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Management Concepts & Organisational Behaviour - Manager And Environment

Indirect Environment - Manager And Environment

   Posted On :  17.05.2018 09:30 pm

Indirect environment of business is usually more complex and uncertain than the direct.

Indirect Environment
Indirect environment of business is usually more complex and uncertain than the direct. Management is often compelled to make assumptions about the impact of the various factors like technology, general economic conditions, socio-cultural and political factors. Let us, therefore, examine the impact of these factors on the business.


Technology, in the organizational context, influences the ways of doing things. It influences various processes. Technological changes affect the efficiency with which products are manufactured and sold, when a product will become obsolete, how information can be gathered and processed, and what customers expect from the organization’s products and so on. Important technological developments that have profoundly affected the organizations and society in the last two decades are the computer, cell phone technology, laser, xerography, integrated circuits, semiconductors, television, satellite communication, nuclear power, synthetic fuels and foods, etc. All these innovations have thoroughly changed the face of the society. Therefore, today’s organizations need to keep abreast of technological changes that affect their operations and products so as to remain competitive. Failure of the management to clearly gauge the technological changes would cost the business dearly. It endangers the very survival of the organization.

The pace at which technological changes occur varies from industry to industry. In some industries where technology is stabilized, the changes are less frequent and less turbulent. One the other hand in some industries like information technology, telecommunication systems, polymers, etc. changes are frequent. Depending upon the nature of business and the type of technology used, every organization has to assess the technological environment form time to time.

Economic Conditions

Managers must also assess how changes in general economic conditions will affect the operations. The fluctuations in economic activities of a nation as measured by the various parameters like the gross domestic product (GDP), price level, employment, aggregate demand and supply of consumer and industrial goods, etc. have far reaching impact on the prosperity of the business. These factors affect the cost of the inputs and the ability of customers to buy the goods and services. Organizations’ must be able to tackle effectively the inflationary and recessionary trends in the economy. When the economy is in an upbeat mood, firms normally benefit enormously and commit the resources for further growth with a hope of continuity of favorable economic conditions. Problems arise when the economy turns downswing. It is at that stage, firms have to adjust themselves to the down turn in economic conditions. Efficiency in operations, elimination of wastage, product planning, etc. hold the key for the survival of firms in such an adverse economic climate. As business organisations, in terms of size and impact, have grown into mega institutions, their failure will have disastrous effects on the society. By virtue of their size, they also influence significantly the economic stability of the nation. Further, it is important to note that a given change in economic environment may have a positive effect on some organizations and a negative effect on others. Therefore, a manager must be able to clearly assess the impact of changes in economic conditions on the industry in general and his firm in particular.

Socio-Cultural Factors

Organisations are affected by the culture of the particular society in many ways. Firms which have their operations in more than one country have to adapt to the respective cultures in an effective way. Otherwise, they find it difficult to gain the acceptance of the society. Sound understanding of the cultural variables is all the more important for firms in a country like India where there are several diversities in cultures of various regions within the country.
Culture is a wider concept which includes value systems, beliefs, likes and dislikes, altitudes and perceptions. If the products or services of a firm are not in line with the culture of the place, they may not be accepted by the society. For instance, in India ‘Miss’ brand cigarette targeted at the women was a failure because it is against the cultural ethos of the society. Likewise at the international level, many brands have failed because they are out of tune with the respective cultures. At the same time, it may be remembered that certain products and services also affect the culture of a place. The satellite television and the cell phone that made deep inroads into the Indian culture, and how certain values particularly in the Indian youth are changing makes a good example.
As such, an organization cannot insulate itself from the socio-cultural factors specific to a community. For example, paying bribes to obtain contracts or political favors, promotion on the basis of favoritism instead of competence, and spreading unfavorable rumors about a competitor are considered unethical and immoral business practices in many countries. In some countries such practices are seen as normal and accepted business practices because of differing socio-cultural factors. In this regard, General Electric’s former chairman Reginald Jones observation is worth mentioning. He states that “organizations must be able to anticipate the changing expectations of society; and serve them more effectively than competing firms. This means that the organization itself must change, consciously evolving into an institution adapted to the new environment”.

Political Environment

The performance, growth and survival of business in general, to a larger extent, depend on the attitude of the government towards business. Since government is fully empowered to monitor and control the various institutions of the society, the policies pursued by the government affects the business in a significant way. The continuity of policies is very much essential. That depends on the stability of the government of the particular nation. For instance, the attitude of the government in India towards foreign companies has undergone dramatic change in the last two decades. In the late seventies during the Janata Party rule at the centre, Coca-Cola, IBM and a few other multinationals were forced to leave the country. There were several other restrictions on the equity holding of foreign partners. The whole thing has changed, in the last few years so much so that multinationals are not only welcome but are also offered many facilities.
The cooperation that exists between business and government in Japan has in fact helped the Japanese Companies to conquer the world markets in the last few decades. In Japan, Ministry of International Trade and Industry (MITI) extends all out support to the organizations to emerge internationally competitive. In India too, of late, we see a lot of change in the attitude of the government both at central and state level towards the business. Various state governments are weighing with each other with attractive packages to woo the foreign investment in many core sector industries.
The various factors discussed so far highlight the impact of the environment on the business. If companies like Dr, Reddy Labs, Tata Motors, Larsen & Toubro, Reliance, ITC, etc. are able to go global, it is precisely because of their ability to assess the changing environment effectively and to adapt to the changes with considerable case. As a result, we see a few Indian companies reaching the status of being called Indian multinationals.


Tags : Management Concepts & Organisational Behaviour - Manager And Environment
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