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Chapter 2: The Management Environment External Environment Factors, forces, situations, and events outside the organization that affect its performance. One of the biggest mistakes managers make today is failing to adapt to the changing world. No successful organization, or its managers, can operate without understanding and dealing with the dynamic environment—external and internal—that surrounds it. The term external environment refers to factors, forces, situations, and events outside the organization that affect its performance. For example, a volcanic eruption in Iceland in 2010 prevented delivery of auto parts that led to a shutdown at a BMW plant in South Carolina and a Nissan Motors facility in Japan. Components of the External Environment the external environment includes six components: • The economic component encompasses factors such as interest rates, inflation, changes in disposable income, stock market fluctuations, and business cycle stages. • The demographic component includes trends in population characteristics such as age, race, gender, education level, geographic location, income, and family composition. • The technological component focuses on scientific and industrial innovations. • The sociocultural component is concerned with societal and cultural factors such as values, attitudes, trends, traditions, lifestyles, beliefs, tastes, and patterns of behavior. • The political/legal component looks at federal, state, and local laws, as well as other countries’ laws and global laws. It also includes a country’s political conditions and stability. • The global component encompasses issues associated with globalization and a world economy. What Is the Economy Like Today? ◼ Global productivity still slow ◼ Global trade is sluggish ◼ U.S. employment is up ◼ Is the American dream still a possibility? The economic crisis that gripped the United States and other countries in 2008 appears to finally be over, though growth and productivity in Europe is still behind that of the United States. Global trade is also sluggish, prompting some analysts to ask whether the world is becoming less connected. With an unemployment rate of just 5.5 percent, U.S. employment is up, but much of that is related to low-wage jobs. Further complicating the picture is the fact that some seven million Americans are trapped in part-time jobs, unable to find full-time positions. Moreover, just 64 percent of Americans still believe that the so-called American dream that hard work leads to success and riches is real. Economic Inequality Harris Interactive Poll: Only 10 percent of adults think economic inequality is “not a problem at all.” Most survey respondents believed that it is either a major problem (57 percent) or a minor problem (23 percent). Why has this issue become so sensitive? Those who worked hard and were rewarded because of their hard work or creativity have long been admired. In the United States, that gap between the rich and the rest has been much wider than in other developed nations for decades and was accepted as part of our country’s values and way of doing things. The Sharing Economy Asset owners share with other individuals through peer-to- peer service, for a set fee, their underutilized physical assets or their knowledge, expertise, skills, or time. Airbnb, Uber, Zipcar, and SnapGoods are just a few examples of a fast-growing phenomenon called the sharing economy, in which asset owners share with other individuals through peer-to-peer service, for a set fee, their underutilized physical assets or their knowledge, expertise, skills, or time. Demographics Demography is destiny. What determines whether an organization has a strong culture or a weak culture?If there is a high level of agreement and commitment among the members of an organization on the importance of these values, their organization has a strong culture. An organization in which members do not agree with the core values or are not committed to the core values has a weak culture.
Is the view that much of an organization's success or failure is due to external forces outside managers control?Symbolic view: Much of the organization's success or failure is due to external forces outside of the manager's control. The two constraints on managers' discretion are organizational culture (internal) and the environment (external).
What is the initial source of an organization's culture?The original source of an organization's culture usually reflects the vision, mission and values of the organization's founder(s). Because they have the original idea, they usually have unique ways of carrying it out. Typically, they're not usually constrained by previous customs or approaches.
Which dimension of organizational culture is the degree to which employees are competitive rather than cooperative?in organizational culture, aggressiveness is the degree to which employees are aggressive and competitive rather than cooperative.
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