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Book Summary Fundamentals of Management BMO- 24306
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Hoofstuk 2External environment: factors, forces, situations and events outside the organization that affect its
performance.
- Economic component: factors such as interest rates, inflation, employment/unemployment
rates, disposable income levels, stock market fluctuations and business cycle stages.
- Demographic component: concerned with trends in population characteristics such as age,
race, gender, education level, geographic location, and family composition.
- Technological component: concerned with scientific or industrial innovations.
- Sociocultural component: concerned with societal and cultural factors such as values,
attitudes, trends, traditions, lifestyles, beliefs tastes and patterns of behaviour.
- Political/legal component: look at federal, state, and local laws, as well as laws of other
countries and global laws.
- Global component: encompasses those issues (political instability) associated with
globalization and a world economy.
Sharing company: an economic environment in which asset owners share with others individuals
through a peer-to-peer service, for a fee ,their underutilized physical assets, (such as a home, car,
cloths, tools etc.)
Omnipotent view of management: the view that managers are directly responsible for an
organization’s success or failure
- Differences in performance are due to decisions and actions of managers
- Get fired if profits decreases
Symbolic view of management: the view that much of an organization’s success or failure is due to
external forces outside managers’ control.
- Managers don’t have a significant effect on organization’s performance
- Managers symbolize control and influence by developing plans, making decisions and
engaging in other managerial activities to make sense out of random, confusing, and
ambiguous situations.
Demographics: the characteristics of a populations used for purposes of social studies. They can
have a significant impact on how managers manage. Such as age, income, sex, race, education level,
ethnic makeup etc..
Studying demographics involves looking not only at current statistics but also at future trends:
- Recent analysis of birth rate shows-> more than 80% of babies being born are form Africa
and Asia.
- India will be the youngest country by 2020 -> median age 29 years.
Technology: any equipment tools, or operating methods that are designed to make work more
efficient
- Impact on process where inputs (labor, raw materials) are transformed into outputs (goods,
and services to be sold). -> robots and computer equipment.
- Impact on information. -> IT has created desktop computers, tablets etc. They can work from
any place
- Changed way managers manage. -> communicating with telecommuting individuals who
work from home.
, The external environment constrains and challenges managers:
1. Through its impact on jobs and employment
2. Through the environmental uncertainty that is present
3. Through the various stakeholder relationships that exist between an organization and its
external constituencies.
1. During past global recession unemployment rates rose to levels not seen in many years ->
challenges for managers who must balance work demands and having enough people with
the right skills to do an organization’s work.
2. Environmental uncertainty: the degree of change and complexity in an organization’s
environment.
First dimension of uncertainty is the degree of unpredictable change. If the components in
an organization’s environment change frequently -> dynamic environment. A stable
environment might be one in which there are no new competitors, few technological
breakthroughs by current competitors, little activity by pressure groups to influence the
organization etc..
The other dimension of uncertainty describes the degree of environmental complexity,
which looks at the number of components in an organization’s environment and the extent
of the knowledge that the organization has about those components. An organization that
has few competitors, customers, suppliers etc. has a less complex and less uncertainty
environment.
Environmental complexity: the number of components in an organization’s environment
and the extent of knowledge that the organization has about those components.
Managers try to minimize uncertainty, which is an threat to an organization’s effectiveness.
3. The more obvious and secure these relationships with stakeholders, the more influence
managers will have over organizational outcomes.
These groups can influence the organization: Starbucks, coffee bean farmers, employees,
local communities etc. may impact the decision of a manager.
Managers should care about the relationships with stakeholders because it can lead to
desirable organizational outcomes such as improved predictability of environmental
changes, successful innovations etc..
Stakeholders: any constituencies in an organisation’s environment and the extent of
knowledge that the organization has about those components.
Organizational culture:
- Culture is perceived: it cannot be physically touched, but employees experience it on the
basis of what they experience within the organization
- Culture is descriptive: it is concerned with how members perceive or describe the culture.
- Culture is shared: individuals tend to describe the organization’s culture in similar terms.
Organizational culture: the shared values, principles, traditions and ways of doing things that
influence the way organizational members act.
Organization’s culture affects managers:
1. Its effect on what employees do and how they behave.
2. It effect on what managers do.
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