Learning Objectives

2-1. Explain the five internal environmental factors.

Management refers to the people responsible for an organization’s performance. Mission is the organization’s purpose or reason for being. The organization has human, physical, financial, and informational resources to accomplish its mission. The systems process is the method of transforming inputs into outputs as the organization accomplishes its mission. Structure refers to the way in which the organization groups its resources to accomplish its mission.

2-2. Describe the three levels of organizational culture and their relationship to each other.

Level 1 of culture is behavior—the actions employees take. Level 2 is values and beliefs. Values represent the way people believe they ought to behave, and beliefs represent if–then statements. Level 3 is assumptions—values and beliefs that are deeply ingrained as unquestionably true. Values, beliefs, and assumptions provide the operating principles that guide decision making and behavior.

2-3. Discuss how nine external environmental factors can affect the internal business environment.

Customers decide what products the business offers, and without customer value, there are no customers or business. Competitors’ business practices often have to be duplicated in order to maintain customer value. Poor-quality inputs from suppliers result in poor-quality outputs without customer value. Without a qualified labor force, products and services will have little or no customer value. Shareholders, through an elected board of directors, hire top managers and provide directives for the organization.

Society, to a great extent, determines what are acceptable business practices and can pressure business for changes. The business must develop new technologies, or at least keep up with them, to provide customer value. Economic activity affects the organization’s ability to provide customer value. For example, inflated prices lead to lower customer value. Governments set the rules and regulations that businesses must adhere to.

2-4. Explain why people use unethical behavior, why and how they justify their unethical behavior, and three factors that influence behavior to be ethical or unethical.

People commonly use unethical behavior for personal gain or to avoid getting into trouble. People justify their behavior to protect their self-concept by rationalizing that there is a good reason for using the unethical behavior. The three factors that influence behavior are personality traits and attitudes (some people have more integrity), the level of moral development (preconvential, conventional, postconventional), and the situations (sometimes there is more incentive to be unethical).

2-5. Identify four guides to ethical behavior and three things organizations should do to manage ethics.

The four guidelines that help ensure ethical behavior are following the Golden Rule (“Don’t do anything to anyone that you would not want someone to do to you); answering the four questions of the four-way test (Is it the truth? Is it fair to all concerned? Will it build goodwill and friendship? Will it be beneficial to all concerned?); trying to create a win-win situation for all relevant stakeholders so that everyone benefits from the decision with the stakeholder’s approach; and using discernment and advice to consider if the behavior is ethical and asking others if it is. To manage ethics, organizations should develop codes of ethics and conduct training, top managers should support the code and lead by example, and the code should be enforced and violators punished by encouraging whistle-blowing.

2-6. Characterize the three levels of social responsibility and explain its relationship with sustainability.

Social responsibility is the conscious effort to operate in a manner that creates a win-win situation for all stakeholders. The three levels of social responsibility include legal (focus on maximizing profits while obeying the law), ethical (focus on profitability and going beyond the law to do what is right, just, and fair), and benevolent (focus on profitability and helping society through philanthropy). Social responsibility and sustainability are related because part of being socially responsible is to maintain or improve the firm’s sustainability.