to foreign countries to
be dissuaded by our government or the government of the destination
countries which could affect the organizations plans to maintain or expand
travel publications.
Ask students to volunteer to share their answers.
While students are writing their responses, if you have access to a dry-erase board
or chalkboard, draw four columns on the board for each component: Economy,
Technology, Sociocultural, Political/legal. After writing for two minutes, have
students shout out trends and events they believe may affect business.
For example: Corporate downsizing, unemployment, gasoline prices, starting
a family.
Write student shout-outs in pertinent column on the board. Use examples only for
verbal discussion, not board work.
Once the list is final, move to video viewing section of plan
[Do not erase board until after viewing the video.]
View
The Lonely Planet clip is 11.5 minutes long.
(Section 5) Tell students that the video opens with brief comments from Lonely
Planet employees discussing the organizations culture. Instruct students to make
notes of the organizational cultures referred or alluded to in the video in terms of
Internal Environments.
 Creation and Maintenance of Organizational Cultures
Ex. Owners started company out of love for travel.
 Successful Organizational Cultures
Ex. Employee creativity is strongly encouraged.
 Changing Organizational Cultures
Ex. No dress code is enforced.
Discuss the Internal Environments observed in the video. These are some
suggested questions you can pose. Does the environment foster success? Why or
not? Is this organization’s culture effective? Would this culture work in other
fortune 500 companies? Could the freedom granted to employees present
problems in the work environment? Explain.
Follow Up
(In Class)
with lecture
Have students refer to the lists created in the warm up exercise. Ask students to
consider factors mentioned in the video. Were Customer Components mentioned
in the video that are not included on the board? If so, add them to the lists on the
board.
(Section 3.1) The Customer Component is a Specific Environmental factor
discussed in the video. Explain the direct correlation between General
Environment factors and the Customer Component. Based on the video, did
Lonely Planet act in a reactive or proactive manner toward customers when
dealing with external issues and trends?
Follow Up
(After
Class) with
assignment
(Section 1.1) According to punctuated equilibrium theory, companies experience
periods of stability followed by short periods of dynamic, fundamental change,
followed by a return to periods of stability. Based on the video, would you
consider The Lonely Planet to be in a state of equilibrium, revolution, or new
equilibrium? Ask students to determine the success or failure of the organization
Chapter 2: Organizational Environments and Cultures
31
based on what they know about Lonely Planet’s external and internal
environments discussed in the video.
For example: I believe the company is in a period of revolution based on
environmental and economic factors. The company will be successful
because it is shifting focus to local weekend excursions, however, it will have
to downsize because the staff size is based on local and world travel
publications that is currently limited due to external environmental factors.
The internal environment of Lonely Planet will successfully maneuver
through this because management is scanning trends, being proactive and
considering strategic alternatives.
Assignment Teaching Tips and Solutions
What Really Happened? (Solution to “What Would You Do?” chapter-opening
case)
SIRIUS XM SATELLITE RADIO, INC.
In the case assignment for Chapter 2, you learned that Sirius XM Radio, Inc. was at a crossroads that
appeared to be precipitated by the market. The company has now merged, but started out as one of two
approved licensees to provide satellite radio in the United States. Although its subscribers now number
more than 18.5 million, Sirius XM is struggling to make a profit. The company is fighting against stiff
competition from portable MP3 devices (and the iPod) and other in car technologies. Let’s address the
questions posed in the case and find out what really happened.
How can Sirius XM compete in its current environment? What can Sirius XM do to be successful?
The general environment for radio had been relatively static for more than 50 years, but it has changed
dramatically since XM and Sirius first acquired their licenses in 1997 (before they merged). MP3 players,
iPods, free radio, free HD Radio programming, Internet radio, and in-car DVD players with plasma
screens simply did not exist in 1997. With the advent of these new mediums of delivery, the environment
had become substantially dynamic. In this particular dynamic environment, the technology changed after
the two companies had enormous investments in orbiting satellites and licenses to broadcast only via that
means. Reacting to the increased competition, XM and Sirius sought to differentiate themselves via bigname stars and exclusive broadcast arrangements with major sports leagues. While these deals were not
economically justified alone, the companies believed they would lead to increased subscribers, which
they appear to have indeed done.
Both companies stopped their efforts to sign these big-name stars and instead focused their efforts
on cost cutting and customer acquisition and away from content offering. After the merger, Sirius XM
offers substantial, exclusive sports radio stations, exclusive top name talk radio stations, and commercial
free stations. Their combined subscribers are over 18.5 million, and there is room for tremendous growth
in the car radio and in-home radio markets.
One approach to an environment that has changed is to reduce or eliminate the competition so
that costs can be reduced and—potentially—so that prices can be raised. Exploring this option pushed
XM to pursue a merger with its rival, Sirius. In July 2008, the companies announced that they had
finalized their agreement to merge their operations in a deal that valued each business equally. Because
they were the only two companies in this segment of the industry, the elimination of the escalating costs
for big-name stars, the combining of back-office operations, and the ability to focus their competitive
efforts on the new mediums were expected to lead to significant bottom-line improvements.
A merger of this kind, however, encountered some difficulties in the legal component of the
general environment. An antitrust provision in the 1997 licenses prohibited a merger between the two
32
Chapter 2: Organizational Environments and Cultures
operations, but the companies argued that the audio-entertainment market had broadened enough that
their merger should not be considered a monopoly. However, in the end, both the Federal
Communications Commission and the Department of Justice waived the provision, resulting in the new
company, Sirius XM Radio, Inc.
No business would exist without customers. But how can Sirius XM find customers willing to pay for
radio when there are so many alternatives, including free radio?
The customer component of a company’s specific environment plays a critical role in the company’s
success. All companies have the ability to “buy” customers. Indeed, most businesses buy customers
through numerous techniques, including coupons, sales, gifts, and frequent buyer cards. Virtually from
their initiation, XM and Sirius used the “shaver approach” to acquiring customers. Shaver companies
have traditionally attempted to attain most of their profit from the sales of razor blades. The companies
give away the shaver handles or sell them below cost in hopes that enough customers will buy the highly
profitable blades. In a similar fashion, the cell phone industry virtually gives away its basic phones; the
required two-year service contract earns the profits. This model works when the profit margins are
substantial (as with shaver blades) or the price of the monthly contract varies with use (as with cell
phones). Unfortunately, the shaver approach has not worked well for satellite radio, as the contracts allow
unlimited use for $12.95 a month. And although the radios cost less than an iPod, they still range from
$19.99 for bare-bones Sportscaster model to $169.99 for the Delphi model with tons of options. As
recently as 2005, a new customer costs XM more than $89 a year. A year’s subscription yields only $155
in revenue, and annual customer turnover is close to 50 percent. This means that the average annual
revenue for each customer is $155/2, or $78, and the expenses do not include any operational expenses.
Sirius XM radio made a substantial move to lower its customer-acquisition costs by focusing on two
areas. The first was to eliminate the practice of giving away radio receivers or selling them below cost.
Under the new plan, radio receivers would be sold only with a subscriber contract.
The second (and far more important) move has been to emphasize factory installations by the
major automobile companies. That is, prioritize selling to companies which themselves have a large
customer base. Both GM and Honda are original shareholders in the original XM Radio. Each has sharply
increased XM installations as original equipment. New-car customers traditionally get a free trial period,
and 54 percent become paid subscriptions. A direct result has been a sharp drop in XM’s customeracquisition costs from over $89 per subscriber to less than $70 in just one year. Achieving positive cash
flows is critical for the continuation of this as a business model.
Sources: “Stronger Signals for XM,” BusinessWeek Online, 27 February 2007; S. Sutel, “Sirius Posts Narrower 4Q Loss,”
BusinessWeek Online, 27 February 2007; P. Nussel “XM is Bullish about ’07 Car Installations,” Automotive News, 15 January
2007; S. Rosenbush, “New Conditions May Ease XM-Sirius Merger,” BusinessWeek Online, 28 February 2007; S. McBride, D.
Berman, & A. Schatz, “Sirius and XM Agree to Merge, Despite Hurdles,” Wall Street Journal, 20 February 2007, A1, A13.
Self-Assessment
CHECK YOUR TOLERANCE FOR AMBIGUITY
This assessment is meant to establish your students’ tolerance for ambiguity. Even though many
strategists liken business to chess, in that game, both players can see all the pieces and anticipate an
opponent’s moves. In reality, business is more like poker, where no player really knows what cards the
other players are holding; they can only assume and make decisions based on internal information and
assumptions or interpretations about their opponents’ behavior.
In-Class Use
Have students open their books to page 49 of the text and give them 5 to 7 minutes to complete the inventory.
Use the Self-Assessment PowerPoint slides and have students raise their hands as you read off the scoring
ranges. Tell students to keep their hand up until you have counted the responses for each item and entered the
count into the spreadsheet embedded in the PowerPoint presentation. Display the distribution to the class so
students can see where they fit.
Remind your students that the business environment is complex and uncertain, and managers must
learn to adapt to environmental shifts and new developments – sometimes on a daily basis. For some
Chapter 2: Organizational Environments and Cultures
33
managers, however, this can be a challenging task because everyone’s comfort level is different when it
comes to ambiguity. For some, not knowing all the details can be a source of significant stress, whereas
for others uncertainty is not a source of anxiety. As a manager, your students will need to develop an
appropriate tolerance for ambiguity. For example, being stressed out every time interest rates change can
be counterproductive, but completely ignoring the economic environment can be detrimental to a
company’s performance.
Scoring
Scoring instructions are included in the Self-Assessment Appendix at the end of the book. But students
will want to know what their raw score means. Here’s what you can tell them:
There are three ways to understand your tolerance of ambiguity. First, think of ambiguity as novelty,
or the extent to which you are tolerant of new, unfamiliar information or situations. You can also think of
your response to ambiguity as a function of complexity, or the extent to which you are tolerant of
multiple, distinctive, or unrelated information. Lastly, ambiguity can be thought of as insolubility, or the
extent to which you are tolerant of problems that are difficult to solve because alternative solutions are
not evident.
Scores range from 16 to 112, and a score from 40 to 48 is average. Higher scores indicate a higher
tolerance for ambiguity; lower scores indicate a low tolerance for ambiguity, or the desire to have
everything clearly, simply, and easily mapped out. If your score is low, it does not necessarily mean that
you will have an unsuccessful management career. Examine your results more closely. Was your score
driven lower by certain questions? Which ones? What do those particular questions reveal about your
tolerance for ambiguity? Are you more daunted by difficult tasks, or by forging new territory?
Conversely, an extraordinarily high tolerance for ambiguity can also be detrimental to a manager because
it may indicate an overdeveloped propensity toward risk.
Management Team Decision
DOG DAY BLUES
Purpose
The purpose of this exercise is for students to assess the importance of certain policies to an
organizational culture, and to weigh the effects of changing policies that account for the unique character
of that organizational culture. This exercise also pushes them to consider how external issues
(sociocultural, demographic) affect the internal environment of the firm.
Setting It Up
Divide your students into teams of 4 to 6 members. As a warm-up, you may wish to ask how students
would feel about working in an office where employees were allowed to bring pets. If you didn’t assign
the case as homework, give students 5 minutes to read it over before beginning the exercise. Since it is
early in the semester, let the students hammer out a decision on their own. As the semester progresses,
however, have them experiment with the different group decision-making techniques presented in
Chapter 4.
Depending on the time you can dedicate to the exercise, you may consider the following set-up. First
divide the class into teams of 4 to 6 members. Assign each group of students a perspective (for pets or
against pets) and have them discuss the reasons in support of that perspective. For example, a group of
“for pets” would only discuss reasons to keep the pet policy. Make sure that the groups alternate around
the room. That is, try not to put two groups of “for pets” next to each other. This will be important for
the second part of the exercise. Give students roughly 5 minutes to come to some conclusions and
develop some moderately sound arguments in support of their perspective. Then, have half the members
of each “for pets” group turn their chairs to make a group with half the members of an “against pets”
group. Since the “for” and “against” groups alternate around the room, you should be able to assemble
mixed groups by having students adjust the angle of their seats (or simply turning in their seats to face a
new set of students). Now have the mixed groups debate the issue of the pet policy and come to
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Chapter 2: Organizational Environments and Cultures
agreement on the questions below. Remind students that they need not hold to their assigned perspective
if the arguments from other members are convincing enough to make them change their minds.
Questions
1. Do you buy the expensive air cleaner or eliminate the pet policy? Why or why not?
Reasons to buy the air cleaner (and keep the pet policy) could include: increased employee satisfaction,
for employees who use the policy, which often translates to increases in customer satisfaction; roughly
75% of companies with pet policies think the practice of bringing pets to work leads to a more creative
work environment; having pets around leads to a more relaxed work environment.
Reasons to eliminate the pet policy could include: growth of a company will make it extremely difficult to
manage everyone’s interests; pet policies are okay for dogs and cats, but as the company grows, the
chances of an employee wanting to bring in a more “controversial” pet – like a ferret, rat, or snake –
increase greatly; there are enough challenges with humans getting along in the workplace that it seems
foolhardy to complicate matters further by adding pets.
2. If you choose to stop allowing animals at the office, what effect, if any, do you think the change
will have on the company’s culture?
Although individual shop proprietors have long taken their pets to work (think of how many store cats,
birds, and dogs you’ve seen around), pet policies are generally a product of the informal business culture
characterized by the dot com boom of the late 20th century. In order to distance themselves from rigid
hierarchies that defined much of corporate America, upstart technology companies tended to liberalize
everything from work dress codes to executive perks. One pronounced differentiating factor was pet
policies. Companies like Amazon, AutoDesk, Apple, Excite@Home, eMonitoring, Rainfinity, and
Netscape all had pet policies that allowed employees to bring their pets to work. At Amazon, success
caused it to ultimately scale back its pet policy; when it needed to lease larger, more business-appropriate
office space, the landlord had restrictions against pets. Other companies – like Netscape, Burton
Snowboards, and IAMS pet food – have maintained their pet-friendly policies and feel better for it.
Some students will feel that abandoning the pet policy will signal the death of the fun work culture at
the company in the case, but companies like Apple, Excite, Rainfinity, and eMonitoring have put an end
to pet policies without sacrificing the casual atmosphere and creative work environment that the pet
policies exemplified. Other students will argue the opposite: that people are responsible for creating the
culture through organizational stories and heroes, and that in the end, the culture is about the people, not
their pets.
3. Can you think of a way to allow people to bring pets to work without upgrading the air cleaner
or running afoul of OSHA?
Most companies with pet policies attempt to satisfy employee constituents on both sides of the debate.
Some have animal-free zones to satisfy the needs of employees with pet (and other) allergies. At other
companies, employees use baby-gates to cordon off pet areas. An advertising agency in Austin, Texas has
built a fence around three historic homes that comprise its campus so that employee dogs can play freely
outdoors. Another possibility would be to dedicate a pet-care space to the building, much like corporate
childcare centers. That way, employees’ animals wouldn’t be alone during the day, owners could visit
with pets during the day, but the troublesome aspects of having pets wander freely through company
office space would be eliminated.
Practice Being a Manager
NAVIGATING DIFFERENT ORGANIZATIONAL CULTURES
Exercise Overview and Objective
Chapter 2: Organizational Environments and Cultures
35
This exercise gives students some practice in recognizing cultural differences through a familiar lens, that
of musical genres. Your class has been chosen as a “representative” college class, and executives at
music company SonyBMG are interested in hiring students as interns who work with the company to
identify and invest in the most promising up-and-coming talent in various genres. These interns will
serve on the “Top Wave Team (TWT).” In this exercise students will be grouped by their primary musical
affinity. The objective of the exercise is for students to explore the cultures that surround their particular
genre, as well as to consider the opportunities and challenges of managing across cultural differences.
Preparation
You should survey your class at least two sessions prior to the session in which you plan to conduct the
exercise. You may use the form below for this survey (see Step 1):
---------------------------------------------------------------------------------------------------
Musical Preferences Survey
Your Name: _________________________________
Class/Time: _________________________________
Identify yourself with one of the following musical genres based on:
a) preference/affinity (i.e., “This is my favorite type of music”); and b) knowledge/understanding (i.e., “of
all types of music, I know the most about this type of music”):
___
___
___
___
a) Rock
b) Country
c) Religious/Spiritual
d) Urban/Hip-Hop
___ e) Rap
___ f) Jazz/R&B
___ g) Pop/Mainstream
___ h) Classical
Other: __________________ (please identify)
Examine the results of the survey, sorting student responses by genre. The exercise will work
best if you have at least three (3) or four (4) groups with significant representation. If your students are
heavily represented in only one or two genres, it will be best to conduct a follow-up survey by “subgenres” (i.e., sub categories of preference within Urban/Hip-Hop). To develop a sub-genre survey form,
enlist a few student volunteers who seem particularly interested in, and savvy about, music.
An alternative approach to a follow up survey is to simply ask the largest group(s) to sort
themselves into sub-categories prior to running the exercise. Although the aim is to sort into three or four
major groups, avoid “forcing” this result. The key in this exercise is to take advantage of naturally
occurring musical cultures/sub-cultures.
In-Class Use
Encourage students to tackle the exercise as representatives of their favorite musical genre. They are the
ones who must argue for the future of the genre. This is also a rare opportunity to speak directly to the
“movers and shakers” in a major music company. The exercise will be more productive, and more fun, to
the extent that students “take up the cause” for their musical “tribe.”
Debrief by discussing these questions, which also appear in Step 6:



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Did you sense some cultural affinity with others who shared your musical tastes? Why, or why
not?
What expectations might be associated with choosing someone to “represent” a group on a
team such as the TWT?
What tensions and challenges might face each member of the TWO in a real-life setting of
serving on a group that represents various cultures?
Chapter 2: Organizational Environments and Cultures
You might close the debriefing session with a summation discussion of the opportunities and
challenges posed by working across cultural differences. Recognize that students in your class may vary
in their commitments to a particular musical culture from “passionate groupie” to “casual listener.” But
within each of us we find some aspects of our identity that are rooted in cultures and sub-cultures.
Drawing upon this diversity, while at the same time coordinating effectively across differences, is a major
management challenge.
Take Two – Biz Flix
BRAZIL
1. Describe the culture at Sam’s new employer.
Organizational cultures exist on three levels: observed culture or behavior, expressed values and beliefs,
and unconsciously held assumptions and beliefs. Even though the clip is short, it communicates many
things about the surface and expressed levels of the organizational culture at Sam’s new place of
employment. The rigid dress code, uniformity of the offices, drab gothic-industrial architecture, and
employee identification numbers tend to indicate a strongly bureaucratic organization in which work (and
workers) is highly compartmentalized.
The shouting, bustling group of workers chasing after the boss for answers, and the way in which
Sam quickly loses his name to become “Employee DZ-015” support the visual evidence of a bureaucratic
organization. The boss’ statement that “we have a crack team of decision makers” is ironic, as all of the
employees running down the hall after him are seeking a decision, unable to make them on their own.
2. How easy would it be to change the culture at Sam’s new company?
In general, organizational cultures are very difficult to change, particularly the unconscious beliefs held
deep below the surface. Although the clip depicts a bustling workplace (for a moment), it’s clear that the
culture is more rigid and less flexible, more formal and less casual, and more hierarchical and less flat.
Those characteristics, all elements of mechanistic organizations, which will be discussed in Chapter 8, run
counter to the characteristics of successful organizational cultures. In Section 5.2, successful
organizational cultures are marked by four key characteristics: adaptability, employee involvement, clear
vision, and consistency. The lack of adaptability and employee involvement indicate that, given that
corporate cultures are generally difficult to change, the culture at Sam’s new employer will probably be
exceedingly hard to change.
3. In which kind of business environment do you think the culture at Sam’s employer is
able to operate most successfully?
Based on its corporate culture, Sam’s new employer is most likely to operate successfully in stable,
simple environments. The rigidity and hierarchy make the company less flexible, and therefore, less able
to adapt to rapidly changing (i.e. dynamic) environments. Likewise, based on the clip, it appears that the
manager is the only one making decisions. Reliance on management to this extent indicates that the
employees themselves are either not capable or not empowered to make decisions. Such companies have
difficulty drawing on the expertise throughout their organization and so may not have the organizational
structure to respond to complex environments.
Take Two – Management Workplace
LONELY PLANET
1. Create a list describing how each component of the general and specific external environment
affects Lonely Planet. For example, under technology, you could write that the rise of the
Internet has caused more people to research travel opportunities online rather than with
guidebooks.
Chapter 2: Organizational Environments and Cultures
37
Lonely Planet is impacted by factors in both the general and specific environment. This question
highlights one important trend in the technological component of the general environment. In the
political/legal component of the general environment, the company might be affected by changes in travel
based upon perceived security risks abroad associated with political factors. For example, more U.S.
travellers might opt for domestic travel over foreign travel if U.S. relations with foreign countries
deteriorate and/or if political tensions increase (e.g., Asian countries near North Korea). In the economic
component of the general environment, Lonely Planet is impacted by the levels of personal and
disposable income. Changes in income are likely to impact travel in a manner similar to that of many
luxury goods—increases shift demand toward upscale travel; decreases in income increase demand for
downscale (local) travel. Finally, sociocultural trends in the general environment affect travel
preferences. For example, if more married adults desire to travel with their children then Lonely Planet
will need to highlight family vacation routes and destinations. In the specific environment, Lonely Planet
is clearly impacted by its competitors. As a few of the managers in the video state, the market for travel
books is rather crowded. Lonely Planet must benchmark its product and work to distinguish itself from
competitors. Industry regulation probably exerts mild influence on the company, primarily in regards to
keeping customers informed about travel documentation and passport requirements. The advocacy
groups component of the specific environment is also likely to play a minor role, primarily in relation to
environmental issues (e.g., cruise ship impact on ocean/port environment) and perceived bias in travel
recommendations (e.g., favoring exclusive resorts over indigenous hotels). Lonely Planet’s suppliers are
a major component of its environment. The company must “source” quality attractions, hotels, and
restaurants. It needs accurate and timely information, along with “off the beaten path” tips that help the
company to distinguish its product. Finally, Lonely Planet must respond to the customer component of its
specific environment. The company’s new “road trip” line of books is an example of effective response
to changing customer needs. These books aid U.S. “getaway” travellers taking shorter, more spontaneous
trips.
2. Which factors in the external environment could create uncertainty for Lonely Planet?
Probably the two areas that create the greatest uncertainty for Lonely Planet are sociocultural trends, and
competitors. Sociocultural trends are often subtle, but may also shift dramatically. It is not easy to
monitor such trends, as this information is less visible than economic or technological changes.
Competitors are another area of major uncertainty. Lonely Planet employees are themselves passionate
travellers, and so they are likely to be sensitive to the customer perspective and to readily spot changes in
customer preference. But their relationship with customers can be disrupted by strong and unanticapted
offerings from rivals. The managers in the video refer frequently to the intensity of competition. In
addition to this concern, powerful booksellers control important distribution channels. Lonely Planet
might lose its favorable position with booksellers, and/or face an alliance of travel book publisher and
major bookseller. Finally, high tech firms may develop technological substitutes for Lonely Planet’s
products, such as enhanced global positioning devices or internet-based travel products.
3. Give an example of Lonely Planet’s corporate culture at each of the three levels identified in
Exhibit 2.4.
At the Surface Level, the workers at Lonely Planet display an informal and social culture. Employees are
casually dressed, easygoing, and relaxed. Throughout the video these employees are meeting and
interacting with one another. It is clear that they know each other well, and depend heavily on face-toface communication. At the Expressed Values and Beliefs Level, employees consistently refer to such
values as “passion for travel,” “pioneering” mindset, and “non-corporate culture.” It is clear from these
statements that they share a love for travel, and a pride in their distinctive form of organization. Finally,
ath the Unconciously Held Assumptions and Beliefs, it is likely that the Lonely Planet employees share
an assumption that “mainstream” or “typical tourist” travel is bland and unsatisfying. They probably
believe that getting off the beaten path and seeking the unusual is the only way to truly learn about a
particular area and its culture. They also seem to share a belief that “typical corporations” are also rather
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Chapter 2: Organizational Environments and Cultures
bland and lifeless. They seem to value the informal and face-to-face culture at Lonely Planet as one that
fosters genuine interpersonal relationships and helps employees find meaning in their work.
Additional Materials
Review Questions
1. Describe the three basic characteristics of changing external environments.
The three basic characteristics of changing external environments are environmental change, complexity,
and munificence.



Environmental change is the rate at which a company’s general and specific environments
change. If the environment is stable, this means that the rate of change is slow; if the environment
is dynamic, this means that the rate of change is fast.
Environmental complexity is the number of external factors in the environment that affect
organizations. Complex environments have many environmental factors; simple environments
have few.
Resource Scarcity is the degree to which an organization’s external environment has an
abundance or scarcity of critical organizational resources.
2. How do the characteristics of changing environments affect uncertainty?
Environmental change, environmental complexity, and resource scarcity affect environmental uncertainty,
which is how well managers can understand or predict the external changes and trends affecting their
businesses. Environmental uncertainty is lowest when environmental change and environmental
complexity are at low levels and resource scarcity is small (i.e., resources are plentiful). In these
environments, managers feel confident that they can understand, predict, and react to the external forces
that affect their businesses. By contrast, environmental uncertainty is highest when environmental change
and complexity are extensive and resource scarcity is a problem. In these environments, managers may
not be at all confident that they can understand, predict, and handle the external forces affecting their
businesses.
3. What is the difference between the general and specific business environments?
The general environment is the economic, technological, sociocultural, and political trends that indirectly
affect all organizations. The specific environment includes the customer, competitor, supplier, industry
regulation, and public pressure group trends that are unique to an industry and which directly affect how a
company does business. All companies participate in the same general environment, but each company’s
specific environment is distinct, based on its business and industry.
4. List the components of the general environment.
The general environment consists of economic, technological, sociocultural, and political/legal events and
trends that affect all organizations. Because the economy influences basic business decisions, managers
often use economic statistics and business confidence indices to predict future economic activity. Changes
in technology, which is used to transform inputs into outputs, can be a benefit or a threat to a business.
Sociocultural trends, like changing demographic characteristics, affect how companies run their
businesses. Similarly, sociocultural changes in behavior, attitudes, and beliefs affect the demand for a
business’s products and services. Court decisions and new federal and state laws have imposed much
greater political/legal responsibilities on companies.
5. How do the elements of the specific business environment affect businesses?
Chapter 2: Organizational Environments and Cultures
39
Each organization also has a specific environment that is unique to that firm’s industry and directly
affects the way it conducts day-to-day business. The specific environment of any company can be
divided in to five sectors:





Customers influence the products and services a company offers, the prices charged for those
offerings, the company’s reputation, and the sales generated by business operations.
Competitors also influence the products and services a company offers and the prices charged for
those offerings. Competitors also influence how a company conducts business in a certain market
segment, the company’s location, and the overall strategy a company pursues (attack or avoid
competitors).
Suppliers influence the cost of the products and services a company offers and therefore affect the
profitability of the firm. Suppliers (who they are and what they can provide) also affect the types
of products that a company is able to put on the market.
Industry regulation has the potential to influence nearly every aspect of a company’s operations.
For example, a caterer would need to comply with all the health codes and liquor laws that govern
its industry.
Advocacy groups affect businesses through boycotts (or support). For example, advocacy groups
were ultimately responsible for Home Depot changing its policy of buying lumber harvested from
old-growth forests.
6. Describe the three-step process that managers use to make sense of their changing
environments.



Environmental scanning: Managers search the environment for important events or issues that
might affect an organization. This allows managers to stay up-to-date on important industry
factors and to reduce uncertainty.
Interpreting environmental factors: Managers determine what these environmental events and
issues mean to the organization. These events could present either threats to or opportunities for
the organization.
Acting on threats and opportunities: Managers can protect themselves against competition or
capture strategic opportunities.
7. How are organizational cultures created and maintained?
An organizational culture is the set of key values, beliefs, and attitudes shared by organizational members.
Founders of organizations are the primary drivers of organizational culture. However, when they are
gone, organizational heroes sustain their values, attitudes, and beliefs. Organizational heroes are people
admired throughout the organization for their qualities and achievements. Their activities provide the
basis for organizational stories, which help employees make sense of organizational events and changes.
8. What are the characteristics of successful organizational cultures?
Organizational cultures create a successful internal environment by binding all employees together in a
“we’re- in-this-together” attitude. When employee attitudes are congruous with the culture, they are
happy and motivated to work hard for the organization because they believe in what they’re doing.
Preliminary research shows that organizational culture is related to organizational success. Cultures based on
adaptability, involvement, a clear vision, and consistency can help companies achieve higher sales growth,
return on assets, profits, quality, and employee satisfaction. Adaptability is the ability to notice and respond to
changes in the organization’s environment. Involvement is the degree to which employees participate in
decision making. (Higher involvement leads to a greater sense of ownership and responsibility among
employees.) A clear vision provides a direction for organizational activities, and consistency involves
actively defining and teaching organizational values, beliefs, and attitudes throughout the company.
9. Identify the three levels of organizational culture and give examples of each.
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Chapter 2: Organizational Environments and Cultures
Three levels of organizational culture are: 1) the surface, where reflections of culture can be heard, seen,
or otherwise observed (examples of such artifacts include dress codes, office layouts, and specific
employee behaviors); 2) just below the surface, where values, beliefs, and attitudes are expressed by
people (such values and beliefs can be understood by observing what people say and decision-making
processes); and 3) far below the surface, where unconsciously held assumptions and beliefs lie. Those are
the unwritten views and rules of the organization that constitute its core principles and values.
10. How can managers change organizational cultures?
Managers can successfully change the surface levels of culture by motivating different behavior. The
underlying elements (far below the surface) are difficult to identify and change. Managers can change
culture through behavioral addition or behavioral substitution. In behavioral addition, employees are
motivated to perform a new behavior in addition to already accepted ones. In behavioral substitution,
employees perform a new behavior in place of another.
Additional Assignments and Internet Activities
Management Decision
ENVIRONMENTAL ROLLER COASTER
It couldn’t be a better day to be at Cedar Point amusement park. It’s mid-September, sunny, and 75
degrees, and there’s no one waiting in any of the lines. Passing by the Millennium Force roller coaster,
you stop to get a slushee and then sit down at a nearby picnic table to start thinking about the annual
environmental scan.
Since joining the management team of Cedar Point, a large regional amusement park located in
Sandusky, Ohio, you’ve done this exercise 10 times. Each time, it is more difficult because the
environment keeps changing, but doing the environmental assessment has kept Cedar Point viable. You
think to yourself “We’ve just finished a tight season, but we managed to come out ahead. We are facing
some big shifts, though both in the general business environment and in the amusement industry, so we
need to build a plan to meet those environmental challenges.”
Pausing for a moment, you stare at the coaster’s 80-degree drop. Your mind dives just as steeply
into a flurry of issues: shifts toward year-round schooling; trends in the insurance industry; new forms of
entertainment; new competition; the effect of changing demographics on your attendance and your work
force; higher gasoline prices; and the impact of the economy in general. You’ve been able to increase the
price of admission year after year, but how long can you continue to do that? Your straw makes a loud
noise as you finish your slushee. “I guess that means it’s time to head back to the office and figure out
what trends are going to affect the park and how.”
Purpose
The purpose of this exercise is for students to engage in scenario planning. It is an exercise in dealing
with adversity and learning how to make tradeoffs. As students examine the data presented in the case,
the challenge for them will be to make distinctions between safe assumptions, risky presumptions, and
factual data. In the process, students should clearly define their objectives and their strategy for
accomplishing them.
Setting It Up
You can use this assignment as a team exercise in class, or as an individual take-home assignment.
Regardless, warm-up your students by asking them if they have ever worked at an amusement park.
Put students into teams of four or five and have them imagine that they are the management team for a
major regional amusement park (like Six Flags, Cedar Point, or Paramount). As such, they should create a
plan that addresses the issues brought forth in the case. About ten minutes after the start, encourage the
teams to interact by asking for feedback from one another, as suggested by question #2.
Questions
Chapter 2: Organizational Environments and Cultures
41
1.
Consider the issues that you as the Cedar Point manager are examining as part of this
exercise. What other issues should you examine?
The text lists these issues: shifts toward year-round schooling; trends in the insurance industry; new
forms of entertainment; new competition; the effect of changing demographics on your attendance and
your work force; higher gasoline prices; and the impact of the economy in general. Other issues students
could cite include raising the driving age from 16 (in most states) to 18; trends in teen employment (teens
working elsewhere can’t visit the park at all or as frequently); population shifts toward the coasts, large
urban centers, and sun-belt states; federal and state safety regulations; zoning laws that might limit park
expansion; or others.
2.
Create a list of issues addressing each of the environmental factors discussed in the chapter
(economy, technology, political/legal, sociocultural, customer, competitor, supplier, industry
regulation). For each item on your list, explain how Cedar Point will face the challenges
posed by that factor in its environment.
Students’ lists will vary. Make sure that students clearly articulate how the company should meet the
challenge. Here are some sample answers:
Economy: Gasoline prices continue to rise, making it less attractive for people who live farther than,
say, 60 miles away to come for the day. In response, management could begin chartering Cedar Point
day trips, which would allow guests to ride a coach to the park, stay all day, and be chauffeured back
to their town.
Technology: The ubiquitous nature of digital entertainment technology puts pressure on the park to
develop attractions that integrate these new media. The park could respond by developing and
installing more visual reality-type features.
Political/legal: Proliferation of class-action lawsuits causes legal fees and insurance rates to rise.
Management could lobby for tort reform.
Sociocultural: Year-round schooling puts a crimp on both the pool of eligible workers and on the
number of visitors to the park. Management responds by changing the park schedule to be open
every day during each two-week school vacation, every weekend during the year, and every evening
during the holiday season. It will also consider opening for after school hours a few times a week.
Customer: Demographic shifts will result in increases in the numbers of older customers. The park
could open a section of tamer, nostalgic rides.
Competitor: Other entertainment options, like game halls and movie theaters, have an impact on
overall park attendance. Management could incorporate movie theaters and game halls, much the
same way they incorporate swimming by adding water parks.
Supplier: Increased legal risk limits the number of manufacturers of thrill rides. Management could
investigate procuring rides from global manufacturers, or management would increase the lead time
required to design, order, manufacture, and install new attractions.
Industry regulation: Government creates age and size regulations for more dangerous rides and
requires parks to retrofit older rides with new safety technology. The park complies with new
regulations.
3.
Based on the solutions you generated in question 2, how uncertain is the amusement park
industry? Why do you think as you do? (Think about the environmental change,
complexity, and resources of the amusement park industry.)
Students’ answers will vary depending on the lists they generated for question 2. They should, however,
come to the conclusion that the amusement park industry is generally uncertain. The industry is highly
complex because it is subject to many environmental factors; it is dynamic because of rapidly changing
technologies, consumer behaviors, and demographic trends; and resources like energy (need to power the
rides) and employees (traditionally teenagers) are becoming either increasingly costly or difficult to
obtain.
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Chapter 2: Organizational Environments and Cultures
Develop Your Career Potential
DEALING WITH THE PRESS
In this age of 24-hour cable news channels, tabloid news shows, and aggressive local and national news
reporters intent on exposing corporate wrongdoing, one of the most important skills for a manager to
learn is how to deal effectively with the press. Test your ability to deal effectively with the press by
putting yourself in the following situations. To make the situation more realistic, read the scenario and
then give yourself two minutes to write a response to each question.
Rats Take Over Manhattan Taco Bell
The release of Internet footage showed large rats running across the floors, over tables, and climbing onto
countertops of a Manhattan Taco Bell. What is most surprising is that the day before the television crew
filmed the rats through the restaurant window, New York City health inspectors had given the restaurant a
passing grade! The broadcast prompted parent company Yum! Brands to temporarily close that and
several other Taco Bell stores owned by franchisee ADF Companies. Based in New Jersey, ADF owns
over 350 fast-food franchises in several states. A TV reporter from Channel 5 has arrived with his camera
crew at the Taco Bell you manage in Brooklyn. It’s lunchtime, the restaurant is bustling, and the reporter
walks right in with his crew and puts you on the spot, asking you if you would grant a short interview and
let him ask questions of a few of your patrons. When you agree, he starts right in with these questions:
1. “Yesterday’s filming of rats at an ADF-owned Taco Bell has caused consumers to question the
cleanliness of the restaurants where they eat. This restaurant is also owned by ADF Companies. Do you
also have problems with rodents?”
2. “Recent outbreaks of E. coli at other Taco Bells in the Northeast were finally attributed to
contaminated lettuce, so Taco Bell changed suppliers.” To the cameraman: “Get the camera in close here
[camera zooms into the kitchen area, the slop sink, and the handwashing station] because I want our
viewers to see the kitchen.” Back to you: “How can consumers be sure that contamination occurred at the
produce supplier and not inside filthy restaurants?”
3. “The health inspectors gave a passing grade to the rat infested Taco Bell just a day before television
crews filmed the rats running all over the restaurant. That doesn’t instill our viewers with great
confidence in the system. Would you be willing to let our camera crews accompany the health inspector
during a full inspection of your restaurant so that viewers can see what an inspection entails?”
Purpose
This exercise is designed to introduce students to some basic rules about dealing with the press in a crisis.
There are several ways to structure this exercise. One way is to have students prepare written answers to
the questions before coming to class. Another is to have students answer the questions during class. If
time is a consideration, give students one minute to answer each question. After students have generated
their own answers to each question, form groups and have some students be reporters, firing the
questions, while others are managers, answering the questions. What I prefer to do is to ask for
volunteers who are willing to respond to the questions in front of the class (but be sure to stress that this is
a developmental exercise and that, since few of them have ever had to deal with the press, making
mistakes is part of learning).
Setting It Up
Begin by rereading the scenario. Then pose the first question and give the student an opportunity to
respond. At this point, you could stop to discuss what students liked or disliked about each answer. What
I prefer to simulate a “press environment,” by beginning with the initial question as stated in the case, and
then allowing the rest of the class, who has assumed the reporter role, to ask follow up questions as they
think of them in the course of the “interview.” In my opinion, when “reporters” fire questions at the
“manager,” and the “manager” has to respond immediately, the role play is much more realistic. After 3
or 4 minutes, we stop to discuss the manager’s responses: what we liked, didn’t like, and how they could
be improved.
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In addition to the restaurant scenario in the textbook, you have the option of using the one below,
titled “Hotel Customer Dies in Strange Accident.” You may wish to do both scenarios in class, allowing
the “reporters” and “managers” to switch roles and experience the same level of pressure. After role
playing both scenarios and discussing, ask the class to generate an explicit list of rules for dealing with
the press. After conducting the role plays, students will have a good feel for what works and what
doesn’t. Then share this list of do’s and don’ts with your class.
Rats Take Over Manhattan Taco Bell
1. “Yesterday’s filming of rats at an ADF-owned Taco Bell has caused consumers to question the
cleanliness of the restaurants where they eat. This restaurant is also owned by ADF Companies.
Do you also have problems with rodents?”
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Take the initiative - If you don’t answer reporters’ questions, they’ll find someone who will,
someone who is likely to answer from a different perspective. Company spokespersons need to
take the initiative to share the company’s perspective on what has occurred.
Make company management visible - As soon as possible, put top company management in front
of the press. Because the public will hold top management accountable, it’s best to have top
managers responding to reporters’ questions.
Bridging - Bridging is briefly answering a reporter’s questions and then switching to a message
that you want to communicate. Politicians do this frequently. Answer a question, then briefly
emphasize 3 or 4 points that summarize the company’s message to the public.
Identify and speak to your audience - In this case, there are several audiences, people who watch
TV news, people who live near the restaurant, or people who like to eat at Taco Bell (and other
fast-food restaurants). Obviously, the latter is the most important to Taco Bell. However, there is
probably some overlap with people who live in the neighborhood. When speaking to an
audience, it’s important to recognize what you say is likely to be only a small part of a TV, print,
or radio reporter’s story. Accordingly, you can speak more effectively to your audience by using
visual or word images instead of facts. Most people don’t have the time or are reluctant to
immerse themselves in the details of a story. Facts are easily forgotten. Images are easily
remembered. For example, instead of stating that there are no rats at Taco Bell take the reporters
to the dining room and show how clean it is. Ordinary people are more likely to remember that
image than a discussion of your cleaning procedure.
2. “Recent outbreaks of E. coli at other Taco Bells in the Northeast were finally attributed to
contaminated lettuce, so Taco Bell changed suppliers.” To the cameraman: “Get the camera in
close here [camera zooms into the kitchen area, the slop sink, and the handwashing station]
because I want our viewers to see the kitchen.” Back to you: “How can consumers be sure that
contamination occurred at the produce supplier and not inside filthy restaurants?”
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Stick to the facts. Don’t wing it. If you don’t have a cleanliness policy or practice, don’t make
one up on the spot. Reporters will, well, smell a rat. If there are sanitation procedures, describe
them. But don’t guess the answers to questions.
If you don’t know, offer to find out. Reporters don’t give exams. You don’t have to know the
answer to each question off the top of your head. When you don’t know, say so. “I don’t know
the answer to that question.” When you don’t know, but can find out, say so. But then be sure to
deliver the answer in a timely manner.
Never say “no comment.” - No comment is perceived as a statement of guilt. It’s better to say, “I
don’t know.”
Focus on shared objectives - In almost any crisis, emphasize shared objectives. For example, you
might say, “At ADF Taco Bells, we try to ensure that all our produce is fresh and moves safely
from the farm to our kitchens. We want all of our customers to enjoy a satisfying meal prepared
in a sanitary kitchen.” Shared objectives help viewers see the crisis from the organization’s
perspective.
Chapter 2: Organizational Environments and Cultures
3. “The health inspectors gave a passing grade to the rat-infested Taco Bell just a day before
television crews filmed the rats running all over the restaurant. That doesn’t instill our viewers
with great confidence in the system. Would you be willing to let our camera crews accompany
the health inspector during a full inspection of your restaurant so that viewers can see what an
inspection entails?”
If possible, cooperate with reporters - Reporters work under short deadlines. Reporters need information.
Reporters want a good story. And if they don’t get these things from you, they’ll get them from someone
else. It’s possible to cultivate a good relationship with the press by helping them do their jobs. What do
they need? Print reporters (magazines and newspapers) want facts and details. Radio reporters want
sound bites. TV reporters want visuals, a tour, an action shot (video of an ongoing event) and a brief
sound bite. But you don’t have to agree to every request. In this case, if you don’t have the authority to
grant the request, tell the reporters that you would be glad to ask your supervisor and get back with the
reporters within the week. That way, you may be able to help the reporters get the story they really want
(how health inspections are conducted) and also give your company time to make a decision. Were you to
immediately acquiesce to the reporter’s request, you could end up in trouble with the company,
particularly if higher levels of management would have been disinclined to grant the reporter’s wish.
Then if you say yes, and upper management reneges for whatever reason, the reporter might then think
your restaurant has something to hide.
Out-of-Class Project: “Organizational Culture.” Divide the class into small groups. Have each group
collect stories about the founders of large businesses, such as McDonald’s, Starbucks, UPS, Walgreen, or
Wrigley’s. Have these groups write a paper or make a presentation focusing on who these founders are,
what “vision” they created, and how they may still influence the current culture of the organization.
Alternately, assign this to individual students.
Out-of-Class Project: “Competitive Analysis.” Divide the class into groups of 4-5 students. Assign
each group to represent one of the following companies: IBM, Coca-Cola, Microsoft, Daimler-Chrysler,
Procter & Gamble, Nike, McDonald’s, Wal-Mart, United Airlines, or General Electric. Have each group
do a thorough analysis of the company’s top 3 or 4 competitors, including the following: the competitors’
strengths and weaknesses, key financial information (total sales, gross profit, and net income), target
markets (both geographic and demographic), and key product lines.
In-Class Activity: “Debate over Legislative Health Care.” A January 2006 Wall Street Journal article
reported legal action taken by the state of Maryland, which sued Wal-Mart to in an effort to force
businesses to underwrite a larger portion of employee health-care benefits. Spark a debate in your class
by asking students to respond to the following statement: “Businesses should be required to pay for
employees’ health care.” The full citation is J. Schuman, “Latest Health-Care Front: Maryland vs. WalMart,” Wall Street Journal, 13 January 2006, A2.
In-Class Activity: “Environmental Scanning.” Divide the class into small groups (no more than 2-3
students). Give each group a recent annual report of a well-known company and have them list all the
factors in the external environment that have affected the company. Students should focus on both the
general and specific environments. (If the classroom has computers, have students download or read the
annual reports on-line.) Have groups discuss what they’ve found.
Advocacy Groups. Go to the web site of PETA (People for the Ethical Treatment of Animals),
www.peta.org. Answer the following questions: 1) What are PETA’s goals? 2) What types of companies
might PETA affect politically? 3) Do you believe in PETA’s actions? Why or why not? 4) How far
should advocacy groups go in promoting their causes? 5) How should business organizations react to
these groups?
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Political Environment. Go to the web site of the U.S. Federal Trade Commission (FTC) www.ftc.gov.
What are the goals of the FTC? How does the FTC protect consumers? How does it regulate trade?
Describe at least one current court case in which the FTC is involved. How would the FTC affect you if
you ran a telemarketing company? A tobacco company?
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Chapter 2: Organizational Environments and Cultures