Blog My Campus

Going global, implementing employee empowerment, and investing in new forms
of capital are all decisions that require organizational change. An organization’s
ability to change depends heavily on its organizational culture.
Organizational culture is the set of basic assumptions about the organization,
its goals, and its business practices. Culture describes an organization’s norms in
internal and external, as well as formal and informal, transactions.
Culture refers to the values, beliefs, and attitudes that permeate a business.
If strategy defines where a company wants to go, culture determines how—
maybe whether—it gets there. Every business has some kind of culture, just because
it’s an organization of human beings. But most businesses never give the
topic a second thought. Their culture is to do things the way they always have
or the way everybody else does them.
A few companies, by contrast, have explicit, highly distinctive cultures—
strong, focused cultures that stick out from the crowd like the Grateful Dead at
a marching-band convention. [For example, Southwest Airlines is] famous for

its wild and woolly—not to say manic—culture. Everybody at Southwest, from
CEO Herb Kelleher to the newest gate attendant, pitches in to make sure that
customers have a good time and that airplanes get unloaded and reloaded and
back in the air fast.” 19
Organizational culture is heavily influenced by the culture of the nation in
which the organization is domiciled, the extent of diversity in the workforce, and
the personal styles and philosophies of the top management team. These variables
play a significant role in determining whether the communication system tends to
be formal or informal, whether authority is likely to be centralized or decentralized,
whether relations with employees tend to be antagonistic or cooperative, and
how control systems are designed and used. Like many of the other influences on
organizational strategy, organizational culture can change over time. In most cases,
however, culture is more likely to change due to new management rather than because
existing managers changed their style.


Environmental Constraints
A final factor affecting strategy is the environment in which the organization operates.
An environmental constraint is any limitation on strategy brought about
by external differences in culture, competitive market structures, fiscal policy (such
as taxation structures), laws, or political situations. Because an organization’s management
cannot directly control environmental constraints, these factors tend to be
long-run rather than short-run.
Wal-Mart provides an excellent example of the influence of environmental constraints
on organizational strategy. Wal-Mart first entered Europe in 1997 by purchasing
a chain of German retail stores. Germany, unfortunately, is known for high
labor costs, surly employees, and a variety of arcane restrictions about zoning,
pricing, and operating hours. Wal-Mart had to discontinue its “Ten-Foot Rule” requiring
employees to speak to customers within ten feet of them and encouraging
employees to be customer friendly. Some stores do not bag purchases because
the practice is unheard of in Germany. But the company cannot refund customers
the price difference on an item sold elsewhere for less because it is illegal in Germany.
Nor can the associates receive Wal-Mart stock options because they are difficult
and expensive to grant under German law.