Unit 3 The Enterprise Environment

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Unit 3 The Enterprise Environment

• The Economic Context

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Market Structures

• Perfect competition
• Or Pure Competition
• Characterized by many customers and many
  suppliers of an identical product.

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Characteristics of Perfect Competition

• Many buyers and sellers
• No buyer or seller can control the price
• A homogenous product
• Substitute
• Sufficient knowledge
• Perfect information
• Free entry
• Freedom enter or quit from a market

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• Any example of perfect competition?

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• Imperfect competition
• The characteristics of imperfect competition

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monopoly

• Definition only one firm supplies a product
• Which is given more attention to when markets are
  monopolies?
• Why do so many companies want to be monopolies?

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True or False

• Monopoly is characterized by a lack of
  competition
• Monopolies will set a lower price and a higher
  level of output than would be set under perfect
  competition.
• Monopoly prevents innovation.

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Oligopoly

• Definition it is characterized by a few,
  dominant suppliers.
• A high degree of interdependencies among
  suppliers.
• Question
• What must suppliers do in order to keep an
  identical product at a high price?

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Economic Structures

• Capitalist economy system
• Market economy
• Freedom to own and profit
• Justified profit motive
• Reinforcement by law of private property
• Belief in the worth of the individual.
• Question What are individuals free to do under
  capitalism?

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• Marxist economy system
• Command economy
• Equal share and ownership of productive goods
• Profit being evil
• Central planning
• Question How are goods produced and distributed
  under Marxist economy?

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• Socialist economy system
• Mixture of the previous two systems
• no economy is pure.
• Questions
• Which two economic systems are in sharp contrast?
• What economic system lays special emphasis on the
  value of the individual?
• What kind of economic system do you think China
  is now under?

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The Entrepreneurial Environment

• What is the entrepreneurial environment?
• What is entrepreneurship?
• What countries do not encourage entrepreneurship?

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• Three factors that encourage entrepreneurship
• The possibility of exercising monopoly power
• Risk taking
• Intrinsic rewards of innovation

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• Questions
• What is the difference between innovation and
  invention?
• Why are entrepreneurs are forced to keep
  searching new ideas and keep innovating?
• Why must managers be aware of the various laws
  and regulations of the countries that they do
  business in?

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The External Environment
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Why

• No organization in a vacuum
• The forces outside could be a double-edge sword

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• External organizational environment
• All elements existing outside and with the
  potential to affect the organization.

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• Two layer of external environment
• General environment
• Task environment (specific environment)

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• General environment
• the forces outside organizations boundaries that
  can impact it indirectly
• Task environment (specific environment)
• The forces closer to the organization that impact
  it directly

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External environment
General environment
economic
international
suppliers

Labor market
organization
demographic
legal-political
customers
competitors
Task environment
sociocultural
technological
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The general environment

• It includes
• international
• technological
• sociocultural
• economic
• legal-political
• Population condition

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The General Environment

• General environmental trends and events
• Little ability to predict them
• Even less ability to control them
• Can vary across industries

Demographic
Sociocultural
Political/Legal
Technological
Economic
Global (International)
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International dimension

• Globalization
• Think internationally

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Global Segment

• Increasing global trade
• Currency exchange rates
• Emergence of the Indian and Chinese economies
• Trade agreements among regional blocs (NAFTA, EU,
  ASEAN)
• Creation of WTO (decreasing tariffs/free trade in
  services)

Demographic
Sociocultural
Political/Legal
Technological
Economic
Global (International)
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Managing in a Global Environment

• Challenges
• Coping with the sudden appearance of new
  competitors
• Acknowledging cultural, political, and economic
  differences
• Dealing with increased uncertainty, fear, and
  anxiety
• Adapting to changes in the global environment

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Technological Dimension

• It includes scientific and technological
  advancements
• Latest advancement of technology
• Computer
• Internet
• video cameras
• digital products
• ATM
• mobile phone

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Technological Segment

• Genetic engineering
• Emergence of Internet technology
• Computer-aided design/computer-aided
  manufacturing systems (CAD/CAM)
• Research in synthetic and exotic materials
• Pollution/global warming
• Miniaturization of computing technologies
• Wireless technology

Demographic
Sociocultural
Political/Legal
Technological
Economic
Global
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• What impact has technology brought to business
  life?
• SOHO
• PAPERLESS OFFICE

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Sociocultural dimension

• Demographic characteristics
• Norms
• Customs
• Values
• Geographical distribution
• Population density
• Age
• education levels

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Sociocultural Segment

• More women in the workforce
• Increase in temporary workers
• Greater concern for fitness
• Greater concern for environment
• Postponement of family formation

Demographic
Sociocultural
Political/Legal
Technological
Economic
Global
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Demographic Segment

• Aging population
• Rising affluence
• Changes in ethnic composition
• Geographic distribution of population
• Greater disparities in income levels

Demographic
Sociocultural
Political/Legal
Technological
Economic
Global
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The Cultural Environment

• National Culture
• The values and attitudes shared by individuals
  from a specific country that shape their behavior
  and their beliefs about what is important.
• May have more influence on an organization than
  the organization culture.

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Economic Dimension

• Macro level
• Taxation
• Government spending
• General demand,
• Interest rates
• Exchange rates
• Micro level
• Merger and acquisition

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Economic Segment

• Interest rates
• Unemployment
• Consumer Price index
• Trends in GDP
• Changes in stock market valuations

Demographic
Sociocultural
Political/Legal
Technological
Economic
Global
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The Economic Environment

• Economic Systems
• Market economy
• An economy in which resources are primarily owned
  and controlled by the private sector.
• Command economy
• An economy in which all economic decisions are
  planned by a central government.
• Monetary and Financial Factors
• Currency exchange rates
• Inflation rates
• Diverse tax policies

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Legal-political

• Government do everything just for their goals
  including influencing the behaviors of enterprise
  through law and politics.
• Such as
• consumer protection legislation
• product safety requirements
• import and export restriction
• environment protection agency
• Pressure groups

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• The Legal Environment
• Stability or instability of legal and political
  systems
• Legal procedures are established and followed
• Fair and honest elections held on a regular basis
• Differences in the laws of various nations
• Effects on business activities
• Effects on delivery of products and services

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• Try to analyze the external environment of GDPU
• As a manager, how the external environment will
  influence his work?

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How the Environment Affects Managers

• Environmental Uncertainty
• The extent to which managers have knowledge of
  and are able to predict change their
  organizations external environment is affected
  by
• Complexity of the environment the number of
  components in an organizations external
  environment.
• Degree of change in environmental components how
  dynamic or stable the external environment is.

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Task environment
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Review

• Try to analyze the external environment of GDPU
• As a manager, how the external environment will
  influence his work?

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How the Environment Affects Managers

• Environmental Uncertainty
• The extent to which managers have knowledge of
  and are able to predict change their
  organizations external environment is affected
  by
• Complexity of the environment the number of
  components in an organizations external
  environment.
• Degree of change in environmental components how
  dynamic or stable the external environment is.

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Task Environment

• It includes those sectors that have a direct
  working relationship with the organization.
• Forces from suppliers, distributors, customers
  ,competitors and the labor market.
• It refers the choices, actions and outcomes a
  given user has for a given task.

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Customers

• Definition Those people and organization who
  acquire goods or service from the organization
  are customers.
• Key words frequent purchase relationship
  maintaining future
• The receiver

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• Broadly speaking, customers can be divided into
  two main groups.
• Internal customers
• People who work with you.
• External customers
• People who work outside your business.

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• Internal customers
• Fellow workers
• Supervisors
• Managers
• Trainees
• Cleaners
• Part time staff

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• External customers
• Customers
• Suppliers
• Designers
• Service providers
• Contractors
• Sales representatives
• Delivery personnel

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The determiner

• Terms
• Customer needs and satisfaction
• Customer service
• Customer relationship management
• What are the relations between the organization
  and customers?

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Competitors

• Definition
• others Seller of a product or service whose
  product or service can be used to fill or satisfy
  a consumer need (real or imagined) in a market
  where other sellers offer products that will also
  fill or satisfy the same need.

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Relation between competitors

• Consequence of high level of competition
• Low price
• Little profit
• Cooperation

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• Who is a competitor in business?
• Business competitors are
• Other organizations offering the same product or
  service now.
• Other organizations offering similar products or
  services now.
• Organizations that could offer the same or
  similar products or services in the future.
• Organizations that could remove the need for
  a product or service.

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• Competitor analysis has two primary activities
• 1) obtaining information about important
  competitors
• 2) using that information to predict competitor
  behavior.

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• The goal of competitor analysis is to understand
• with which competitors to compete,
• competitors' strategies and planned actions,
• how competitors might react to a firm's
  actions,
• how to influence competitor behavior to the
  firm's own advantage.

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• Can you give some examples of competitors?

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• Competitor analysis has several important roles
  in strategic planning
• To help management understand their competitive
  advantages/disadvantages relative to competitors
• To generate understanding of competitors past,
  present (and most importantly) future strategies
• To provide an informed basis to develop
  strategies to achieve competitive advantage in
  the future
• To help forecast the returns that may be made
  from future investments (e.g. how will
  competitors respond to a new product or pricing
  strategy?

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• What questions should be asked when undertaking
  competitor analysis? The following is a useful
  list to bear in mind
• Who are our competitors?
• What threats do they pose?
• What are the objectives of our competitors?
• What strategies are our competitors pursuing and
  how successful are these strategies?
• What are the strengths and weaknesses of our
  competitors?
• How are our competitors likely to respond to any
  changes to the way we do business?

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Suppliers

• Definition those providing the organization with
  inputs
• Managers need to secure reliable input sources
• Managers often prefer to have many, similar
  suppliers of each item.
• What are the relations between suppliers and the
  organization?

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• Suppliers provide organization with inputs
• Suppliers provide raw materials, components, and
  even labor.
• Working with suppliers can be hard due to
  shortages, unions, and lack of substitutes.
• Suppliers with scarce items can raise the price
  and are in a good bargaining position.

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Labor market

• Definition
• Two factors
• Continuous education and training
• Labor dislocation

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• Distributors organizations that help others to
  sell goods.
• Compaq Computer first used special computer
  stores to sell their computers but later sold
  through discount stores to reduce costs.
• Some distributors like Wal-Mart have strong
  bargaining power.
• They can threaten not to carry your product.

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• Theoftware it includes Shareware and software
  licensed for use inside campus

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About Task Environment

• Managers can change task environment.
• Try to analyze the task environment of GDPU.

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Terms

• Perfect competition monopoly oligopoly
  inflation rate foreign exchange rate consumer
  purchasing power unemployment rate interest
  rate not-for-profit organization merger
  acquisition customer service going bankrupt
  continuous investment labor market.

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Managing the Organization Environment

• Managers must measure the complexity of the
  environment and rate of environmental change.
• Environmental complexity deals with the number
  and possible impact of different forces in the
  environment.
• Managers must pay more attention to forces with
  larger impact.
• Usually, the larger the organization, the greater
  the number of forces managers must oversee.
• The more forces, the more complex the mangers
  job becomes.

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• Environmental change
• refers to the degree to which forms in the
  task and general environments change over time.
• Change rates are hard to predict.
• The outcomes of changes are even harder to
  identify.
• Managers thus cannot be sure that actions taken
  today will be appropriate in the future given new
  changes.

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Reducing Environmental Impact

• Managers can counter environmental threats by
  reducing the number of forces.
• Many firms have sought to reduce the number of
  suppliers it deals with which reduces
  uncertainty.
• All levels of managers should work to minimize
  the potential impact of environmental forces.
• Examples include reduction of waste by first line
  managers, determining competitors moves by
  middle managers, or the creation of a new
  strategy by top managers.

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Boundary Spanning

• Managers must gain access to information needed
  to forecast future issues.
• Boundary spanning is the practice of relating to
  people outside the organization.

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Boundary Spanning Roles
Managers in boundary spanning roles
feedback information to other managers
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Scanning and Monitoring

• Environmental scanning is an important boundary
  spanning activity.
• Includes reading trade journals, attending trade
  shows, and the like.
• Gatekeeping the boundary spanner decides what
  information to allow into organization and what
  to keep out.
• Must be careful not to let bias decide what comes
  in.
• Interorganizational Relations firms need
  alliances globally to best utilize resources.
• Managers can become agents of change and impact
  the environment.

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Change as a 2-way Process
Change in Environment affects
Environment
Organization
Managerial actions impact
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The Organization as an Open System
Output Stage
Conversion Stage
Input Stage
Sales of outputs Firm can then buy inputs
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Systems between org. n env.
Environment
System
Transformation
Outputs
Inputs
Raw materials Human resources Capital Technology
Information
Products services Financial results Information
Human results
Employees work activities Management
activities Technology and operations methods
Environment