A _____ represents a phrase or sentence that succinctly expresses a key corporate value.

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The Environment and Corporate Culture

Are You Fit for Managerial Uncertainty? The External Environment

Task Environment General Environment

The Organization–Environment Relationship

Environmental Uncertainty Adapting to the Environment

The Internal Environment: Corporate Culture

Symbols Stories Heroes Slogans Ceremonies

Types of Culture Adaptability Achievement

Culture Culture Involvement Consistency

Culture Culture

New Manager Self-Test: Cultural Preference Shaping Corporate Culture for Innovative Response

Managing the High-Performance Culture Cultural Leadership

After studying this chapter, you should be able to:

1. Define an organizational ecosystem and how the general and task environments affect an organization’s ability to thrive.

2. Explain the strategies managers use to help organizations adapt to an uncertain or turbulent environment.

3. Define corporate culture.

4. Provide organizational examples of symbols, stories, heroes, slogans, and ceremonies and explain how they relate to corporate culture.

5. Describe four types of corporate culture.

6. Examine the relationship between culture, corporate values, and business performance.

7. Define a cultural leader and explain the tools that a cultural leader uses to create a high-performance culture.

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Mostly True Mostly False

1. Enjoyed hearing about new ideas even when trying to meet a deadline. __________ __________

2. Welcomed unusual viewpoints of others, even if we were working under pressure.

__________ __________

3. Made it a point to attend industry trade shows and company events. __________ __________

4. Specifically encouraged others to express opposing ideas and arguments. __________ __________

5. Asked “dumb” questions. __________ __________

6. Always offered comments on the meaning of data or issues. __________ __________

7. Expressed a controversial opinion to bosses and peers. __________ __________

8. Suggested ways of improving my and others’ ways of doing things. __________ __________

Are You Fit for Managerial Uncertainty?1

instructions: Do you approach uncertainty with an open mind? Think back to how you thought or behaved during a time of uncertainty when you were in a formal or informal leadership position. Please answer whether each of the following items was Mostly True or Mostly False in that circumstance.

scoring and interpretation: Give yourself one point for each item that you marked as Mostly True. If you scored less than 5, you might want to start your career as a manager in a stable rather than an unstable environment. A score of 5 or above suggests a higher level of mindfulness and a better fit for a new manager in an organization with an uncertain environment.

In an organization in a highly uncertain environment, everything seems to be changing. In that case, an important quality for a new manager is “mindfulness,” which includes the qualities of being open-minded and an independent thinker. In a stable environment, a manager with a closed mind may perform all right because much work can be done in the same old way. In an uncertain environment, even a new manager needs to facilitate new thinking, new ideas, and new ways of working. A high score on the preceding items suggests higher mindfulness and a better fit with an uncertain environment.

You sometimes feel like you are chasing cats,” said Georgetown University Associate Vice President Scott Fleming. He was talking about how hard it is to monitor where the T-shirts, sweatshirts, and other apparel the university’s bookstore sells come from. As a result of pressure from student activists and public outrage over recent accidents and worker deaths at overseas textile factories, Georgetown’s bookstore remodeled displays so that garments made by Alta Gracia get pride of place ahead of Nike, Adidas, and other big brands. Why? Alta Gracia is the label of a South Carolina company that is carving a niche by paying above-average wages and promoting safe, humane working conditions at its Domini- can Republic factory. Georgetown belongs to a nationwide apparel consortium that includes 180 schools that are pressuring the industry by making a commitment to do business with companies with ethical and socially responsible practices. The effect has been small but no- ticeable. The threat of losing out on the $4 billion market for apparel branded with university logos has gotten the attention of managers at large multinational corporations. “They target young people with their advertising, but they have not respected us enough to realize we won’t mindlessly consume their product,” said recent Georgetown graduate Natalie Margolis.2

“

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Part 2 The Environment of Management76

Growing concerns over conditions in low-wage overseas factories is a big environmen- tal issue for managers in retail organizations today, as well as for those in manufacturers such as Nike and Apple that use overseas contractors. However, managers face many chal- lenges from both the external and internal environments. This chapter explores in detail components of the external environment and how they affect the organization. The chapter also examines a major part of the organization’s internal environment—corporate culture. Corporate culture is both shaped by the external environment and shapes how managers respond to changes in the external environment.

The External Environment The external organizational environment includes all elements existing outside the boundary of the organization that have the potential to affect the organization.3 The environment includes competitors, resources, technology, and economic conditions that influence the organization. It does not include those events so far removed from the orga- nization that their impact is not perceived.

The organization’s external environment can be conceptualized further as having two components: task and general environments, as illustrated in Exhibit 3.1.4 The task environment is closer to the organization and includes the sectors that conduct day- to-day transactions with the organization and directly influence its basic operations and performance. It is generally considered to include competitors, suppliers, customers, and the labor market. Students and suppliers are major elements of the task environment for university bookstores, for example. The general environment affects organizations indi- rectly. It includes social, economic, legal-political, international, natural, and technological factors that influence all organizations about equally. Changes in federal regulations or an economic recession are part of the organization’s general environment, as are shifting social attitudes toward matters such as how and where the products we use are made. These events do not directly change day-to-day operations, but they do affect all organizations eventually.

A new view of the environment argues that organizations are now evolving into busi- ness ecosystems. An organizational ecosystem is a system formed by the interaction among a community of organizations in the environment. An ecosystem includes organi- zations in all the sectors of the task and general environments that provide the resource and information transactions, flows, and linkages necessary for an organization to thrive.5 For example, Apple’s ecosystem includes hundreds of suppliers and millions of customers for the products that it produces across several industries, including consumer electronics, Internet services, mobile phones, personal computers, and entertainment.6

Customers

Competitors

Suppliers

Labor Market

Task Environment Technological

Natural

Sociocultural

Economic

Legal/Political

International

General Environment

Internal Environment Employees

Culture Management

exhibit 3.1 Dimensions of the Organi- zation’s General, Task, and Internal Environments

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Chapter 3 The Environment and Corporate Culture 77

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The organization also has an internal environment, which includes the elements within the organization’s boundaries. The internal environment is composed of current employees, management, and especially corporate culture, which defines employee behavior in the internal environment and how well the organization will adapt to the external environment.

Exhibit 3.1 illustrates the relationship among the task, general, and internal environments. As an open system, the organization draws resources from the external environment and releases goods and services back to it. We will first discuss the two components of the external environment in more detail. Later in the chapter, we examine corporate culture, the key element in the internal environment. Other aspects of the internal environment, such as structure and technology, are covered in later chapters of this book.

Task EnvironmEnT The task environment includes those sectors that have a direct working relationship with the organization, among them customers, competitors, suppliers, and the labor market.

Customers Those people and organizations in the environment that acquire goods or services from the organization are customers. As recipients of the organization’s output, customers are important because they determine the organization’s success. Organizations have to be responsive to marketplace changes. Consider Encyclopædia Britannica, where sales of the set of 32 bound volumes declined from 100,000 in 1990 to barely 3,000 in 1996. Customers no longer had time for door-to-door salespeople and no longer wanted a 129-pound set of books. Managers knew something had to be done. They followed a carefully planned strategic transition to remake Encyclopædia Britannica into a totally different organization by 2012, when the last bound volumes were printed and the com- pany’s digital strategy was fully in place. Managers placed heavy emphasis on their K–12 customers, where Britannica’s high editorial quality had always been appreciated. Con- tent is updated every 20 minutes by teams of scholars from around the world. Today, more than half of U.S. students and teachers have access to online Britannica content, and the service is growing even faster overseas. The company also has around 500,000 household subscribers, who prefer quality and credibility over Wikipedia’s quantity and free access.7

Competitors Organizations in the same industry or type of business that provide goods or services to the same set of customers are referred to as competitors. Competitors are con- stantly battling for loyalty from the same group of customers. For example, in early 2013, Samsung became the world leader in smartphone sales, topping Apple in several countries, and the competition has gotten even hotter as Samsung has stepped up the challenge in the U.S. market. The company held its first promotional event for its flag- ship smartphone, the Galaxy S4, at a packed event at New York’s Radio City Music Hall. Apple’s iPhone still has strong brand loyalty, but the buzz at the moment is on Samsung’s side. A survey found that first-time smartphone buyers preferred Samsung by about a 3-to-1 margin. “This is Samsung’s time right now,” said Gene Munster, an analyst at Piper Jaffray.8

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” —ChArlES DArWin (1809–1882), nAturAliSt

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Part 2 The Environment of Management78

Hot topic

Suppliers Suppliers provide the raw materials that the organization uses to produce its output. A candy manufacturer, for example, may use suppliers from around the globe for ingredi- ents such as cocoa beans, sugar, and cream. A supply chain is a network of multiple busi- nesses and individuals that are connected through the flow of products or services. For Toyota, the supply chain includes over 500 global parts suppliers organized by a produc- tion strategy called just-in-time ( JIT).9 JIT improves an organization’s return on invest- ment, quality, and efficiency because much less money is invested in idle inventory. In the 1970s, the Japanese taught U.S. companies how to boost profit by keeping inventories lean through JIT. “Instead of months’ worth of inventory, there are now days and even hours of inventory,” says Jim Lawton, head of supply management solutions at consultant Dun & Bradstreet. Lawton points out that there is a downside, however—one that be- came dramatically clear after a March 2011

earthquake in Japan: “If supply is disrupted, as in this situation, there’s nowhere to get product.”10

The quake, which triggered massive tsunami waves and caused the second-worst nuclear disaster in history, at the Fukushima power plant along the Pacific coastline, revealed the fragility of today’s JIT supply chains. Japanese parts suppliers for the global auto industry were shut down, disrupting production at auto factories around the world. “Even a missing $5 part can stop an assembly line,” said a Morgan Stanley representative. Because of this natural disaster, Toyota’s production fell by 800,000 vehicles—10 percent of its annual output. Despite the potential for such disruptions, most companies aren’t willing to boost inventories to provide a cushion. Even a slight increase in inventory can cost companies millions of dollars.11

Labor Market The labor market represents people in the environment who can be hired to work for the organization. Every organization needs a supply of trained, qualified personnel. Unions, employee associations, and the availability of certain classes of employees can influence the organization’s labor market. Labor market forces affecting organizations right now include (1) the growing need for computer-literate knowledge workers; (2) the neces- sity for continuous investment in human resources through recruitment, education, and training to meet the competitive demands of the borderless world; and (3) the effects of international trading blocs, automation, outsourcing, and shifting facility locations on labor dislocations, creating unused labor pools in some areas and labor shortages in others.

Changes in the various sectors of the general and task environments can create tre- mendous challenges, especially for organizations operating in complex, rapidly changing industries. Costco Wholesale Corporation, with warehouses throughout the world, is an example of an organization operating in a highly complex environment.

At the Hyundai Motor Company manufacturing plant in Alabama, auto parts are sourced from nearly 20 suppliers located in that same state. While some parts are sourced locally, others come from great distances, and Hyundai deliberately seeks out women- and minority-owned businesses across the globe. The company is committed to maintaining diversity in its supply chain.

Concept Connection

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Innovative Way Costco Wholesale Corporation

Costco Wholesale Corporation, a no-frills, self-service warehouse club, operates an interna- tional chain of membership warehouses offering a limited selection of products at reduced prices. Costco’s complex environment is illustrated in Exhibit 3.2.

Costco’s business model focuses on maintaining its image as a pricing authority, consis- tently providing the most competitive prices. “Everything we do is to provide goods and ser- vices to the customer at a lower price,” said Jim Sinegal, co-founder and recently retired CEO. New CEO Craig Jelinek has vowed that a low-price philosophy will continue to guide the company. Costco warehouses are designed to operate efficiently and to communicate value to members. The warehouse decor—high ceilings, metal roofs, exposed trusses—keeps costs low and contributes to the perception that Costco is for serious shoppers seeking serious bargains. Other strategies for keeping prices low include offering only around 4,000 unique products at a time (by contrast, Walmart offers over 100,000) and negotiating low prices with suppliers. Only about 28 percent of sales come from outside the United States, but same store sales in overseas markets have been growing about four times faster than those in the United States. The biggest part of Jelinek’s plan is to increase Costco’s international presence. In a 2013 interview, he said that the company would open its first locations in France and Spain within the next two years, and that two-thirds of Costco’s expansion over the next five years would be international, with a focus on Japan, Taiwan, and South Korea.

Costco’s biggest competitive advantage is its loyal workforce. “Costco compensates em- ployees very well—well above the industry in terms of wages and benefits,” says R. J. Hot- tovey, a retail analyst at Morningstar. When the economic downturn worsened in late 2009 and many retailers cut wages and issued layoffs, Costco handed out raises. The happiness and morale of employees is often overlooked in the retail industry, but not at Costco. Thanks to its good treatment of workers, Costco has one of the lowest turnovers in the retail industry (around 5 percent), and since 2009, sales have grown 39 percent and the stock price has doubled.12

• The organizational environment, consisting of both task and general environments, includes all elements existing outside the boundary of the organization that have the potential to affect the organization.

• An organizational ecosystem includes organizations in all the sectors of the task and general environments that provide the resource and information transactions, flows, and linkages necessary for an organization to thrive.

• The general environment indirectly influences all organizations within an industry and includes five dimensions.

• The task environment includes the sectors that conduct day-to-day transactions with the organization and directly influence its basic operations and performance.

• The internal environment includes elements within the organization’s boundaries, such as employees, manage- ment, and corporate culture.

• Customers are part of the task environment and include people and organizations that acquire goods or services from the organization.

• Competitors are organizations within the same industry or type of business that vie for the same set of customers.

• Suppliers provide the raw materials the organization uses to produce its output.

• The labor market represents the people available for hire by the organization.

Remember This

GEnEral EnvironmEnT The dimensions of the general environment include international, technological, sociocul- tural, economic, legal-political, and natural.

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Part 2 The Environment of Management80

Greenhouse inventories to track emission trends Energy-ef cient building design Committed to aggressive environmental protection in the gasoline business

Focuses on bulk needs of families in suburban communities Targets wide range of customers Average customer income is $57,000

Managers pushing for increase in government-mandated minimum wage Offers government-required health insurance for employees Supports privatization of liquor sales (license states)

Legal/Political

Strong growth expected in Asian markets 28% of sales from countries outside the U.S.

Brand-name vendors, such as P&G, Kraft, and Whirlpool Builds close supplier relationships to keep prices low Supplier Diversity Program for minority- and women-owned businesses

Suppliers

172,000 loyal, highly productive employees Considers employees a competitive advantage Lean and stable executive ranks Labor & bene�ts comprise 70% of operating costs

Labor Market

Natural

E-commerce Web sites in U.S. and Canada generated $2.1 million in 2012 sales; added a Web site in the United Kingdom Uses technology to manage store and corporate operations Introduced mobile apps for Apple and Android in 2012

Technological

General Environment

Task Environment

Sociocultural

Negatively affected by economic slowdown Susceptible to ‡uctuating currency exchange rates Value pricing drives customer traf�c

Economic

International

Vigorous and widespread Sam’s Club, BJ’s Wholesale Club, Walmart, The Home Depot, Lowe’s Growing threat from online competition, including Amazon.com

Competitors

69.9 million members 30% are small business owners Appeals to customers seeking high volume and low price 89% membership renewal

Customers

Costco Wholesale Corporation

exhibit 3.2 The External Environment of Costco Wholesale Corporation

SOURCES: Costco Wholesale Annual Report 2012, Costco Wholesale Corporation Investor Relations Web site, http://phx.corporate-ir.net/phoenix .zhtml?c=83830&p=irol-reportsannual (accessed August 26, 2013); Brad Stone, “Costco CEO Craig Jelinek Leads the Cheapest, Happiest Company in the World,” Bloomberg Businessweek (June 6, 2013), http://www.businessweek.com/articles/2013-06-06/costco-ceo-craig-jelinek-leads-the-cheapest -happiest-company-in-the-world (accessed August 26, 2013); “Costco Wholesale Corporation,” Marketline (April 30, 2012): 3–9; Alaric DeArment, “Costco’s Lobbying Changes WA’s Liquor Laws: Who Is Next?” Drug Store News, (December 12, 2011): 12; and Sharon Edelson, “Costco Keeps Formula as It Expands,” Women’s Wear Daily (January 30, 2012): 1.

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International In his book The World Is Flat, Thomas Friedman challenges managers to view global markets as a level playing field where geographical divisions are irrelevant.13 A flat world, Friedman argues, creates opportunities for companies to expand into global markets and build a global supply chain. As managers expand into global markets, they have to con- sider the international dimension of the external environment, which includes events originating in foreign countries, as well as new opportunities for U.S. companies in other countries. The international environment provides new competitors, customers, and sup- pliers and shapes social, technological, and economic trends as well.

Consider the mixed results Starbucks experienced as it expanded into European mar- kets. Starbucks fans packed stores in Germany and the United Kingdom, for example, but sales and profits in the company’s French stores were disappointing. In fact, after eight years operating 63 stores, Starbucks never turned a profit in France. What international factors could be hindering the company’s success in France? First, a sluggish economy and Europe’s debt crisis hurt sales. Plus, Starbucks faced high rent and labor costs in France, which eroded profits. The company was also slow to tailor the Starbucks experience to the French café culture. Whereas a New Yorker might grab a paper cup of coffee to go, the French prefer to linger over a large, ceramic mug of coffee with friends in a café-style environment. To respond to these challenges, Starbucks launched a multimillion-dollar campaign in France that includes an upscale makeover of stores, with more seating and customized beverages and blends that appeal to local tastes.14 The international environ- ment will be discussed in more detail in the next chapter.

Technological The technological dimension of the general environment includes scientific and tech- nological advancements in a specific industry, as well as in society at large. Advances in technology drive competition and help innovative companies gain market share. However, some industries have failed to adapt to technological shifts and are facing decline. Manag- ers at Fuji got high marks for seeing the trend toward digital cameras and responding faster than Kodak, but even they didn’t anticipate or prepare for the wireless revolution. Adding WiFi technology for Internet connectivity is common in many consumer electronics, but for the most part, digital cameras remain stand-alone devices. It’s an oversight that is hurt- ing not only Fuji, but also Panasonic, Olympus, Canon, and other camera makers. The number of photos being taken is soaring, but most people are using their smartphones so they can easily share photos on Facebook, Instagram, and other social media. Shipments of compact digital cameras plummeted 42 percent in the first five months of 2013. “It’s the classic case of an industry that is unable to adapt,” said Christopher Chute, a digital imaging analyst at research firm IDC.15

Sociocultural The sociocultural dimension of the general environment represents the demographic characteristics, norms, customs, and values of the general population. Important socio- cultural characteristics are geographical distribution and population density, age, and edu- cation levels. Today’s demographic profiles are the foundation of tomorrow’s workforce and consumers. By understanding these profiles and addressing them in the organization’s business plans, managers prepare their organizations for long-term success. Smart manag- ers may want to consider how the following sociocultural trends are changing the con- sumer and business landscape:

1. A new generation of technologically savvy consumers, variously called Gen Z, Re- Gens, the Connected Generation, or simply Post-Millennials, has intimately woven technology into every aspect of their lives. Mobile devices shape the way they commu- nicate, shop, travel, and earn college credits. This generation will make up 40 percent of

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Part 2 The Environment of Management82

the population in the United States and Europe by 2020 and will constitute the largest cohort of consumers worldwide. Predictions of what they will value as consumers include brands that are trust- worthy and products and companies that show a commitment to environmental, social, and fiscal responsibility.16

2. Young people are also leading the trend toward widespread social equality. Polls show that views about social mores and lifestyles are shifting. The percentage say- ing society should encourage greater toler- ance of people with different lifestyles and backgrounds increased from 29 percent in 1999 to 44 percent in 2013. Support for gay marriage increased to 53 percent from 30 percent in 2004, and a number of states already have passed laws allowing same- sex marriage.17 Another poll shows that 57 percent of people support a path to citi- zenship for illegal immigrants, and 48 per- cent support the legalization of marijuana.18

3. The most recent U.S. census data show that more than half of all babies born in 2011 were members of minority groups, the first time that has happened in U.S. history. Hispanics, African Americans, Asians, and other minorities represented 50.4 percent of births in 2011. The nation’s growing diversity has huge implications for business.19

Economic The economic dimension represents the general economic health of the country or re- gion in which the organization operates. Consumer purchasing power, the unemployment rate, and interest rates are part of an organization’s economic environment. Because organi- zations today are operating in a global environment, the economic dimension has become exceedingly complex and creates enormous uncertainty for managers.

In the United States, many industries, such as banking, are finding it difficult to make a comeback despite the slowly rebounding economy. KeyCorp, one of the nation’s largest banking-based financial services organizations, reports an uneven turnaround, with a mix of both good and bad news. While KeyCorp faces a reduction in total assets, a drop in revenue, and a decline in the profit margin in the lending business, it also reports fewer delinquent loans and strong demand from corporate customers for new loans. With banks stretching from Alaska to Maine, KeyCorp has benefited from geographic diversity because some re- gions of the United States rebounded faster than others. “As we are in economic recovery . . . our business model, our size, our geographic diversity is an advantage,” said Beth Mooney, KeyCorp’s CEO. “Conventional wisdom five years ago would have said differently.”20

Legal-Political The legal-political dimension includes government regulations at the local, state, and federal levels, as well as political activities designed to influence company behavior. The U.S. political system encourages capitalism, and the government tries not to overregulate business. However, government laws do specify rules of the game. The federal govern- ment influences organizations through the Occupational Safety and Health Administra- tion (OSHA), Environmental Protection Agency (EPA), fair trade practices, libel statutes

Shrewd home builders are responding to shifts in the sociocultural dimension. Aging baby boomers have been a mainstay of the housing market during the economic downturn, and what they want are smaller houses designed with features to help them stay in their own homes as long as possible. For example, this award-winning Green Lake Residence in Seattle, Washington, designed by Emory Baldwin of ZAI, Inc., offers an efficient, adaptable plan that includes no-step entries and closets stacked on top of each other that can be converted into an elevator shaft if necessary.

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Chapter 3 The Environment and Corporate Culture 83

allowing lawsuits against business, consumer protection and privacy legislation, product safety requirements, import and export restrictions, and information and labeling require- ments. One of the most recent challenges in the legal-political dimension is the Patient Protection and Affordable Care Act, sometimes called Obamacare (passed in 2010 and upheld by the Supreme Court as constitutional in 2012). The act requires that companies provide health insurance for employees or pay penalties.21

Managers in many companies work closely with national lawmakers, educating them about products and services and legislation’s impact on their business strategies. Long before its NASDAQ debut in May 2012, for ex- ample, Facebook had been quietly befriending the nation’s top lawmakers. Managers hired former political aides with access to top leaders in both parties and had them lead training sessions on using Facebook to communicate with voters. In addition, Facebook stepped up its lobbying efforts and set up a political action committee. “It’s smart advocacy 101,” said Rey Ramsey, CEO of Tech- Net, an industry group that includes Facebook. What you ultimately want is for a legislator to understand the consequences of their actions.”22

Natural In response to pressure from environmental ad- vocates, organizations have become increasingly sensitive to the Earth’s diminishing natural re- sources and the environmental impact of their products and business practices. As a result, the natural dimension of the external environment is growing in importance. The natural dimension includes all elements that occur naturally on Earth, including plants, animals, rocks, and resources

Concept Connection

Whether they are motivated by a desire to preserve natural resources, to impress their customers with their social responsibility, or to comply with new legislation, many companies are looking for ways to treat the natural environment better. Some are doing it by switching to renewable energy sources, while others are trying to reduce pollution. Promoting the use of cloth carrying bags like these is just one example of how retailers can help minimize the amount of trash going into the world’s landfills.

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Green Power Reaching Mythical Proportions

In Greek mythology, Nike was the winged goddess of victory. With headquarters in Portland, Oregon— considered one of the world’s “greenest” cities— Nike, Inc. has a corporate culture centered around a commitment to victory, both on the athletic field and as one of the top 100 most sustainable corpora- tions. Some companies give a nod to sustainability by reducing toxins, but Nike goes further. The com- pany’s predictive tool, the Considered Design Index, monitors the total environmental impact of the running shoe production cycle, scoring everything from fabric to reducing waste.

Victory in sustainability also means influenc- ing other companies. Nike CSR staff spearheaded GreenXchange, which brought together compa- nies to explore opportunities, share information, and keep abreast of trends and issues. As Nike’s sus- tainability influence grows, its cultural mantra re- flects the winged deity: “There is no finish line for environmental efforts—we can always go further.”

Sources: Marc J. Epstein, Adriana Rejc Buhovac, and Kristi Yuthas, “Why Nike Kicks Butt in Sustainability,” Organizational Dynamics 39 (2010): 353–356; and “Sustainable Business at Nike, Inc.,” Nike corporate Web site, http://nikeinc.com/pages/responsibility (accessed July 24, 2012).

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Hot topic

such as air, water, and climate. Protection of the natural environment is emerging as a critical policy focus around the world. Governments are increasingly under pressure to explain their performance on pollution control and natural resource management. Nations with the best environmental performance, along with some comparison countries, are listed in Exhibit 3.3. Note that the top performer is Switzerland, which gets most of its power from renewable sources—hydropower and geothermal energy.

The natural dimension is different from other sectors of the general environment be- cause it has no voice of its own. Influence on managers to meet needs in the natural envi- ronment may come from other sectors, such as government regulation, consumer concerns, the media, competitors’ actions, or even employees.23 For example, environmental groups advocate various action and policy goals that include reduction and cleanup of pollution, development of renewable energy resources, reduction of greenhouse gases such as carbon dioxide, and sustainable use of scarce resources such as water, land, and air. The oil spill in the Gulf of Mexico in 2010 brought environmental issues to the forefront. Months after a BP-Transocean rig at the Deepwater Horizon oil well exploded, hundreds of thousands of gallons of oil were still flowing into open water each day, adding to the millions of gallons already contaminating the water and beaches along the coast of Louisiana, Mississippi, Alabama, and Florida, and threatening the region’s fish, birds, turtles, and vegetation. “One of the last pristine, most biologically diverse coastal habitats in the country is about to get wiped out,” said Felicia Coleman, who directs the Florida State University Coastal and

Rank Country Score

1 Switzerland 76.69

2 Latvia 70.37

3 Norway 69.92

4 Luxembourg 69.2

5 Costa Rica 69.03

6 France 69

7 Austria 68.92

8 Italy 68.9

9 Sweden 68.82

10 United Kingdom 68.82

11 Germany 66.91

12 Slovakia 66.62

13 Iceland 66.28

14 New Zealand 66.05

15 Albania 65.85

37 Canada 58.41

49 United States 56.59

116 China 42.24

125 India 36.23

132 Iraq 25.32

exhibit 3.3 2012 Environmental Performance Index

SOURCE: 2012 Environmental Performance Index, Yale Center for Environmental Law and Policy, Yale University, http://epi.yale .edu/epi2012/rankings; and Center for International Earth Science Information Network, Columbia University.

Note: The scores for each country are based on 25 performance indicators covering both environmental public health and ecosystem vitality, such as air pollution and greenhouse gas emissions.

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