2Chapter
The
Management
Environment
2-1
1
Learning Objectives
•Explain what the external environment is and why it’s
important.
•Discuss how the external environment affects managers.
•Define what organizational culture is and explain why it’s
important.
•Describe how organizational culture affects managers.
2-2
When you finish studying this chapter, you will be able to:
•Explain what the external environment is and why it’s important.
•Discuss how the external environment affects managers.
•Define what organizational culture is and explain why it’s important.
•Describe how organizational culture affects managers.
2
2-3
3
2-4
4
What Is External Environment?
External environment is the factors,
forces, situations, and events
outside the organization that affect
its performance.
2-5
One of the biggest mistakes managers make today is failing to adapt to the changing
world. No successful organization, or its managers, can operate without
understanding and dealing with the dynamic environment—external and internal—
that surrounds it.
The term “external environment” refers to factors, forces, situations, and events
outside the organization that affect its performance.
Because of today’s global society, a volcanic eruption in Iceland in 2010 prevented
delivery of auto parts that led to a shutdown at a BMW plant in South Carolina and a
Nissan Motor facility in Japan.
5
Components of External Environment
2-6
As shown here in Exhibit 2-1, the external environment includes sixcomponents:
•The economic component encompasses factors such as interest rates, inflation, changes in
disposable income, stock market fluctuations, and business cycle stages.
•The demographic component includes trends in population characteristics such as age,
race, gender, education level, geographic location, income, and family composition.
•The technological component focuses on scientific and industrial innovations.
•The sociocultural component is concerned with societal and cultural factors such as values,
attitudes, trends, traditions, lifestyles, beliefs, tastes, and patterns of behavior.
•The political/legal component looks at federal, state, and local laws, as well as other
countries’ laws and global laws. It also includes a country’s political conditions and stability.
•The global component encompasses issues associated with globalization and a world
economy.
6
How Has the Economy Changed?
•Began with turmoil in mortgage markets
•Spread to businesses when broader credit markets collapsed
•Called the “Great Recession”
•Characterized by foreclosures, high rates of unemployment,
huge public debt, and widespread social problems
2-7
The current U.S. economic crisis, which began with turmoil in mortgage markets and
spread to businesses when broader credit markets collapsed, has been called the
“Great Recession” by some analysts. Due to our global society, economic troubles in
