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The Environment of Management (PESTEL (Economic (interest and inflation…
The Environment of Management
why
managers act on assumptions about culture and the evironment
assumptions affect what is done
organisations depend on their environment for inputs and to take outputs
Organisational Cultures
Schein - culture develops as people work together and develop shared beliefs
beliefs relate to mission, goals, ways of achieving goals and how to measure the performance
belief that culture affects performance
How culture develops
shared values, shared beliefs, norms, individual and group behaviour, reinforcing outcomes
Components of culture
espoused beliefs and values
beliefs members hold about their work and the situations with which they deal
Artefacts - surface level are visible features - dress, layout
basic underlying assumptions
deeply held ideas about the way people work together and the sources of success
Hofstede's comparative analysis
Uncertainty avoidance
High - tolerate ambiguity e.g. Latin america and Latin Europe
Low - uncomfortable with uncertainty, prefer clarity e.g. US, GB
Individualism
Individualist societies - stress individual responsibility and success for example US and UK
Collectivist societies stress loyalty to group in return for support e.g. Asia and South America
Power Distance
Accept inequality of wealth and power for example France and Brazil
Low - do not accept inequality - e.g. Sweden
Masculinity
Masculinity - societies show assertive behaviour e.g. Japan
Femininity - societies show modest behaviour, interest in quality of life e.g. Sweden, Norway and Denmark
Long term orientation
Long term - value rewards that will come far into the future e.g. China, Taiwan, Hong Kong and Japan
Short term - value past and present, respect for tradition
Socio-cultural context
meaning of culture
patterns of basic assumptions and ways of behaving that groups develop and transmit to new members
Context and culture
high context - shared experience and understanding
low context - meaning is clear and explicit
Attitudes
to change
result of positive human action or of events beyond human influence
to time
infinite or scarce resource to manage
conflict and harmony
some countries see dissent as normal and healthy and expect conflicts
others value harmony - seniority
Multiple cultures
Martin challenged view that culture takes a uniformed form
three perspectives
differentiation - conflicting beliefs by function or level
fragmentation - fluid transient views about events not related to functions or levels
integration - members have consistent beliefs and values
External forces
competitive environment
general environment
managers
stakeholders
Stakeholders
how to manage conflicting interests
companies seek to influence stakeholders
people or groups with expectations of organisation
customers, communities, government
Porter's Five forces of Competition framework
Potential entrants (threat), substitutes (threat), suppliers and buyers (bargaining power) - rivalry among existing firms
Threats of new entrants
entry barriers include
customer loyalty
economies of scale
high cost of set up
regulations
fewer new entrants leads to bigger profits
Intensity of rivalry among competitors - -> less profit
rivalry increases when
market growing slowly so firms fight for shares
high fixed costs encourage overproduction
many firms, but no dominant one
Power of buyers - more power less profit
increases if
many alternative products or suppliers are available
cost of switching to rivals is low
buyer takes high percentage of sales
bargaining power of supplier
few alternatisve
low percentage of buyers costs, little incentive to seek alternatives
buyer takers small percentage of sales
Threat of Substitutes
technological developments
new suppliers
buyers willing to change buying habits
managing the 5 forces
managers try shape them as part of their strategy
competitive forces affected by those in the general environment
subjective interpretation
PESTEL
Technological
discoveries
production and communication
socio cultural
lifestyles
demographics
Economic
interest and inflation rates
labour costs
growth prospects
Political
regulations
taxes
government
environment
water resources
climate change
legal
new laws and regulations
Purpose
attention to how may differ between nations
critical factors that stimulate internal change
Corporate Governance
Interests of professional managers often diverge from those of owners and or citizens who use and pay for public services
governance refers to rules and processes intended to ensure transparency and accountability
substance includes - internal controls, mechanism to limit power of individuals, process to manage relationships between groups
Integrating themes
sustainability
climate change managers seek ways to run organisations more sustainably
internationalisation
international organisations benefit from different cultural perspectives of employees
Entrepreneurship
seeing external opportunity is a key skill
governance
some cultures encourage excessive risks, which governance systems can discourage
Why study international aspects
distance not only management issue
different practices affect nations
growing value of business across national borders
conducting business internationally
exporting and importing
licensing
joint ventures
alternative structures
global companies - closely integrated operations across many countries
transnational companies - operate in many, but decentralise - consistent image
multinational companies - based in one country operate in many
The globalisation debate
benefits
wider choice
brings wealth, value
costs
benefits rich countries
corruption