MGMT 2100 Chapter Notes - Chapter 3: E-Reader, Regulation, Organizational Culture
External Environments: all events outside a company that have the potential to influence or
affect it
● Ex. Uber effects what taxi companies do as well as forces them to lay off taxi drivers
Environmental Change: the rate at which a company’s general and specific environments
change
● Stable Environment: an environment in which the rate of change is slow
○ Wholesale food distribution business
● Dynamic Environment: an environment in which the rate of change is fast
○ Phone industry
■ Frequently coming out with updated models and new phones
Punctuated Equilibrium Theory: the theory that company's go through long periods of stability
(equilibrium), followed by short periods of dynamic, fundamental change (revolutionary periods),
and finishing with a return to stability (new equilibrium)
● Companies often experience both stable and dynamic environments
● Ex. U.S. airline industry
Environmental Complexity
Environmental Complexity: the number and the intensity of external factors in the environment
that affects organizations
● Simple Environments: an environment with few environmental factors
○ Ex. dairy industry
■ Highly competitive but simple business
■ Milk is produced the same way today as it was 100 years ago
● Complex Environments: an environment with many environmental factors
○ Ex. PC business
■ Many new tablets, e-readers, and smartphones are coming out with new
technology and better capabilties
Resource Scarcity: the abundance or shortage of critical organizational resources in an
organization’s external environments
● When environmental change and complexity are at low levels, resource scarcity is low
(resources are plentiful), uncertainty is low
● When environmental change and complexity are at high levels, resource scarcity is high
(resources are scarce), uncertainty is high
Uncertainty: extent to which managers can understand or predict which environmental changes
and trends will affect their business
The 2 Types of External Environments
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General Environment: the economic, technological, sociocultural, and political/legal trends that
indirectly affect all organizations
● Economy
○ The current state of a country’s economy affects virtually every organization
doing business there
○ Businesses want a growing economy rather than a shrinking or static economy
○ Influences whether to hire more employees, expand production, or take out loans
to purchase equipment
○ Business Confidence Indices: indices that show managers’ level of confidence
about future business growth
■ Ex. quarterly survey of 100 CEOs in large company's across a variety of
different industries
● Technological
○ The knowledge, tools, and techniques used to transform inputs into outputs
● Sociocultural
○ Demographic characteristics (number of people with particular skills), general
behavior, attitudes, and beliefs of people in a particular society
○ Demographic characteristics affect how companies staff their business
○ Changes in behavior, attitudes, and beliefs affect the demand for a business’s
products and services
● Political/legal trends
○ The legislation, regulations, and court decisions that govern and regulate
business behavior
Specific Environment: the customers, competitors, suppliers, industry regulations, and
advocacy groups that are unique to an industry and directly affect how a company does
business
● Customers
○ Companies can not exist without customer support
○ Monitoring customers’ changing wants and needs is critical
■ Reactive Customer Monitoring: identifying and addressing customer
trends and problems after they occur
● Listen closely to customer complaints and respond to customer
concerns
● Customers are either
○ Promoters: would recommend the business to someone
○ Passives: neither negative nor positive
○ Detractors: customers who would not recommend the
business
■ Proactive Customer Monitoring: identifying and addressing customer
needs, trends, and issues before they occur
● Monitoring the weather to determine what people are going to be
doing
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Document Summary
External environments: all events outside a company that have the potential to influence or affect it. Uber effects what taxi companies do as well as forces them to lay off taxi drivers. Environmental change: the rate at which a company"s general and specific environments change. Stable environment: an environment in which the rate of change is slow. Dynamic environment: an environment in which the rate of change is fast. Frequently coming out with updated models and new phones. Punctuated equilibrium theory: the theory that company"s go through long periods of stability (equilibrium), followed by short periods of dynamic, fundamental change (revolutionary periods), and finishing with a return to stability (new equilibrium) Companies often experience both stable and dynamic environments. Environmental complexity: the number and the intensity of external factors in the environment that affects organizations. Simple environments: an environment with few environmental factors. Milk is produced the same way today as it was 100 years ago.
