1. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
Chapter 3Chapter 3
EnvironmentalEnvironmental ForcesForces

2. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Environmental ForcesEnvironmental Forces
Business Environment
Task Environment
Competitive Forces in the Task Environment
Technological Forces
Political and Legal Forces

3. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
The General Environment and EnvironmentalThe General Environment and Environmental
Forces Affecting OrganizationsForces Affecting Organizations
Adapted from Figure 3.1
The General Environment
Cultural Forces
Political - Legal Forces
Technological Forces
Competitive Forces
Organization
Ecosystem
PoliticalSystem
Demographics Economic System
3.2

4. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
The General EnvironmentThe General Environment
Sometimes called the
macro-environment.
Are external factors, such
as inflation and
demographics, that
usually affect indirectly all
or most organizations.

5. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Factors in the General EnvironmentFactors in the General Environment
Type of economic system and
economic conditions
Type of political system
Condition of the ecosystem
Demographics
Cultural Background

6. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Roles of Government in BusinessRoles of Government in Business
In the US, the government acts as a
watchdog over business
Provides direction in areas such as:
antitrust,
monetary policy,
defense,
human rights
environmental matters

7. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
The Economic SystemThe Economic System
The US has an economic system
in which there are:
privately controlled markets
based on supply and demand
free market competition
private contracts
profit incentives
technological advancement

8. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
The EcosystemThe Ecosystem
There is a renewed commitment
to the environment in the US
1981 - 4% wanted environmental
improvements
1997 - 80% want improvements

9. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Environmentally-Conscious Business PracticesEnvironmentally-Conscious Business Practices
Cut back on environmentally unsafe
operations
Compensate for environmentally risky
endeavors
Avoid confrontation with state and federal
pollution control agencies
Comply early with government regulations
Promote new manufacturing technologies
Recycle wastes
3.3

10. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
DemographicsDemographics
Characteristics of a population such as age,
race, gender, ethnic origin, and social class
determine the characteristics of work groups,
organizations, specific markets, or nations
population.
Demographics influence marketing, advertising,
and human resources decisions.
Such as the number of individuals the ages of
18 to 25
They change all the time.

11. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Cultural ForcesCultural Forces
Culture is the shared characteristics, values,
and beliefs of a group that distinguishes
them from another group
Such as religion, language, and heritage

12. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Hofstede’s FrameworkHofstede’s Framework
Power distance
Degree to which influence/control are unequally distributed
among individuals within a particular culture
salary differentiation from CEO to front line employees
Uncertainty avoidance
Degree to which members of a society attempt
to avoid ambiguity, riskiness, and indefiniteness
of future
Individualism
Extent to which society expects people to take
care of themselves and their immediate families
And/or the degree to which individuals believe
they are masters of their own destiny
3.5

13. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Hofstede’s Framework (contd.)Hofstede’s Framework (contd.)
Collectivism
Measures tendency of group members to focus on the
common welfare and feel loyalty toward one another
Masculinity
Degree to which acquisition of money
and things is valued and high quality
of life for others is not
Confucian dynamism
Stability of society is based on unequal relationships
Family is the prototype of all organizations
People should treat others as they would like to be treated
3.6

14. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Basic Types of Task EnvironmentsBasic Types of Task Environments
Adapted from Figure 3.3
Factors in environment are
few
quite similar to each other
basically the same over time
Example: Soft-drink distributors
Factors in environment are
few
somewhat similar to each other
continually changing
Example: Fast-food outlets
Factors in environment are
numerous
not similar to each other
basically the same over time
Example: Basic food production
firms
Factors in environment are
numerous
not similar to each other
continually changing
Example: Computer firms
STABLESTABLE CHANGINGCHANGING
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XX
3.8

15. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Ambiguity or unpredictability of certain factors external
to an organization
governmental regulations
competition
stability of inputs
demand characteristics
e.g. Customer bargaining power
3.6
Environmental UncertaintyEnvironmental Uncertainty

16. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Turbulent EnvironmentTurbulent Environment
Complex, constantly changing
Both ambiguous and unpredictable

17. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Competitive Forces in the Task EnvironmentCompetitive Forces in the Task Environment
Adapted from Figure 3.4
Suppliers
bargaining
power
Threat
of new
competitors
Buyers
bargaining
power
Threat of
substitute
goods/services
Rivalry among
existing firms
in industry
3.9

18. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
CompetitorsCompetitors
Importance and Effect of Competitors
competitors are an important day-to-day
environmental force facing organizations
rivalry among competitors leads to
price cutting
advertising promotions
enhanced customer service or warranties
improvements in product or service quality

19. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
New EntrantsNew Entrants
Barriers to Entry:
economies of scale
decrease in per unit costs as volume of
goods/services produced increases
product differentiation
uniqueness in quality, price, design,
brand image, or customer service that
gives a product an edge over the
competition

20. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
New Entrants cont.New Entrants cont.
capital requirements
dollars needed to finance equipment supplies,
advertising, R&D, and the like necessary to start
government regulation
may bar or severely restrict potential new
entrants to an industry

21. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Substitute Goods and ServicesSubstitute Goods and Services
Goods/Services
that can easily replace the firm’s goods/services
I.e. Starbucks introduced a new drink called
Frappuccino. It is a cold drink that can substitute
for the more traditional hot coffee drink

22. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
CustomersCustomers
Potential Effects of Customers
they may drive down prices
push for more or higher-quality products
increase competition among sellers by
playing one against each other

23. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
IntegrationIntegration
Purchasing or developing related business units
thought of as facing the customer
Forward Integration-purchasing your customer
Why?
Backward Integration-purchasing your supplier
Why?
Horizontal Integration-purchasing competitors
Why?

24. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Customers cont...Customers cont...
Exhibit Bargaining Power to the Extent that:
they purchase a large volume relative to the
supplier’s total sales
the product/service represents a significant
expenditure by the customer
they pose a realistic threat of backward integration,
for example: the purchase of one or more of its
suppliers
they have readily available alternatives for the same
services/products

25. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
SuppliersSuppliers
Bargaining Power of Suppliers
often controls how much they can :
raise prices above their costs
reduce the quality of goods and services
is increased by patents and copyrights
is increased by supplier-customer alliances
which are advocated by total quality programs

26. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Impact of TechnologyImpact of Technology
What is technology?
knowledge, tools, techniques, and actions
used to transform material , information, and other inputs
into finished goods and services
plays pivotal role in creating and changing an
organization’s task environment

27. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright © 1999
PPT
Impact of Technology cont...Impact of Technology cont...
Role in Strategy :
creates strategic options not feasible with older
technologies
approaching those of traditional large-scale
manufacturing facilities
marketing over the internet
online, real-time financial management systems
can determine profit and loss on a a daily basis
improved access to services (e.g. Banking)