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Industry life cycle

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Industry life cycle

  1. 1. Chapter 5 Managing the Organizational Environment PowerPoint Presentation by Charlie Cook © Copyright The McGraw-Hill Companies, Inc., 2003. All rights reserved.
  2. 2. Forces in the Organizational Environment Forces in the Organizational Environment © Copyright McGraw-Hill. All rights reserved. 5–2 Figure 5.1
  3. 3. The Task Environment The Task Environment • Suppliers Individuals and organizations that provide an organization with the input resources that it needs to produce goods and services • Raw materials, component parts, labor (employees) Relationships with suppliers can be difficult due to materials shortages, unions, and lack of substitutes. • Suppliers that are the sole source of a critical item are in a strong bargaining position to raise their prices. Managers can reduce these supplier effects by increasing the number of suppliers of an input. © Copyright McGraw-Hill. All rights reserved. 5–3
  4. 4. The Task Environment (cont’d) The Task Environment (cont’d) • Distributors Organizations that help other organizations sell their goods or services to customers • Powerful distributors can limit access to markets through its control of customers in those markets. • Managers can counter the effects of distributors by seeking alternative distribution channels. © Copyright McGraw-Hill. All rights reserved. 5–4
  5. 5. The Task Environment (cont’d) The Task Environment (cont’d) • Customers Individuals and groups that buy goods and services that an organization produces • Identifying an organization’s main customers and producing the goods and services they want is crucial to organizational and managerial success. © Copyright McGraw-Hill. All rights reserved. 5–5
  6. 6. The Task Environment (cont’d) The Task Environment (cont’d) • Competitors Organizations that produce goods and services that are similar to a particular organization’s goods and services Potential Competitors • Organizations that presently are not in the task environment but could enter if they so chose Strong competitive rivalry results in price competition, and falling prices reduce access to resources and lower profits. © Copyright McGraw-Hill. All rights reserved. 5–6
  7. 7. The Task Environment (cont’d) The Task Environment (cont’d) • Barriers to Entry Factors that make it difficult and costly for the organization to enter a particular task environment or industry Economies of scale • Cost advantages associated with large operations Brand loyalty • Customers’ preference for the products of organizations currently existing in the task environment. © Copyright McGraw-Hill. All rights reserved. 5–7
  8. 8. The Industry Life Cycle The Industry Life Cycle • Industry Life Cycle The changes that take place in an industry as it goes through the stages of birth, growth, shakeout, maturity, and decline. Birth: industry competitors seek to develop the winning technology Growth: industry products gain acceptance and rapid growth in product demand attracts new competitors Shakeout: industry growth slows, weak firms exit the industry, and rivalry increases © Copyright McGraw-Hill. All rights reserved. 5–8
  9. 9. The Industry Life Cycle (cont’d) The Industry Life Cycle (cont’d) • Industry Life Cycle (cont’d) Maturity: the market stabilizes as demand levels off, the industry is now dominated by a few large competitors Decline: demand for industry products declines, competition increases, failing competitors either exit the market or are acquired by rival firms © Copyright McGraw-Hill. All rights reserved. 5–9
  10. 10. Stages in the Industry Life Cycle Stages in the Industry Life Cycle © Copyright McGraw-Hill. All rights reserved. 5–10 Figure 5.3
  11. 11. The General Environment The General Environment • Economic Forces Interest rates, inflation, unemployment, economic growth, and other factors that affect the general health and well-being of a nation or the regional economy of an organization Managers usually cannot impact or control these. Forces have profound impact on the firm. © Copyright McGraw-Hill. All rights reserved. 5–11
  12. 12. The General Environment The General Environment • Technological Forces Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services • Results in new opportunities or threats to managers • Often makes products obsolete very quickly. • Can change how managers manage. © Copyright McGraw-Hill. All rights reserved. 5–12
  13. 13. The General Environment (cont’d) The General Environment (cont’d) • Sociocultural Forces Pressures emanating from the social structure of a country or society or from the national culture • Social structure: the arrangement of relationships between individuals and groups in society • National culture: the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society. Cultures and their associated social structures, values, and norms differ widely throughout the world. © Copyright McGraw-Hill. All rights reserved. 5–13
  14. 14. The General Environment (cont’d) The General Environment (cont’d) • Demographic Forces Outcomes of change in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class • During the past two decades, women have entered the workforce in increasing numbers and most industrial countries’ populations are aging. • This will change the opportunities for firms competing in these areas as demands for child care and health care are forecast to increase dramatically. © Copyright McGraw-Hill. All rights reserved. 5–14
  15. 15. The General Environment (cont’d) The General Environment (cont’d) • Political Forces Outcomes of changes in laws and regulations, such as the deregulation of industries, the privatization of organizations, and increased emphasis on environmental protection • Increases in laws and regulations increase the costs of resources and limit the uses of resources that managers are responsible for acquiring and using effectively and efficiently. © Copyright McGraw-Hill. All rights reserved. 5–15
  16. 16. The General Environment (cont’d) The General Environment (cont’d) • Global Forces Outcomes of changes in international relationships; changes in nations’ economic, political, and legal systems; and changes in technology, such as falling trade barriers, the growth of representative democracies, and reliable and instantaneous communication Important opportunities and threats to managers: • The economic integration of countries through freetrade agreements (GATT, NAFTA, EU) that decrease the barriers to trade. © Copyright McGraw-Hill. All rights reserved. 5–16
  17. 17. Managing the Organizational Environment Managing the Organizational Environment • Environmental Change The degree to which forces in the task and general environments change and evolve over time • Reducing the Impact of Environmental Forces Top management: devise strategies that take advantage of opportunities and counter threats Middle managers: collecting about competitors’ intentions, new customers, and new suppliers for the firm’s crucial or low-cost inputs First-line managers: use resources efficiently and get closer to customers © Copyright McGraw-Hill. All rights reserved. 5–17
  18. 18. Managing the Organizational Environment Managing the Organizational Environment (cont’d) (cont’d) • Creating an Organizational Structure Increasing the complexity of the organization’s structure in response to the changing organizational environment Departments are assigned to develop the skills and knowledge necessary to deal with environmental changes and to cooperate with other departments to efficiently and effectively get products to customers © Copyright McGraw-Hill. All rights reserved. 5–18

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