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- Managers directly responsible for an org success or failure
- Quality or org is determined by the quality of its managers
- Managers have limited effect on org outcomes due to factors outside their control
- Ability of managers to affect outcomes influenced and constrained by external factors
- -economy, consumers, gov. policies, competitors, industry conditions, technology, actions of previous managers.
outside forces and institutions that can potentially affect the orgs performance
Components of external environment
- Customers - orgs exist to meet consumers needs
- Suppliers - provide materials and equipment as well as financial labour inputs
- Competitors - all orgs have one or more competitors to which they must be prepared to respond
- Public pressure groups - special interest groups that attempt to influence the actions of orgs.
- Economic conditions - include interest rates, inflation rates, disposable income, stock market, business cycles
- Legal-Political Conditions - Federal, provincial, local gov influence what orgs can and can't do
- eg. Human rights act, employment equity act etc.
- Socio-cultrual Conditoins - Changing expectations of society
- Demographic conditions - trends in physical characteristics of a population (gender age location etc)
- Technological Conditions - rapid changes occurring in tech.
Economic conditions (general env.)
include interest rates, inflation rates, disposable income, stock market, business cycles
Legal-Political Conditions (general env.)
Federal, provincial, local gov influence what orgs can and can't doeg. Human rights act, employment equity act etc.
Socio-cultrual Conditions (general env.)
Changing expectations of society
Demographic conditions (general env)
trends in physical characteristics of a population (gender age location etc)
Technological Conditions (general env.)
rapid changes occurring in tech.
- Global trade - regional trading alliances, WTO (world trade org), eg. EU, NAFTA, ASEAN. WTO - sets rules for international trade, 153 countries
- Legal-Political environment
- Economic Environment
- Cultural environment
Global trade (global env.)
regional trading alliances, WTO (world trade org), eg. EU, NAFTA, ASEAN. WTO - sets rules for international trade, 153 countries
Legal-Political environment (global env.)
- Stability or instability of legal and political systems
- - managers of global orgs must understand specific laws in countries when they do business
- - some countries have a history of unstable gov leading to greater uncertainty for companies operating there
Economic environment (global env.)
- need to understand economic system of a country
- - market economy in which resources are primarily owned and controlled by private sector
- - planned economy, all economic decisions are planned by central gov
- country's economic situation has the potential to constrain a managers decisions.
- Understand currency exchange rates, inflation, and diverse tax policeis.
Cultural Environment (global env.)
- national culture is more influential than corporate culture.
- Managers and employees vary on 5 attributes of national culture
- 1. individualism vs collectivism
- 2. power distance
- 3. uncertainty vs avoidance
- 4. long term and short term orientation
Individualism vs collectivism
- - degree to which people in a country prefer to act as individuals rather than members of groups.
- - individualistic socieities look at immediate family needs
- - collectivism societies expect others to look after and protect them
- - how members of society expect power to be equally shared.
- - high power, wide differences in power, employees show much respect to superiors.
- - low power, plays down inequalities, employees not afraid of boss
- - degree to which people tolerate risk and prefer structured over unstructured situations.
- - low uncertainty, comfortable with risks. tolerant of differing opinions
- - high uncertainty, feel threatened by uncertainty, high levels of anxiety
Achievement vs nuturing
- - acheivement, assertiveness, acquisition of money and goods, competition
- - nurturing, emphasizes relationships, concern for others
Long vs short term orientation
- - how a country feels about work and life
- - long term, look to the future, value thrift and persistence
- - short term, values past and presnet, emphasizing respect for tradition and fulfilling social obligations
Types of international orgs
- Multinational corporation - a firm that operates in multiple countries but manages from the home country
- Multidomestic corporation - firm that operates in several countries but decentralizes mgmt to the local country
- Global company - an international company that centralizes mgmt in home country
- Transnational or Borderless operation - international company that eliminates artificial geographical barriers
- Born global - company that chooses to go global from its inception
How organizations go global
- Global sourcing - purchasing materials or labour from around the world wherever cheapest
- Exporting - make products at home and selling them abroad
- Importing - selling products at home that are made abroad
- Licensing and Franchising - giving another org the right to use its name, tech, or product specs. Licensing is used by manufacturing orgs that make or sell another company's products. Franchising is used by service orgs to use another firm's name and operating methods.
- Strategic Alliance - partnership b/w a domestic and foreign company to share resources in developing new products or build production facilities. Joint venture = type of strategic alliance, partners form independent org for a business purpose (fast and less expensive)
- Foreign Subsidiary - direct investment by an org in a foreign country by creating separate, independent production facility or office (greatest resources, highest risk)
- Degree of change and complexity in an orgs environment.
- Environmental uncertainty is affected by... complexity of environment = # of components in an orgs external env. Degree of change in env components = how dynamic or stable external env is
Groups in the org external env that are affected by/have effect on orgs actions
Why manage stakeholder relationships?
- improved org performance
- right thing to do given the independence of orgs and its external stakeholders
Cons of globalization
- use of child labour to produce goods
- economic interdependence of trading countries
- spreading of US culture and values in business world