Changing Environments

Characteristics of Changing External Environments

• Environmental Change
• Environmental Complexity
• Resource Scarcity
• Uncertainty

Environmental Change
Environmental Change is the rate at which a company’s environments change

• stable environments
• dynamic environments

Punctuated equilibrium theory
Companies cycle through long, stable periods and shorter, dynamic environments.

Environmental Complexity
Environmental Complexity: the number of external factors in the environment that affect organizations

Resource Scarcity
The degree to which an organization’s external environment has an abundance or scarcity of critical organizational resources.

Components of the General Environment

• Economy
• Technological trends
• Sociocultural trends
• Political / Legal trends.

Economy

• Growing vs. shrinking economies
• Predicting future economic activity
• Business confidence indices.

Impact of Technology
Technology can be a great benefit or a daunting threat. MP3 players have created a tremendous new business opportunity for some, like Apple, Creative, and other manufacturers. But record labels have suffered from the rapid acceptance of digital music and persistent file swapping.

Sociocultural Component

• Demographic changes
• Changes in behavior, attitudes, and beliefs

Political / Legal Component

• Legislation
• Regulations
• Court decisions

Managers must be educated about the laws, regulations, and potential lawsuits that could affect business.

Specific Environment

• Customer
• Competitor
• Supplier
• Industry Regulation
• Advocacy Group.

Customer Component

• Reactive customer monitoring responding to problems, trends, and events.
• Proactive customer monitoring anticipating problems, trends, and events.

Monitoring customer wants and needs is critical for business success.

Competitor Component
Competitive Analysis

• Deciding who your competitors are
• Anticipating competitors’ moves
• Determining competitors’
• strengths and weaknesses

Industry Regulation Component
Consists of regulations and rules that govern the business practices and procedures of specific industries, businesses, and professions.

Guidelines to Avoid Conflicts of Interest

• There’s no such thing as a free lunch
• Meals and entertaining are valid business
• No gifts worth more than $25 in value
• No cash or cash equivalents
• No discount on goods and services
• No stock in suppliers’ companies
• Don’t allow personal friendship to
• influence decisions.