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
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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