Principles and Dynamics of Management

Principles and Dynamics of Management

Presentation Outline Chapter 3 – The Environment And Corporate Culture Case Analysis – Rio Grande Supply Company Chapter 4 – Managing in a Global Environment Case Analysis – Shui Fabrics

CHAPTER 3 The Environment And Corporate Culture

LEARNING OBJECTIVES • Describe the general and task environments and the dimensions of each. • Explain the strategies managers use to help organizations adapt to an uncertain or turbulent environment. • Define corporate culture and give organizational examples. • Explain organizational symbols, stories, heroes, slogans, and ceremonies and their relationship to corporate culture. • Describe how corporate culture relates to the environment. • Define a cultural leader and explain the tools a cultural leader uses to create a high-performance culture.

The environment surprises many managers and leaves them unable to adopt their companies to new competition, shifting consumer interests, or new technologies. • Example: Xerox was dominant in its industry for many years, but managers missed cues from the environment and got blindsided by rivals Canon and Ricoh when they began selling comparable copy machines at lower prices. • To be effective, managers must monitor and respond to the environment – an open systems view. The events that have the greatest impact on an organization typically originate in the external environment. • Globalization and worldwide societal turbulence affect companies in new ways, making the international environment of growing concern to managers everywhere.

The tremendous and far reaching changes occurring in today’s world can be understood by defining and examining components of the external environment. • The external organizational environment includes all elements existing outside the boundary of the organization that have the potential to affect the organization. • The organization’s external environment can be further conceptualized as having two layers: general and task environments.

The general environment is the outer layer that is widely dispersed and affects organizations indirectly. General Environment Technological Task Environment Customers International Socio cultural Internal Environment LaborMarket Competitors Employees Culture Management Suppliers Economic Legal/Political The dimensions of the general environment include international, technological, socio cultural, economic, and legal-political.

International Dimension - represents events originating in foreign countries as well as opportunities for U.S. (or Philippine) companies in other countries. • Technological Dimension - includes scientific and technological advancements in the industry and society at large. • Socio Cultural Dimension - represents the demographic characteristics, norms, customs and values of the population within which the organization operates. • Economic Dimension - represents the overall economic health of the country or region in which the organization operates. • Legal-political Dimension - includes federal, state and local government regulations and political activities designed to influence company behavior.

The task environment is closer to the organization and includes the sector that conducts day-to-day transactions with the organization and directly influence its basic operations and performance. General Environment Technological Task Environment Customers Socio cultural International Internal Environment Competitors LaborMarket Employees Culture Management Suppliers Economics Legal/Political The task environment includes customers, competitors, suppliers, and the labor market.

Customers - People and organizations in the environment who acquire goods or services from the organization. • Competitors – Other organizations in the same industry or type of business that provide goods and services to the same set of customers. • Suppliers – People and organizations who provide the raw materials the organization uses to produce its output. • Labor Market – The people available for hire by the organization. Every organizations needs a supply of trained, qualified personnel.

Why do organizations care so much about factors in the external environment? The reason is that the environment creates uncertainty for the managers and they must respond by designing the organization to adapt to the environment • Environmental Uncertainty • Organizations must manage environmental uncertainty to be effective • Uncertainty means that the managers do not have sufficient information about environmental factors to understand and predict environmental needs and changes

As indicated in below illustration, environmental characteristics that influence uncertainty are the numbers of factors that affect the organization and the extent to which those factors change. High Uncertainty High Adapt to Environment Rate of Change in Factors in Environment Low Uncertainty Low Low High Numbers of Factors in Environment

In an organization in a highly uncertain environment everything seems to be changing. • In that case, an important quality for a new manager is “mindfulness”, which includes the qualities of being open minded and an independent thinker. • In a stable environment, closed minded manager may perform okay because much work can be done in the same old way. • In an uncertain environment, even a new manager needs to facilitate new thinking, new ideas and a new ways of working. CHAPTER 3 : The Environment and Corporate Culture

ADAPTING TO THE ENVIRONMENT • If an organization faces increased uncertainty with respect to competition, customers, suppliers or government regulations managers can use strategies to adapt these changes, including • boundary-spanning roles, • interorganizational partnerships, and • mergers or joint ventures. CHAPTER 3 : The Environment and Corporate Culture

Boundary-spanning roles • Roles assumed by people and/or departments that link and coordinate the organization with key elements in the external environment. • Boundary-spanners have two purposes for the organization: 1) Detect and process information about changes in the environment; 2) Represent the organization’s interests to the environment. • Boundary-spanning has many ways/approaches to span the boundary (e.g. Marketing and purchasing departments span the boundary to work with customers and suppliers, both face to face and through market research) • Boundary-spanning is an increasingly important task in organizations because environmental shifts can happen quickly in today’s world. • Managers need good information about their competitors, customers, and other elements of the environment to make good decisions. Thus, the most successful companies involve everyone in boundary-spanning activities.

Interorganizational Partnership • An increasingly popular strategy for adapting the environment is to reduce boundaries and increase collaboration with other organizations. • Managers shift from adversarial orientation to a partnership orientation, as summarized in the exhibit in the next slide. CHAPTER 3 : The Environment and Corporate Culture

The Shift to a Partnership Paradigm • From Adversarial Orientation • Suspicion, competition, arm’s length • Price, efficiency, own profits • Information and feedback limited • Lawsuits to resolve conflict • Minimal involvement and up-front investment • Short-term contracts • Contracts limit the relationship • To Partnership Orientation • Trust, value added to both sides • Equity, fair dealing, everyone profits • E-business links to share information and conduct digital transactions • Close coordination; virtual teams and people onsite • Involvement in partner’s design and production • Long-term contracts • Business assistance goes beyond the contract

Mergers and Joint Ventures • A step beyond strategic partnerships is for companies to become involve in mergers or joint ventures to reduce environmental uncertainty. • A merger occurs when two or more organizations combine to become one e.g. Wells Fargo merged with Northwest Corp. to form the nation’s fourth largest bank corporation. • A joint venture involves a strategic alliance or program by two or more organizations. • A joint venture typically occurs when a project is too complex, expensive, or uncertain for one firm to handle alone. • Many small businesses are also turning to joint ventures with large firms or international partners. A larger partner can provide sales staff, distribution channels, financial resources or a research staff.

The internal environment within which managers work includes corporate culture, production technology, organization structure and physical facilities. Corporate culture surfaces as extremely important to competitive advantage. General Environment Technological Task Environment Customers Socio cultural International Internal Environment Competitors LaborMarket Employees Culture Management Suppliers Economics Legal/Political

Culture – The set of key values, beliefs, understandings and norms that members of an organization share. The concept of culture helps managers to understand the hidden, complex aspects of organizational life. Culture is a pattern of shared values and assumptions about how things are done within the organization. This pattern is learned by members as they cope with external and internal problems and taught to new members as the correct way to perceive, think, and feel. Culture can be analyzed at three levels, as illustrated below Exhibit 3.5: Levels of Corporate Culture C Culture that can be seen at the surface level Visible 1. Artifacts such as dress, office layout, symbols, slogans, ceremonies Invisible 2. Expressed values, such as “The Penny Idea,””The HP way” 3. Underlying assumptions and deep beliefs, such as “people here care about one another like a family. Deeper values & shared understandings held by organization members

The fundamental values that characterize an organization’s culture can be understood through the visible manifestations of the following: • Symbol – An object, act or event that conveys meaning to others. Symbols can be considered a rich, nonverbal language that vibrantly conveys the organization’s important values concerning how people relate to one another and interact with the environment. • Stories – A narrative based on the true events and repeated frequently and shared among organizational employees. • Heroes – A figure who exemplifies the deeds, character and attributes of a strong corporate culture. Heroes are role models for employees to follow. • Slogans – A phrase or sentence that succinctly express corporate value. • Ceremonies - A planned activity at a special event that is conducted for the benefit of an audience.

ENVIRONMENT AND CULTURE A big influence on internal corporate culture is the external environment. Cultures can vary widely across organization; however, organizations within the same industry often reveal similar cultural characteristics because they are operating in similar environments. The internal culture should embody what it takes to succeed in the environment. Adaptive Cultures Research at Harvard on 207 U.S. firms illustrated the critical relationship between corporate culture and the external environment. The study found out that a strong corporate culture alone did not ensure business success unless the culture encouraged healthy adaptation to the external environment. As illustrated in Exhibit 3.6, adaptive corporate cultures have different values and behavior from unadaptive cultures.

Exhibit 3.6: Environmentally Adaptive versus Unadaptive Corporate Culture Adaptive Corporate Cultures Unadaptive Corporate Cultures Visible Behavior Expressed Values Managers pay close attention to all their constituencies, especially customers, and initiate change when needed to serve their legitimate interests, even if it entails taking some risks. Managers care deeply about customers, stockholders, and employees. They strongly value people and processes that can create useful change (e.g. leadership initiatives up and down the management hierarchy. Managers tend to behave somewhat insularly, politically, and bureaucratically. As a result, they do not change their strategies quickly to adjust to or take advantage of changes in their business environment. Managers care mainly about themselves, their immediate work group, or some product (or technology) associated with that work group. They value the orderly and risk-reducing management process much more highly than the leadership initiatives.

TYPES OF CULTURES There are four categories or types of culture as illustrated below in Exhibit 3.7. These categories are based on two dimensions: (1) the extent to which external environment requires flexibility or stability; and (2) the extent to which a company’s strategic focus is internal or external. Four Types of Corporate Cultures Needs of the Environment Flexibility Stability External Adaptability Culture Achievement Culture Strategic Focus Involvement Culture Consistency Culture Internal

The four categories associated with these differences are adaptability, achievement, involvement and consistency. • Adaptability Culture – emerges in an environment that requires fast response and high-risk decision making. A culture characterized by values that support the company’s ability to interpret and translate signals from the environment into new behavior responses. • Achievement Culture – A results-oriented culture that values competitiveness, aggressiveness, personal initiative and achievements. An emphasize on winning and achieving specific ambitious goals is the glue that holds the organization together. • Involvement Culture – emphasizes an internal focus on the involvement and participation of employees rapidly adapt the changing needs of the environment. A culture that places high value on meetings the needs of employees and values cooperation and equality. • Consistency Culture – uses internal focus and consistency orientation for a stable environment. A culture that values and rewards a methodical, rational, orderly way of doing things.

Managing the High-Performance Culture • High-Performance Culture - A culture based on a solid organizational mission or purpose that uses shared adaptive values to guide decisions and business practices and to encourage individual employee ownership of both bottom-line results and the organization’s cultural backbone. • Cultural Leadership – A primary way in which managers shaped cultural norms and values to build a high-performance culture. Managers must overcommunicate to ensure that employees understand the new culture values, and they signal these values in actions as well as words. • A cultural leader defines and uses signals and symbols to influence corporate culture. They influence two key areas: • The cultural leader articulates a vision for the organizational culture that employees can believe in. • The cultural leader heeds the day-to day activities that reinforce the cultural vision.

Exhibit 3.8 below illustrates four organizational outcomes based on the relative attention managers pay to cultural values and business performances. Combining Culture and Performance High Good for short-term bottom line, but is it sustainable? C Both bottom-line results and inspiration. Sustainable success via a high-performance culture. D Attention to Business Performance May be going out of business. Little emphasis on results or values. A Strong culture is good for moral, but can managers afford to keep it up without business results? B Low Low High Attention to Values

Interpretation: A company in Quadrant A pays little attention to either values or business results and is unlikely to survive for long. Managers in Quadrant B organizations are highly focused on creating a strong cohesive culture, but they don’t tie organizational values directly to goals and desired business results. Quadrant C represents organizations that are focused primarily on bottom-line results and pay little attention to organizational values. This approach may be profitable in the short run, but the success is difficult to sustain over the long-term - the reason behind is that the “glue” that holds the organization together – that is, shared cultural values- is missing. Company in Quadrant D put high emphasis on both culture and solid business performance as drivers of organizational success. Managers in these organization align values with the company’s day-to-day operations – hiring practices, performance management, budgeting, criteria for promotions and rewards. Quadrant D organization represent high-performance culture.

CASE ANALYSIS Rio Grande Supply Co.

Relevant Facts (1 of 3) • Jasper Hennings, president of Rio Grande Supply Co., knew full well a company’s top executives were largely responsible for determining a firm’s corporate culture. That’s why he took such personal pride in the culture of his Texas-based wholesale plumbing supply company. It didn’t just pay lip service to the values it espoused: integrity, honesty, and a respect for each individual employee. His management team set a good example by living those principles. • The importance of Jasper attached to respecting each individual was apparent in the company’s Internet use policy. It was abundantly clear that employees weren’t to use Rio Grande’s computers for anything but business-related activities. However, Jasper himself had vetoed the inclusion of what was becoming a standard provision in such policies that management had the right to access and review anything employees created, stored, sent, or received on company equipment. He cut short any talk of installing software filters that would prevent abuse of the corporate computer system. Still, the company reserved the right to take disciplinary action, including the possible termination, and to press criminal charges if an employee was found to have violated the policy. Case Analysis: Rio Grande Supply Co.

Relevant Facts (2/3) • Henry Darger, his hard-working chief of operations and a member of his church, had summarily fired a female employee for having accessed another worker’s e-mail surreptitiously. She hadn’t taken her dismissal well. “Just ask Darger what he’s up to when he shuts his office door,” she snarled as she stormed out of Jasper’s office. She made what Jasper hoped was an idle threat to hire a lawyer. When Jasper asked Henry what the fired employee could possibly have meant, tears began to roll down the operations chief’s face. He admitted that ever since a young nephew had committed suicide the year before and a business helped his wife start had failed, he’d increasingly been seeking escape from his troubles by logging onto adult pornography sites. At first, he’d indulged at home, but of late he’d found himself spending hours at work visiting pornographic sites, the more explicit the better. • Henry’s immediate dismissal of the woman who’d tapped into another employee’s e-mail when the operations chief was violating the Internet policy himself was hypocritical. The person charged with enforcing that policy needed to be held to the highest standeards. Case Analysis: Rio Grande Supply Co.

Relevant Facts (3/3) • Jasper knew that Rio Grande employees routinely used computers at their desks to check personal e-mail, do banking transactions, check the weather, or make vacation arrangements. The company had turned a blind eye because it didn’t seem worth the effort of enforcing the ahrd-and-fast policy for such minor infractions. • Henry was a valued, if clearly troubled, employee. Replacing him would be costly and difficult. If Jasper decided to keep him on, the president clearly had no choice but to cross the line and get involved in Henry’s private life, and he would be treating Darger differently from the treatment the female employee received. Case Analysis: Rio Grande Supply Co.

Question#1-A: What environment factors have helped to create the situation Jasper Hennings faces? • The following environment factors have helped to create the situation Jasper Hennings faces: • Technological (External Environment) – considering the technology advancement, it is probable that the company’s employee do non-work related matters such us downloading and research using the internet. • Internal Environment – the company did not adjust to the technology advancement. The company should have taken measure i.e. installing software filters that would have prevented abuse of the company’s computer system. Case Analysis: Rio Grande Supply Co.

Question#1-B: What factors does Jasper need to consider when deciding on his course of action? • Jasper needs to consider the following factors on his course of action? • The company’s policies. • The people that will be affected by the his decision. This includes the people of the company who might be affected either positively or negatively. • The possible consequences of his decision. Case Analysis: Rio Grande Supply Co.

Question#2-A: Analyze Rio Grande’s culture. In addition to the expressed cultural values and beliefs, what other subconscious values and beliefs do you detect? • In addition to the expressed cultural values and beliefs, following are Rio Grande’s subconscious values and beliefs • Empathy/compassion • Self preservation • Right to decide on things which are favorable to the company • Note: Please see the explanation for the above values in the next slide. Case Analysis: Rio Grande Supply Co.

Question#2-B: Are conflicting values present? When values are in conflict , how would you decide which ones takes precedence? • Yes, the following values are in conflict: • Honesty vs. Self preservation –Prior to the termination of the female employee, some employee’s of the company including the terminated female employee were already aware of “Henry Darger’s illegal access to adult pornography sites” but they did not report it to Jasper probably because of fear of losing their job. • Right to decide on things which are favorable to the company vs. Respect for each employee of the company – Jasper vetoed the inclusion of what was becoming a standard provision in the company’s internet and computer use policies that management had the right to access and review anything employees created, stored, sent, or received on company equipment. This is in conflict with the “respect for each employee’s privacy” value of the company. • Respect for the company policy versus compassion – Jasper’s struggle whether to punish Henry in accordance with the company’s policy or to keep him to the company. • When values are in conflict , the value that takes precedence is the one that produce the greatest net benefit for the greatest number. Case Analysis: Rio Grande Supply Co.

Questions#3: Assume you are Jasper. What are the first two action steps you would take to handle the Henry Darger situation? How would your role as a cultural leader influence your decision? What message will your solution send to the other managers and rank-and-file employees? • If I were jasper, I will do the following to handle Henry Darger’ssituation: • Terminate Henry – so that “his actions” will not be a precedent to other employees. • Meet the management team to analyze the root cause of the incident and identify possible improvements of the company’s current processes and internal controls to prevent same incident to happen again. • As a cultural leader, I am pressured to make the best possible decision because the people of the company look up to me. I am expected to perform my duties and responsibilities in accordance with the standards of the company. • Terminating Henry is in accordance with the company’s policies. Thus, this would bring a message to every employees that I’m serious in implementing the company’s policies. Thus, every employees will uphold strict compliance to the policies and procedures of the company. Case Analysis: Rio Grande Supply Co.

CHAPTER 4 Managing in a Global Environment

LEARNING OBJECTIVES • Describe the merging borderless world • Define international management and explain how it differs from the management of domestic business operations • Indicate how dissimilarities in the economic, sociocultural, and legal-political environments throughout the world can affect business operations • Describe the market entry strategies that business use to develop foreign markets • Describe the characteristics of a multinational corporation • Explain the challenges of managing in a global environment Chapter 4 : Managing in a Global Environment

A Borderless World A Borderless World The International Business Environment The Economic Environment The Legal-Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment • Business is becoming a unified, global field • Companies that think globally have a competitive edge • Domestic markets are saturated for many companies • Consumers can no longer tell from which country they are buying Chapter 4 : Managing in a Global Environment

Four Stages of Globalization A Borderless World The International Business Environment The Economic Environment The Legal-Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment The process of globalization typically passes through four distinct stages Domestic stage: market potential is limited to the home country production and marketing facilities located at home International stage: exports increase company usually adopts a multi-domestic approach Multinational stage: marketing and production facilities located in many countries more than 1/3 of its sales outside the home country Global (or stateless) stage: making sales and acquiring resources in whatever country offers the best opportunities and lowest cost ownership, control, and top management tend to be dispersed Chapter 4 : Managing in a Global Environment

Four Stages of Globalization A Borderless World The International Business Environment The Economic Environment The Legal-Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment Chapter 4 : Managing in a Global Environment

The International Business Environment A Borderless World The International Business Environment The Economic Environment The Legal-Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment • It is the management of business operations conducted in more than one country. • It applies the same basic management functions of planning, organizing, leading and controlling. Chapter 4 : Managing in a Global Environment

Key Factors in the International Environment A Borderless World The International Business Environment The Economic Environment The Legal-Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment • Economic • Economic development • Infrastructure • Resource and product markets • Per capita Income • Exchange rates • Economicconditions • Legal-Political • Political risk • Government takeovers • Tariffs, quotas, taxes • Terrorism, political instability • Laws, regulations Organization • Sociocultural • Socio values, beliefs • Language • Religion (objects, taboos, holidays) • Kinship patterns • Formal education, literary • Time orientation Chapter 4 : Managing in a Global Environment

The Economic Environment A Borderless World The International Business Environment The Economic Environment The Legal-Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment • Represents the economic conditions in the country where the international organization operates • This includes factors as • Economic development • Infrastructure • Resource and product markets • Exchange Rates • Inflation • Interest Rates • Economic Growth Chapter 4 : Managing in a Global Environment

The Economic Environment A Borderless World The International Business Environment The Economic Environment The Legal-Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment • Economic Development • Countries categorized as “developing” or “developed” • Criterion used to classify is per capita income • Developing countries have low per capita incomes • LDCs located in Asia, Africa, and South America • Developed are North America, Europe, & Japan • Driving global growth in Asia, Eastern Europe, & Latin America • Infrastructure • A country’s physical facilities that support economic activities like • Airports, highways, and railroads • Energy-producing facilities • Communication facilities Chapter 4 : Managing in a Global Environment

The Economic Environment A Borderless World The International Business Environment The Economic Environment The Legal-Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment • Resource and Product Markets • Managers must evaluate market demand • To develop plants, resource markets must be available – raw materials and labor • Exchange Rate • Rate at which one country’s currency is exchanged for another country’s • Has become a major concern for companies doing business internationally • Changes in the exchange rate can have major implications for profitability of international operations Chapter 4 : Managing in a Global Environment

The Legal-Political Environment A Borderless World The International Business Environment The Economic Environment The Legal- Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment • Major legal-political factors affecting international business are • Political risk • Political instability • Laws and regulations Chapter 4 : Managing in a Global Environment

The Legal-Political Environment A Borderless World The International Business Environment The Economic Environment The Legal- Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment • Political risk • Defined as a company’s risk of loss of assets, earning power, or managerial control due to politically based events or actions by the host governments • Political instability • Events such as riots, revolutions, or government upheavals that affect the operations of an international company Laws and regulations • Laws and Regulations • This pertains to legislations which differ from country to country Chapter 4 : Managing in a Global Environment

The Social Environment A Borderless World The International Business Environment The Economic Environment The Legal- Politcal Environment The Sociocultural Environment International Trade Alliances Getting Started Internationally Multinational Corporations Managing in a Global Environment • A nation’s culture includes the shared knowledge, beliefs and values, as well as the common modes of behavior and ways of thinking, among members of society • There are 4 dimensions of national value systems that influence organization and employee working relationship. (Hofstede’s Value Dimension) • Power distance • Uncertainty avoidance • Individualism and collectivism • Masculinity/femininity • Long-term orientation vs short-term orientation Chapter 4 : Managing in a Global Environment

Principles and Dynamics of Management