Chapter 3 The Environment and Corporate Culture
Chapter 3 The Environment and Corporate Culture
Chapter 3 The Environment and Corporate Culture
Chapter Outline
1. Describe the general and task environments and the dimensions of each.
The organizational environment is all elements existing outside the boundary
of the organization that have the potential to affect and influence the
organization. This environment consists of two layers: the task environment
and the general environment.
The task environment is closer to the organization and includes the sectors
that conduct day-to-day transactions with the organization and directly
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PART 2 The Environment of Management 56
and customers.
The general environment is the outer layer that is widely dispersed and affects
the organization indirectly.
It includes social, demographic, and economic factors that influence all
organizations about equally.
2. Explain the strategies managers use to help organizations adapt to an
uncertain environment.
The environment creates uncertainty for organization members. Uncertainty
means that managers do not have sufficient information about environmental
factors to understand and predict environmental needs and changes. Two
basic factors that influence uncertainty are the number of factors that affect
the organization and the extent to which those factors change. Strategies to
adapt to these changes in the environment include boundary-spanning roles,
interorganizational partnerships, and mergers or joint ventures.
Boundary-spanning roles are assumed by people and/or departments that link
and coordinate the organization with key elements in the external
environment. Interorganizational partnerships are a popular strategy for
adapting to the environment by reducing boundaries and increasing
collaboration with other organizations. A merger is the combining of two or
more organizations into one. A joint venture involves a strategic alliance or
program by two or more organizations.
6. Define a cultural leader and explain the tools a cultural leader uses to change
corporate culture.
One way managers change norms and values toward what is adaptive to the
external environment or for smooth integration is through symbolic
leadership. A symbolic manager is one who uses symbols, stories, slogans,
and ceremonies to change corporate culture. Symbolic managers influence
culture by articulating a vision for the organizational culture that generates
excitement and that employees can believe in. The symbolic leader heeds the
day-to-day activities that reinforce the cultural vision.
The symbolic manager makes sure that symbols, ceremonies, and slogans
match the new values. Actions speak louder than words. Symbolic leaders
"walk their talk."
Lecture Outline
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PART 2 The Environment of Management 58
The organization also has an internal environment that includes the elements
within the organization’s boundaries.
This includes current employees, management, and corporate culture.
Corporate culture defines employee behavior in the internal environment and
how well the organization will adapt to the external environment.
Notes
2. Technological
The technological dimension includes scientific and
technological advancements in a specific industry as well as
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PART 2 The Environment of Management 60
society at large.
Technology has created massive changes for organizations and
industries; today, computer networks, Internet access,
videoconferencing, cell phones, and laptops are taken for
granted.
Other technology will affect organizations and managers; the
decoding of the human genome could lead to revolutionary
medical advances.
3. Sociocultural
The sociocultural dimension represents the demographic
characteristics, norms, customs, and values of the general
population.
Important sociocultural characteristics are: population and
geographical distribution, population density, age, and
education levels
Today’s demographic profiles are the foundation of tomorrow’s work
force and customers.
Forecasters see increased globalization of both consumer markets and labor
supply with increasing diversity in organizations and consumer markets.
B. Task Environment
The task environment is the layer closest to the organization and includes
those sectors that have a direct working relationship with the organization
and include:
1. Customers.
Customers are those people and organizations in the environment that
acquire goods or services from the organization.
Customers are important because they determine the organization’s
success.
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PART 2 The Environment of Management 62
Notes
2. Competitors.
Competitors are organizations in the same industry or type of business
that provide goods or services to the same set of customers.
Specific competitive issues characterize each industry; the recording
industry differs from the steel industry and the pharmaceutical industry.
3. Suppliers.
Suppliers are people and organizations that provide the raw materials
that the organization uses to produce its output.
Many companies are using fewer suppliers and building good relationships
with them so that they will receive high-quality goods at lower prices.
Many companies are finding that being cooperative, rather than
adversarial is the key to saving money, maintaining quality, and
speeding products to market.
4. The labor market.
The labor market represents people in the environment available for
hire by the organization.
Labor market factors that impact organizations include:
the growing need for computer-literate information technology
workers.
the necessity for continuous investment in human resources through
recruitment, education, and training to meet competitive demands
of the borderless world
the effects of international trading blocs, automation, and shifting
plant location upon labor dislocations, creating unused labor pools
in some areas and labor shortages in others.
The external environment for Nortel Networks is illustrated in Exhibit 3.2.
Discussion Question #2: Would the task environment for a bank contain the same
elements as that for a government welfare agency? Discuss.
Notes
the smaller retailer gets almost as much business as the giant. Managers at Target
have succeeded online better than those of any other mass retailer. Target.com sells
items that are too big to stock in retail stores, such as Little Tikes kiddie furniture.
Target test markets new products on the Web before committing to shelf space for
them in the stores. The biggest success for Target.com has bee the “Web as gift-
shop” approach. The site has sold thousands of “Student Survival Kits” such as the
Movie Night package that contains a bucket of popcorn, candy, soda, and a blank
VCR tape. Target.com is also helping to get more customers in the retail stores.
Notes
MANAGER’S SHOPTALK
The New Golden Rule: Cooperate
Companies all over the world are sleeping with the enemy. A decade ago,
many managers would have considered it heresy to collaborate with
competitors, but today they are finding that collaboration is necessary to
compete in a rapidly changing environment. Collaboration in product
development is sweeping every field form autos to aircraft to
biotechnology. Suppliers are a part of this new collaborative business
model. Here are a few tips about what makes a collaborative relationship
successful:
● Enter the relationship with a spirit of true partnership
● When choosing partners, pay attention to culture and values
●Clarify what each partner is expected to give and to get from the
relationship
● Put together the right team, including top management
● Put it in writing
Notes
The internal culture must fit with the external environment and company
strategy.
Culture is defined as the key values, beliefs, understandings, and norms
shared by members of an organization.
Culture is a pattern of shared values and assumptions about how things are
done within the organization.
Culture can be analyzed at three levels, with each level becoming less
obvious:
At the surface level are visible artifacts, which include: manner of dress,
patterns of behavior, physical symbols, organizational ceremonies, and
office layout.
At a deeper level are the expressed values and beliefs, which are not
observable but can be discerned from how people explain and justify what
they do.
They can be interpreted from symbols organization members use to
represent them, stories, and language
Some values become 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 behavior and decisions.
Discussion Question # 7: Define corporate culture and explain its
importance for managers.
Notes
A. Symbols
A symbol is an object, act, or event that conveys meaning to others.
Symbols associated with corporate culture convey the organization’s
important values; Steelcase Corp. built a pyramid-shaped center to
emphasize collaboration.
B. Stories
A story is a narrative based on true events that is repeated and shared
among organizational employees.
Stories are told to new employees to keep the organization’s primary values
alive; at Nordstrom, a story tells of an employee who took back a customer’s
two-year old blouse.
C. Heroes
A hero is a figure who exemplifies the deeds, character, and attributes of a
strong corporate culture.
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CHAPTER 3 The Environment and Corporate Culture 67
Heroes are role models for employees to follow; a security supervisor who
challenged IBM’s chairman because he wasn’t carrying appropriate
identification.
D. Slogans
A slogan is a phrase or sentence that succinctly expresses a key
organizational value; Avertitt Express has “Our driving force is people”
on its trucks to show value for people.
E. Ceremonies
A ceremony is a planned affair that makes up a special event and is
conducted for the benefit of an audience. Mary Kay presents gold pins to
high-achieving sales people.
In summary, organizational culture represents the values and
understanding that employees share.
Notes
themselves, and their values tended to discourage risk taking and change.
B. Types of Cultures Exhibit 3.7
In considering what cultural values are important for the organization,
managers consider the external environment as well as the company’s
strategy and goals.
Studies suggest that the right fit between culture, strategy, and the
environment is associated with four categories or types of culture, based
on two dimensions.
the extent to which the external environment requires flexibility or
stability.
the extent to which a company’s strategic focus is internal or
external.
The adaptability culture is characterized by values that support the company’s
ability to interpret and translate signals from the environment into new behavior
responses.
This culture emerges in an environment that requires fast response and high-risk
decision-making; managers encourage and reward creativity, experimentation,
and risk taking.
Nokia is an example of an adaptability culture.
The achievement culture is a results-oriented culture that values competitiveness,
aggressiveness, personal initiative, and willingness to work long and hard to
achieve results.
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.
Emphasis on winning and achieving specific ambitious goals is the glue for this
organization; people who succeed at Siebel are focused, competitive and driven to
win.
The involvement culture places high value on meeting the needs of employees and
values cooperation and equality.
This culture has an internal focus on the involvement and participation of
employees to rapidly meet changing needs from the environment.
Managers emphasize values such as cooperation, consideration of both
employees and customers, and avoiding status differences; Smucker’s has an
involvement culture.
The consistency culture values and rewards a methodical, rational orderly
way of doing things.
This culture has an internal focus and a consistency orientation for a stable
environment; Pacific Edge Software has successfully implemented elements of a
consistency culture.
Each of these categories can be successful; organizations usually have values that
fall into
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CHAPTER 3 The Environment and Corporate Culture 69
Notes
Discussion Question #9: Describe the cultural values of a company for which
you have worked. Did those values fit the needs of the external environment? Of
employees?
Notes
B. Cultural Leadership
One-way mangers change norms and values toward what is adaptive to the
external environment is through cultural leadership.
A cultural leader defines and uses signals and symbols to influence corporate
culture.
Cultural managers influence culture by:
Articulating a vision for the organizational culture that generates
excitement and that employees can believe in.
Heeding the day-to-day activities that reinforce the cultural
vision.
Managers widely communicate the cultural values through words and actions;
value statements that aren’t reinforced by behavior are meaningless.
Cultural leaders also uphold their commitment to values during difficult times
or crises.
Maintaining consistency with the cultural values helps organizations weather
the storm and come out stronger on the other side.
Cultural leaders let everyone know what really counts.
Notes
The relevance of the Corporate Culture and how it can affect the success or failure
of an organization to achieve its corporate goals.
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CHAPTER 3 The Environment and Corporate Culture 71
In just one year after its 1994 inception, Netscape had grown from a struggling
startup to one of the hottest high-tech IPOs of the decade. After engaging in a
browser war with Microsoft, Netscape had to enter new markets quickly. A year
ago, for example, the company announced its intention to become a presence in the
enterprise and e-commerce software and services arena.
In the long term, the company has a good shot in the enterprise market because it
can compete well on price, performance and support. The secrets to Netscape's
survival lie in its corporate culture. Unencumbered by rigid schedules and policies,
employees are free to come and go as they please or work at home if they like. In
an environment where everyone is encouraged to contribute and have a voice, a
sense of equality is pervasive. The company's environment is the ultimate
expression of a casual, open door culture, which keeps its people motivated and—
more important, say company insiders—highly productive. Netscape's permissive
culture is not just an example of Silicon Valley excess. More than ever, how
companies treat their employees will ultimately affect the bottom line.
There are many companies that will be affected by such predicted changes. Any
company involved in heating or cooling will have to make product
adjustments. This includes manufacturers of heaters, air conditioners, stoves,
refrigerators,
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PART 2 The Environment of Management 72
companies that provide power and parts for these products. Demand for these
products and services and the materials and labor used in manufacturing them
will change.
2. Would the task environment for a bank contain the same elements as that for a
government welfare agency? Discuss.
If customers are defined in the broadest sense, then this may be true of all
companies. However, some companies may have to be more concerned with
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CHAPTER 3 The Environment and Corporate Culture 73
other external elements. For example, oil companies may have plenty of
customers, but the supply of oil may be shrinking. Changes in social and
demographic factors can cause the customer base to completely disappear. A
company could also be inefficient and have unused resources that make it ripe
for a takeover. Taking preventative action for this company could be more
important than worrying about customers, at least in the short run.
5. Caterpillar Corporation was thriving until the mid-1980s, when low oil
prices, high interest rates, a worldwide recession, a soaring U.S. dollar, and
Japanese competition stunned the giant equipment builder. Discuss the type of
response Caterpillar’s management might take.
shows that corporate culture is related to strategy. Finding the right fit
between culture and strategy enables the organization to perform better.
Symbols are important to corporate culture because they are tangible objects,
acts, or events that embody deeper values shared by organization members.
Astute managers create symbols to help reinforce key values. For example,
Mary Kay Cosmetics uses a “golden rule” marble that is given to senior
employees to symbolize that the golden rule will be used in all of their
dealings. Almost anything can serve as a symbol. Thus, stories, heroes,
slogans, and ceremonies all serve their own purpose, but also have symbolic
value by indicating to employees the values and understandings that are
especially significant for the organization.
8. Describe the cultural values of a company for which you have worked. Did
those values fit the needs of the external environment? Of employees?
Baseball team cultures emerge in fast-paced, high risk environments that offer
immediate feedback on decisions. Advertising is an example of a baseball
team culture. The advertising world accepts the notion that each effort will not
result in a hit, but the player’s batting average and performance under
pressure are major components in individual and team success. Top
performers, like top baseball players, gain reputation and become “free
agents” as companies compete for their services. The most successful team
has the strongest and most consistent performers.
10. Do you think a corporate culture with strong values is better for
organizational effectiveness than a culture with weak values? Are there times
when a strong culture might reduce effectiveness?
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CHAPTER 3 The Environment and Corporate Culture 75
The general belief is that cultures with strong values are positive for
organizational effectiveness; that is, the strong culture is a positive influence
for employees, committing them to organizational performance. However, a
strong culture can sometimes prevent the organization from adapting to
change. Employees have such strongly held beliefs about what the
organization should do that new requirements imposed from the industry or
environment may not be heeded. This occurs when an extremely successful
organization continues to perform in the same way rather than modify its
values or its products because everyone is satisfied with the current way of
doing things. A too strong culture can give the organization a blind spot
because employees are happy working in the organization and fail to realize
that it is becoming out of step with the needs of the environment. In this case,
adaptation to the environment will be too slow.
In order to get the students thinking about corporate culture, you may ask them
about norms on their campus. Are there styles of dress, book bags, hangout places,
modes of talking, drinking, dressing or fitness, that govern what reaction students
give to one another? Or ask them about clubs or organizations they belong to. If
there are strong norms, then there is a strong culture, whether it is a positive or
negative one. Often sororities and fraternities have strong cultures and they have
been criticized for that in recent years for the harsh “hazing” practices. Ask them
to compare, if possible, a club or organization with a strong culture and one with a
weaker culture and see what the differences are. Also, note on question 11 where
conforming to mission is distinguished from dress and procedures. Is this what is
asked of college students, or just the opposite? Usually on campuses, conformity is
asked less of mission and more of procedures and dress. How do they feel about
that? In such a situation, the goal is to have everyone alike, whereas conformity to
mission allows for more diversity. Research is building up to suggest that diverse
groups are the best for solving complex problems or problems requiring more
creativity.
Holly Vasquez values the “people culture” at Wallog. It is part of what has kept
her working there, so she does not want to risk lowering morale for the sake of
“making the numbers.” Option 1, firing Larry Norris, is likely to do just that.
Option 2 is correct to some extent that it is Larry’s responsibility to stay current
and meet his quota but poor performance is often a reflection on the manager as
much as the employee. So far, Holly has only “suggested” that Larry study new
techniques
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PART 2 The Environment of Management 76
and the team’s morale is to specifically assign him to do so (Option 3), making
him aware that his performance numbers are critically low and that improvement is
essential. Larry is stubborn and has not been willing to take this initiative on his
own, and there is no guarantee that he will put forth a genuine effort now.
However, as a 27-year sales veteran with high sales in the past, Larry should be
given the opportunity to improve, and Holly can push him in the right direction.
Society of Equals
1. How would you characterize the culture in this company? What are the
dominant values?
2. Why did Ted Shelby’s change experiment fail? To what extent did Ted use the
appropriate change tools to increase employee communication and
participation?
Ted’s change experiment failed because he did not have the cooperation of
senior management. The idea probably had merit, and his employees may
have welcomed the opportunity for providing greater feedback. Ted made an
interesting attempt to be a symbolic manager. He seemed to have developed a
new language to characterize the information processing feedback he wanted
to achieve. Moreover, he consciously used symbols in the form of office
furniture to signal the new cultural values for his department. Thus, Ted’s
ideas seemed to be on the right track. The real problem was that the cultural
ideas Ted tried to implement were inconsistent with the culture in the larger
organization. When this clash occurs, the subculture in the specific
department typically will lose.
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