3 | 1© 2009 South-Western, Cengage Learning

Principles of Management

Chapter 3

The Changing Environment of Management

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What is an EnvironmentWhat is an Environment

The environment of a firm is the sum of all the elements and forces present in its immediate and remote surroundings which have potential impact on its ability to achieve its objectives.

Micro Environment consists of different types of stakeholders.

Macro Environment consists of different factors which are beyond the control of the business.

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Employees

Shareholders &Board of Directors

Customers

Suppliers

Government

Competitors

Labor Unions

Media

Special Interest Groups

Financial Institutions

Socio-cultural

Economic

Politico-legal

Technological

Ecological

THE TOTAL ENVIRONMENT OF THE FIRM THE TOTAL ENVIRONMENT OF THE FIRM

Global

THE FIRM

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DIRECT – ACTION ENVIRONMENT DIRECT – ACTION ENVIRONMENT

Elements of the environment that directly influence an organization’s activities.

Stakeholders – individuals or groups that are directly or indirectly affected by an organization’s pursuit of its goals.

Internal Stakeholders – individuals or groups for whom an individual manager is responsible.

Employees. Companies hire educated and flexible people to run the business.

Shareholders and Board of Directors. The governing structure of a firm . Shareholders are interested primarily in the return of their investments by exercising their voting rights and have left the actual operation of the organizations to the managers.

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What is the impact of CUSTOMERS to the business organization?

• Who are your customers? Why are customers very important to your business organization?

• What will happen when a business loses its customers?

• As a manager, what will you do to keep your customers?

NAME: REACTION PAPER

SUBJECT / YEAR / SECTION: DATE:

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External Stakeholders – groups or individuals in an organization’s external environment that affect the activities of the organization.

Customers. Those who pay to use an organization’s goods or services.

Suppliers. A person or organization that provides supplies such as raw materials, services, equipment, labor or energy to other organizations.

Government. Should not compete on business but should limit itself to preserving law and order and allowing the free market to shape the economy. It is also responsible for passing and enacting laws which establish and enforce the ground rules within which businesses must operate.

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External Stakeholders … cont

Special Interest Groups. Groups of people who organize to use the political process to influence specific issues.

Media. A powerful disseminator of both positive and negative information about the organization.

Labor Unions. Management and union of workers usually engage in some form of collective bargaining to negotiate wages, working conditions, hours, benefits, etc. (1987 Phil. Constitution, Art XIII, Sec 3)

Financial Institutions. Organizations depend on commercial banks, investment banks and insurance companies to acquire funds for maintaining and expanding their activities.

Competitors. People or other organizations that compete for customers or resources.

Phil

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INDIRECT – ACTION ENVIRONMENT INDIRECT – ACTION ENVIRONMENT (EXTERNAL ENVIRONMENT)(EXTERNAL ENVIRONMENT)

Elements of the environment that affect the climate in which an organization’s activities take place. Changes in the environment may represent threats or new opportunities for the firm.

Socio-cultural Environment. These are influences and trends in a country’s society or culture as well as human relationships and values that affect an organization.

Includes demographic distribution of people, race, sex, age, ethnic group, tradition, preferences, lifestyle, etc

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Nagging Inequalities in the Workplace

• Under the Glass Ceiling where women and minorities are prevented from moving up in the management hierarchy.

• Continuing Pressure for Equal Employment Opportunity (EEO)– Women, minorities, and the physically challenged

are all expected to press harder for more employment opportunities.

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Nagging Inequalities in the Workplace (cont’d)

• Part-Timer Promises and Problems

– Contingent workers also called part-timers or flexible workers (include temporary workers, on-call employees & independent contractors) will comprise an increasing percentage of the workforce.

– The advantages of lower wage and benefits costs and the flexibility of a contingent workforce are offset by their negative work attitudes and increased likelihood of quitting.

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The Social-Cultural Environment

Factors included are the levels of education, lifestyle, tastes and preferences, age profile, size and geographic distribution of the population which can influence the kinds of products and services which will be sold and the methods of selling them.

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The Political-Legal Environment

Forces that influence an organization’s activities as a result of the political process or climate. These are changes in the way politics shape laws and laws shape the opportunities and threats to an organization.

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The Economic Environment

• The general economic conditions and trends such as levels of investment, levels of consumer spending, unemployment, inflation rate, interest rates and economic growth that can affect a business performance.

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The Technological Environment

• Includes advances in basic sciences such as physics, as well as new developments in products, processes and materials.

• The level of technology in a society or a particular industry determines to a large extent what products and services will be produced, what equipment will be used and how operations will be managed.

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The Technological Environment

• Technology – is defined as all the tools and ideas available for extending the natural physical and mental reach of humankind. The central theme in technology is the practical application of new ideas.– Technology is facilitating the evolution of the information

age.– Information has become a valuable strategic resource.

Organizations that use appropriate information technologies to get the right information to the right people at the right time will enjoy a competitive advantage.

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Promoting Innovation Through Intrapreneurship

• Intrapreneur– An employee who takes personal responsibility

for pushing an innovative idea through a large organization

• Fostering Intrapreneurship– Focus on results and teamwork.– Reward innovation and risk taking.– Tolerate and learn from mistakes.– Remain flexible and change-oriented.

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Ecological Environment or Environment Factor

• Factors that can affect the Natural Environment where we live in.

• It includes destruction and pollution of air, water and land combine with the continuous increase in population make our Mother Earth unsustainable

• To be Environmentally efficient, Industries must…– Reformulate their products– Modify production processes– Redesign production equipment– Recycle by-products

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ConclusionConclusionAll firms face an external environment which is continuously changing which could represent threats or new opportunities. Managers must anticipate and renew their policies and plans based on the right management approach that is in accordance with the changing times. Anticipating change is possible through constant efforts to improve every aspect of the business. Today’s improvements are the result of yesterday’s efforts, and tomorrow’s improvements must follow from the efforts of today. No one today holds the opinion that what was good yesterday is still good today since social development requires constant changes to stay abreast of times. Society is constantly changing and evolving, so the company to be competitive, must not only adapt itself to social changes but also take all the necessary measures in anticipation of these changes.