Management

Fifteenth Edition, Global Edition

Chapter 3
Influence of the External
Environment and the
Organization’s Culture

Copyright © 2021 Pearson Education Ltd.

Learning Objectives
3.1 Contrast the actions of managers according
to the omnipotent and symbolic views.
3.2 Describe the constraints and challenges facing
managers in today’s external environment.
3.3 Discuss the characteristics and importance of
organizational culture.

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The Manager: Omnipotent or Symbolic?
Omnipotent view: managers are directly responsible for
an organization’s success or failure
Symbolic view: much of an organization’s success or
failure is due to external forces outside managers’ control

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Managerial Constraints

In reality, managers are neither all-powerful nor

helpless. But their decisions and actions are
constrained.
External constraints come from the organization’s
environment and internal constraints come from the
organization’s culture

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Exhibit 3.1 Constraints on Managerial Discretion

Exhibit 3.1 shows that external constraints come from the organization’s
environment and internal constraints come from the organization’s culture.

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The Environment and Environmental Uncertainty

Environment: institutions or forces outside of the

organization that could potentially affect
performance.
Environments differ on degree of environmental
uncertainty
Environmental uncertainty has two dimensions
Degree of change
Degree of complexity

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Exhibit 3.2 Environmental Uncertainty Matrix

Exhibit 3.2 shows the two dimensions of environmental uncertainty.

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Degree of Change
Environments can be either dynamic or stable
In a dynamic environment the components in an
organization’s environment change frequently
In a stable environment the components in an
organization’s environment change very little

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Degree of Environmental Complexity

Environmental complexity looks at the number of

components in an organization’s environment and
the extent of the knowledge the organization has
about those components.
Depending on the organizational environment,
managers may need to know a lot about the
components, or very little.

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The External Environment
Those factors and forces outside the organization
that affect its performance
Economic
Demographic
Political/Legal
Sociocultural
Technological
Global

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Exhibit 3.3 Components of External Environment

Exhibit 3.3 shows the different components that make up the external environment.

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The Specific Environment (1 of 2)

Specific Environment: the part of the environment

directly relevant to the achievement of organizational
goals
Most of management’s attention typically focuses on
the specific environment

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The Specific Environment (2 of 2)

The specific environment includes one or more of

the following:
Suppliers
Customers
Competitors
Government agencies
Special interest groups

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Specific Environment Components (1 of 2)

Suppliers: Managers need to ensure a steady flow of

inputs
Customers: Organizations exist to meet customer
needs
Competitors: All organizations have competitors that
they need to monitor

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Specific Environment Components (2 of 2)

Government: Federal, state, and local governments

influence what the organization can and cannot do.
Pressure Groups: Special interest groups can have a
significant impact on the organization. Lobbyists,
protestors, various action groups all effect change.

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Exhibit 3.6 Strong vs. Weak Cultures

Exhibit 3.4 shows the different components that make up the specific environment.
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Organizational Culture
Just as each individual has a unique personality,
an organization, too, has a personality.

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What is Organizational Culture?
Organizational culture: the shared values,
principles, traditions, and ways of doing things that
influence the way organizational members act and that
distinguish the organization from other organizations

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Six Dimensions of Organizational Culture

Research shows there are six dimensions that

appear to capture an organization’s culture:
1. Adaptability

2. Attention to detail

3. Outcome orientation

4. People orientation

5. Team orientation

6. Integrity

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Exhibit 3.5 Contrasting Organizational Culture

Risk taking and change

discouraged
Creativity discouraged
Close managerial supervision
Work designed around
individual employees

Risk taking and change

rewarded
Creativity and innovation
rewarded
Management trusts
employees
Work designed around teams

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Strong Cultures

Strong cultures: organizational cultures in which the

key values are intensely held and widely shared

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Exhibit 3.6 Strong Versus Weak Cultures

Strong Cultures Weak Cultures

Values widely shared Values limited to a few people –
usually top management
Culture conveys consistent Culture sends contradictory
messages about what’s important messages about what’s important
Most employees can tell stories Employees have little knowledge
about company history or heroes of company history or heroes
Employees strongly identify with Employees have little
culture identification with culture
Strong connection between Little connection between shared
shared values and behaviors values and behaviors

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Where Culture Comes From and How it Continues

The original source of the culture usually reflects

the vision of the founders.
Once the culture is in place, certain organizational
practices help maintain it.
The actions of top managers also have a major
impact on the organization’s culture.

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Exhibit 3.7 Establishing and Maintaining Culture

Exhibit 3.7 illustrates how an organization’s culture is established and maintained.

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How Employees Learn Culture
Stories
Rituals
Material Artifacts and Symbols
Language

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How Culture Affects Managers
Because an organization’s culture constrains what
they can and cannot do and how they manage,
it’s particularly relevant to managers.

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Exhibit 3.8 Types of Managerial
Decisions Affected by Culture

As shown in Exhibit 3.8, a manager’s decisions are influenced by the culture in

which he or she operates.
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Review Learning Objective 3.1
Contrast the actions of managers according
to the omnipotent and symbolic views.
Omnipotent view: Managers are directly
responsible for the organization’s success or
failure.
Symbolic view: Much of the organization’s
success or failure is due to external forces
outside of the manager’s control.
The two constraints on managers' discretion are
organizational culture (internal) and the
environment (external).

Copyright © 2021 Pearson Education Ltd.

Review Learning Objective 3.2
Describe the constraints and challenges facing
managers in today’s external environment.
The external environment includes those factors
and forces outside the organization that affect its
performance.
The main components of the external
environment are economic, demographic,
political/legal, sociocultural, technological, and
global.
These components can constrain and challenge
managers because they have an impact on jobs,
environmental uncertainty, and stakeholder
relationships.

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Review Learning Objective 3.3
Discuss the characteristics and importance
of organizational culture.
The seven dimensions of culture are: attention
to detail, outcome orientation, people
orientation, team orientation, aggressiveness,
stability, innovation, and risk taking.
The stronger the culture, the greater the
impact on the way managers plan, organize,
lead, and control.
The original source of the organizational
culture reflects the founder’s vision.
Culture is transmitted through stories, rituals,
material symbols, and language.

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