September 11, 2012
The Context of Business: A Framework
What is an organization?
An organization consists of people with formally assigned roles, who work
together to achieve stated goals within an identifiable boundary
What determines the ultimate success or failure of an organization?
A social entity – composed of people, interacting with each other to perform
Goal directed – exists for a purpose/goal they were designed to achieve.
Deliberately structured – characterized by formally assigned roles
deliberately divided into sets of activities
Interact with the Environment – obtains input from its environment, and
the organization transforms them and they become outputs (e.g.
In an identifiable boundary – meaning itself as an entity distinct from the
Boundary – identity that bonds us together
A group of people that share a common goal; goal directed
Programmatically begin the process of starting an organization
Doesn’t have to be a human being or social entity (in eyes of the law)
Incorporating an entity which is the organization itself
Can’t understand business if you can’t understand people (greed)
Have some kind of procedures/rules
A form of organized resistance; it’s goal directed and it exists for a purpose
Characterized by assigned roles
Idea of belonging; this creates the culture, overtime, of the organization
Actions/activities of the past create the culture
By aspiring to the motto/boundaries of the organization, you become unique
within that organization
To develop an effective business strategy, every organization must
understand its environment.
Three broad categories of organizations:
o Public/governmental organizations that provide goods and services
without necessarily generating a profit;
o Private/non-governmental organizations, including voluntary
organizations, that offer goods/services without generating a profit; &
o Private organizations that produce goods/services with the intent of
making a profit for the benefit of their owners/shareholders.
The McKinsey 7-S Framework September 11, 2012
Strategy/Structure – one facilitates the other. An appropriate structure will
facilitate an appropriate strategy and vice versa.
Systems – important to have immediate and constant feedback
Skills – dependent on strategy and the staff and number of staff you have
Staff – repetition and routine
Social entities are open systems and like to interact with their environment;
it is necessary for survival
The Internal Context of the Organization (don’t need to memorize definitions)
Strategy – a plan or a course of action leading to the allocation of the
organization’s resources in reaching an identifiable goal(s)
Structure – a pattern of relationships that exist between individuals in the
o It is characterized by the organizational chart (I.e. functional,
o Reflects the formal hierarchy of authority in the organization
Systems – procedures and routinized processes controlling and coordinating
behavior in the organization
Shared Values – significant meanings or guiding principles that the
organization instills in the members
Skills – distinctive capabilities of key personnel
Style – characterization of how key managers behave in achieving the
Organizations as Systems
System – interdependent elements working together to achieve a goal.
Organizations are entities that are embedded in, and dependent on
exchanges with the environment they operate in.
An organization is an Open System
o It must interact with the environment to survive September 11, 2012
o It must continuously interpret and act on environmental change
o Deal with a certain situation on hand
o Interpret the data your analyzing; interpret competition; interpret
o Appropriate strategy based on appropriate interpretation on the
changes and what’s happening over time (fundamental rule of
o Past success does not ensure future success
o Past success creates an ego; may blind you to new changes you
haven’t observed in the past
What do we mean by Environment?
We refer to the external context of the organization as the environment
The specific or task environment consists of groups that have a direct
influence on the organization’s ability to obtain r