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developed countries. This has led many companies to outsource (or “offshore”) their
manufacturing operations to countries such as China and Mexico. In the 1990s,
knowledge work was thought to be safe from outsourcing, but in the 21st century we
are also seeing many service operations moved to places with cheaper wages. For

example, many companies have outsourced software development to India, with
Indian companies such as Wipro and Infosys emerging as global giants. Given these
changes, understanding how to manage a global workforce is a necessity. Many
companies realize that outsourcing forces them to operate in an institutional
environment that is radically different from what they are used to at home. Dealing
with employee stress resulting from jobs being moved overseas, retraining the
workforce, and learning to compete with a global workforce on a global scale are
changes companies are trying to come to grips with.
Changes in the Market Conditions
Market changes may also create internal changes as companies struggle to
adjust. For example, as of this writing, the airline industry in the United States is
undergoing serious changes. Demand for air travel was reduced after the September
11 terrorist attacks. At the same time, the widespread use of the Internet to book
plane travels made it possible to compare airline prices much more efficiently and
easily, encouraging airlines to compete primarily based on cost. This strategy seems
to have backfired when coupled with the dramatic increases in the cost of fuel that
occurred begining in 2004. As a result, by mid-2008, airlines were cutting back on
amenities that had formerly been taken for granted for decades, such as the price of a
ticket including meals, beverages, and checking luggage. Some airlines, such as Delta
and Northwest Airlines, merged to stay in business.
How does a change in the environment create change within an organization?
Environmental change does not automatically change how business is done. Whether
the organization changes or not in response to environmental challenges and threats
depends on the decision makers’ reactions to what is happening in the environment.
Growth
It is natural for once small start-up companies to grow if they are successful.
An example of this growth is the evolution of the Widmer Brothers Brewing
Company, which started as two brothers brewing beer in their garage to becoming the
11th largest brewery in the United States. This growth happened over time as the
popularity of their key product—Hefeweizen—grew in popularity and the company
had to expand to meet demand growing from the two founders to the 11th largest
brewery in the United States by 2008. In 2007, Widmer Brothers merged with
Redhook Ale Brewery. Anheuser-Busch continues to have a minority stake in both
beer companies. So, while 50% of all new small businesses fail in their first
[4]
year, those that succeed often evolve into large, complex organizations over time.
Poor Performance
Change can also occur if the company is performing poorly and if there is a
perceived threat from the environment. In fact, poorly performing companies often
find it easier to change compared with successful companies. Why? High
performance actually leads to overconfidence and inertia. As a result, successful
companies often keep doing what made them successful in the first place. When it

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