Lesson 2 Flashcards
The External Environment
The elements of the world constantly change
The external organizational environment includes all outside elements that effect the organization
General Environment
Task Environment
Internal Environment:
Elements within the organization boundaries
General Environment: International
Globalization influences all other aspects of the external environment
New competitors, customers, suppliers
Changes in social, technological, and economic trends
All organizations must compete and think globally
The global environment is complex and ever-changing
Sociocultural
Population is aging
✓Large influx of foreign labour ✓Generation Y is entering the workplace
✓Changing values and needs
Economic
Economic health of the country/region
Consumer purchasing power
Unemployment rate, interest rates, inflation rates
Legal-Political
Government regulation & political activities
Political Risk
Managers must recognize the power of pressure groups, unions, etc
Natural
Organizations must be sensitive to the environment
Natural dimension does not have own voice
Environmental groups advocate action/policy
Reduce pollution
Develop renewable energy
Climate change/global warming
Oil Spills
Organization-Environment Relationship
The environment creates uncertainty for managers Managers must respond and design adaptive organizations Organic vs Mechanistic Organizations
Adapting to the Environment
Changing Management Philosophy: Proactive, Collaboration, Organic
✓ Boundary-spanning roles –link and coordinate the organization with external environment
✓ Interorganizational partnerships –reduce boundaries and begin collaborating with other organizations
✓ Mergers/joint ventures –legal combination of operations; legal collaboration for specific project
The Internal Environment: Corporate Culture
✓Symbols
✓Stories
✓Heroes
✓Slogans
✓Ceremonies
Shaping Corporate Culture for Innovative Response
Corporate culture plays a key role in learning and innovate responses
Bottom-line strategies are successful in the short-term
Successful companies balance culture and performance
Culture is the “glue” that holds the organization together
A Borderless World
Trade barriers have fallen
Communication is faster, cheaper
Consumer tastes converge
Moving through the Stages: Using International Market Strategies
Exporting –transferring products for sale to foreign countries
Outsourcing –also called off shoring, work activities are done in countries with cheap labor
Licensing –enabling a company to produce and market a product in another country
(Franchising is licensing that provides a complete package of materials and services)
Direct Investing –high level of involvement, company manages and controls assets
(Joint ventures, wholly-owned foreign affiliate, greenfield venture)
The Economic Environment
Economic Development -Countries are categorized as either developed or developing based on per capita income
Government Policies
Market Size
Financial Markets
Infrastructure
Resource and Product Markets Companies must evaluate market demand
The Legal-Political Environment
Political risk is defined as the risk of lost assets, earning power, or managerial control Managers must be concerned with the political instability of global markets
The Sociocultural Environment
Other Cultural
Characteristics →
Language →
Religion →
Attitudes →
Social values–Communication Differences
The International Business Environment
Planning, organizing, leading, and controlling in multiple countries can be challenging
It took McDonalds a year to figure out that Hindus in India do not eat beef
In Africa, the baby food includes pictures to aid illiterate consumers
Managers must be mindful in the global marketplace of economic, legal and cultural differences.
Hofstede’s Value Dimensions
Power Distance
✓Uncertainty Avoidance
✓ Individualism and Collectivism ✓Masculinity and Femininity ✓Long term Orientations vs Short term Orientation
Developing Cultural Intelligence
Cultural intelligence –ability to use reasoning and observation skills
Culturally flexible
Adapt to new situations Managers must study the language and learn
