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Chapter 02 - The External and Internal Environments
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p. 47: Does low-cost mean low-quality? Why or why not?
Not necessarily. Efforts to save money can improve processes—for example, simplifying a process in a
p. 47: What are some technologies that have given managers fast access to information?
Two obvious answers are the Internet and portable computers such as laptops. Students may also be fa-
p. 51: In which of these areas would you say PepsiCo tried to create a competitive advantage? (If you
aren't sure, come back to this question after you've studied this section.)
PepsiCo sought to innovate by creating snacks that are more healthful, which could also be seen as com-
p. 53: Would cost be a bigger barrier for someone who opens a new bicycle shop or a developer of mo-
bile game apps? Why?
Cost would be a bigger barrier for a mobile game app, because a tremendous investment in research is
p. 55: To meet this requirement, what qualities would a company need in its employees?
A company that can manufacture customized products quickly will need employees who are themselves
p. 57: Name a company that has delivered good customer service to you.
Answers will vary. This is a chance for students to think about what “service” means in concrete, practi-
cal terms.
p. 65: What might "flexible processes" mean for a fast-food restaurant? For an auto company?
For a fast-food restaurant, a flexible process is any part of food production that enables the restaurant to
sizes, and so on.
p. 71: To be aligned with its environment, what values should an organic grocery store chain company
have?
BOTTOM LINE
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Terracycle Wants to Eliminate All Waste
1. To what extent do you agree with Szaky that organizations can be profitable while mak-
ing a positive impact on the environment and society?
You can surely be profitable while making a positive impact on the environment and so-
2. Can you envision a world that doesn't produce waste? If so, what changes would need to
be made before that could happen?
There would need to be a lot of new procedures put into place in order to do this; howev-
SOCIAL ENTERPRISE
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LECTURETTE 2.1
Operations and Human Resources: IBM’s Workforce Management Initiative
As the book explains, one way in which an organization can manage its competitive environment is
through becoming a globally integrated enterprise. IBM has adopted a human capital management ap-
proach to better utilize its talented workforce. Considering labor as an input and IBM products as an out-
put, the company launched its Workforce Management Initiative (WMI) to capture and effectively lever-
age every employee’s skill set and training. All of IBM’s approximately 330,000 employees are captured
in this database. Having this database allows managers to search for employee talent within the compa-
ny---around the world---rather than having to look outside to recruit talent and fill current needs. The
Sources:
http://intelligententerprise.informationweek.com/showArticle.jhtml;jsessionid=FRFIJGEA3BMIXQE1G
HPSKHWATMY32JVN?articleID=175002433 (accessed on December 22, 2009)
LECTURETTES
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1. This chapter’s opening quote by Peter Drucker said, “The essence of a business is outside it-
self.” What do you think this means? Do you agree?
Students may ask: What is meant by the word “essence?” It has a number of meanings. However,
according to the dictionary, it means “that which makes something what it is.” It is important to remem-
ber that the purpose of a successful business is to get customers and to retain customers.
Using the definition above, Drucker’s statement can be interpreted to mean that it is the outside environ-
2. What are the most important forces in the macroenvironment facing companies today?
In order to answer this question, the student probably needs to recognize that different companies operate
in different industries and a critical macroenvironment force facing one company may be a minor factor
for another. Three examples are given below:
3. What are the main differences between the macroenvironment and the competitive environ-
ment?
The macroenvironment consists of the major forces (international, economic, social and natural,
demographic, technological, and political/legal) which affect all businesses to some degree.
DISCUSSION QUESTIONS
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4. What kinds of changes do companies make in response to environmental uncertainty?
Organizations may adapt to the environment by altering their work structures and work processes
in order to reduce uncertainty. When uncertainty arises due to environmental complexity, many
organizations adopt more decentralized decision-making structures. This allows people with the
5. We outlined several proactive responses organization can make to the environment. What
examples have you seen recently of an organization responding effectively to its environment?
Did the effectiveness of the response depend upon whether the organization was facing a
threat or an opportunity?
A number of proactive responses to the environment are identified in the text:
Independent strategies: The firm acts on its own to change some aspect of the current environ-
6. Select two organizations that you are interested in. Research information about the firms or
talk with an employee if possible. What types of cultures do they have? Write a paragraph
that describes each culture.
EXAMPLE: “Company X seems to really care about their new employees. The employee I
spoke to told me that the company actively encourages employees to move from job to job within
Chapter 02 - The External and Internal Environments
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7. When you were visiting colleges to decide where to attend, were there cultural differences in
the campuses that made a difference in your choice? How did these differences impact your
decision on which college to attend?
Student responses to this question will differ widely, but if they understand the concept of culture,
they should talk about the “feeling” a place has - organized, productive, friendly, etc. If students
Chapter 02 - The External and Internal Environments
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EXERCISE 2.1: EXTERNAL ENVIRONMENT ANALYSIS
Objective: To give students the experience of performing an analysis of a company’s external environ-
ment.
Responses to the external environment questions will vary depending on the companies and indus-
tries the students discuss.
Suggested Responses to Discussion Questions
1. What has the company done to adapt to its environment?
Using the music industry as an example, explain how in order adapt to the environment, music com-
2. How does the company attempt to influence its environment?
Continuing with the music industry example, students might indicate that in order to influence the en-
vironment, music companies pay slotting fees to retailers to gain shelf space, and pay fees to ensure
EXERCISE 2.2 - CORPORATE CULTURE PREFERENCE SCALE
Objectives
• To expose students to different types of corporate cultures.
Case Discussion Questions:
1. Review the four types of corporate cultures outlined in the exercise. Working in small
groups, give examples of classes you have taken that correspond to each of the different
types of corporate culture dimensions.
Student responses will vary, but in general, you can expect to see the following differences
across different types of classrooms:
EXPERIENTIAL EXERCISES
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2. How do you know what kind of culture a class has? What do you look for that tells you
how the class is going to be?
Again, student responses will vary, but students are likely to talk about professor behavior
(business practices), the class syllabus (corporate mission statement and official goals), ritual-
Chapter 02 - The External and Internal Environments
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Tata Motors: From Cheap to Awesome?
Case Summary:
This case reveals how important it is to organizations of all sizes to be prepared and ready to
Chapter Topics Related to the Case:
• Discuss how environmental forces impact organizations
Case Discussion Questions:
1. Which barriers to entry contributed most to Tata Motors lack of success with the original
Nano?
Tata Motors suffered from a cost analysis mistake in the way it priced its model. It was not able to
2. Which macroenvironment factors did Tata Motors consider when adjusting the marketing
and manufacturing strategies to achieve success with the more recent Twist and LX
models?
Tato focused on technology and demographics in revamping the Nano. It focused on young urban
3. To what degree of you believe Tata Motors will succeed in delivering a successful low
cost vehicle to consumers in India and other developing economies?
The new focus on a different set of demographics, as well as technological advances, puts Tata
CONCLUDING CASE
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Example 2.1 – Environment Influences: In August of 2013, Jeff Bezos, Amazon founder and
CEO, purchased the Washington Post. The newspaper industry has been suffering over the past
decade due to customers increasingly relying on the Internet for news coverage. The Post’s news-
Example 2.2 – Laws and Regulations: The macroenvironment is composed of international, le-
gal and political, economic, technological and social forces that influence strategic decisions.
Example 2.3 – Environmental Complexity: Recently, more and more Americans are becoming
aware of the environment - specifically the air that they breathe. With concerns about global
warming and pollution at an all-time high, people want to be sure that they and their companies
Example 2.4 – Competitive Intelligence: Faced with declining customer-service ratings and
prices higher than competitors, Michael Dell recently resumed the role of chief executive at the
company he founded. His initial steps to be more competitive focused on eliminating redundan-
Example 2.5 – Independent Strategies: As global warming is threatening the viability of As-
pen’s famed ski resort, companies there are responding by becoming pioneers in corporate envi-
ronmentalism. Aspen uses biodiesel fuel in its bulldozer-sized snowcats, uses a speck of dust to
1 Farhi, Paul. “Washington Post to be sold to Jeff Bezos, the founder of Amazon.” The Washington Post, August 5, 2013. Retrieved
4 Techweb Newswire. “Dell suspends bonuses, streamlines management.” February 5, 2007
EXAMPLES
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Example 2.6 – Corporate Culture: Tony Hsieh, CEO of shoe retailer, Zappos, is passionate
about corporate culture, “The original idea was to add a little fun.” Now companies around the
world are attempting to model Zappos’ renowned corporate culture and customer service model.
5 Fishman, Charles. “Degree of difficulty.” Fast Company, February 2007, Issue 112, pg. 94
6 Palmeri, Christopher. “Zappos retails its culture.” Bloomberg Businessweek. December 2009. Retrieved from
Chapter 02 - The External and Internal Environments
Please see the following additional materials in Connect.
• Opportunity International
For over 25 years, Opportunity International has provided microloans to help impoverished people in
underdeveloped nations improve their lives and work their way out of poverty. Opportunity Interna-
There are no Manager’s Hot Seat clips for this chapter
• Corporate Culture Preference Scale
SELF-ASSESSMENT
SUPPLEMENTAL FEATURES
MANAGER’S HOT SEAT (MHS)
CHAPTER VIDEO
