Writing Business Plans/BUSINESS POLICY AND STRATEGIC MANAGEMENT
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1.Explain elaborately the impact of globalization on the strategy formulation and implementation in Indian industries.
2.(a) How does corporate social responsibility of business represent the cultural values?
(b) Discuss external environment as a source of both opportunities and threats.
3.Discuss the different types of diversification strategies adopted by WIPRO and VIDEOCON.
4.Why Corporate Image is better than Brand Image? What happens if the latter is powerful than the former? Explain.
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1.Explain elaborately the impact of globalization on the strategy formulation and implementation in Indian industries
on a political map, country borders are clear as ever. But on the
competition map, financial,trading, and industrial activities across
national boundaries have rendered that political borders increasingly
Not only firms that compete internationally but also those whose
primary markets is considered domestic will be affected by
competition from around the world.
To some the word "Globalization" may seem a cliché. To others, it may
appear an end in itself. Competitive pressures are creating the need for
most companies to become Global. Globalization is one means for
becoming and remaining a world-class competitor — a goal encased in
the mission statements of most corporations.
When developing a globalization strategy, it is clear that the emerging
markets present the greatest opportunity. The growth projections for
Europe, Japan and the United States pale in comparison to some of the
Throughout the emerging markets an unprecedented consumer market
boom is driving up demand for western-style goods and services. The
largest segment of consumers in these markets is a decade short of its
peak spending years. In India alone, sales of consumer goods are rising
at 14% per year, while China is growing at almost 20% per year.
Couple the consumer-spending boom with the still burgeoning need for
infrastructure improvements and you’ll have a range of opportunities that
extends into the trillions of dollars. Projects are planned or underway in
many of these countries to upgrade transportation and
telecommunication systems, explore energy resources, build power
generation facilities and provide health care facilities.
In addition, the privatization efforts are presenting an incredible range of
opportunities for investors, lending institutions, service providers and
Four key trend influence emerging market potential
There are four key trends that are influencing the emerging market
Overall world population growth is now concentrated in the
developing world. Where industrial nations are facing an
increasingly older population, the emerging markets remain
young. The developed world comprises only 11% of the world’s
Many countries that once relied on centrally planned economies
are becoming market-driven. Industries that governments
previously restricted to foreign companies are now opening to
Access to the emerging markets is increasing due to huge
developments in communications technology such as the Internet
and electronic commerce. Cyberspace represents a profound shift
in the nature of communications as well as our perception of
As infrastructure improvements are made, urban growth in the
emerging markets will continue to explode.
Estimates indicate that the emerging markets' share of world imports will
double by the year 2010, rising to over 38%. Companies dazzled by the
magnitude of these numbers must be equipped with the appropriate
knowledge, information, and strategy to make its market forays
MACRO LEVEL Industry Globalization
is due to such factors as :
• Level of international trade
• Intensity of international competition
• Worldwide product standardization
• Presence of key competitors in all key international markets.
• Intra-firm trade
• Technological intensity
• International linkages of value-added activities among countries
• International integration of value-added activities among countries
• WORLDWIDE FREETRADE AGREEMENTS
• WORLDWIDE ECONOMIC REFORMS
• WORLWIDE FINANCIAL REFORMS
• REMOVAL TARIFF BARRIERS BY COUNTRIES
• REMOVAL OF SUBSIDIES COUNTRIES
• ETC ETC
THE PUSH FACTORS OF GLOBALIZATION
• Per capita income converging among industrial nations
• Convergence of lifestyles and taste
• Growth of global and regional channels
• Establishment of world brands
• Spread of global and regional media
• Continuing push for economies of scale ( but offset by flexible manufacturing)
• Accelerating technological innovation
• Advances in transportation (e.g., use of FedEx to deliver urgent supplies from one continent to another)
• Emergence of newly industrializing countries with productive capability and low labor costs (e.g., China, India and Indonesia)
• Reduction of tariff barriers (e.g., North American Free Trade Agreement)
• Reduction of non-tariff barriers (e.g., Japan’s gradual opening of its markets)
• Creation of trading blocs (e.g., European Union, and Euro Currency in 1999)
• Strengthening of world trade institutions (e.g., formation of the World Trade Organization)
• Continuing increase in level of world trade
• More countries becoming key competitive battlegrounds (e.g., rise of Japan to become a “lead” country)
• Rise of new competitors intent upon becoming global competitors (e.g., Japanese firms in the 1970’s, Korean firms in the 1980’s, Taiwanese firms in the 1990’s, Chinese firms in the 2000s, and probably Indian and Russian firms in the 2010’s.
OTHER FACTORS WHICH DRIVES THE GLOBALIZATION
• In a Globalized industry, firms must simultaneously accomplish:
• Global Scale Efficiency
• Local Responsiveness
• World-Wide Learning
INFORMATION TECHNOLOGY PRODUCTS
the following are the emergent products
-real time management
-faster product diffusion
GLOBAL MARKETING STRATEGY
-market force driven
-government regulation driven
-industry demand driven
GLOBAL MARKET DEMAND IS DRIVEN
-common customer needs
-global customer needs
-lead countries driven
PRODUCT COST DRIVEN - GLOBAL MARKET
-global economies of scale and scope
-steep experience curve
-global sourcing efficiencies
-difference in country cost
-high product development cost
-fast changing technology
GOVERNMENT DRIVEN - GLOBAL MARKET
-favorite trade practices
-compatible technical standards
-common market regulations
-government owned competition
-government owned customers
COMPETITION DRIVEN - GLOBAL MARKET
-high export opportunities
-high import opportunities
COMPETITION DRIVEN - PRODUCT MARKET STRATEGY
-cost leadership strategy
-product differentiation strategy
-niche market strategy
GLOBAL DRIVEN - PRODUCT MARKET STRATEGY
-product cost reduction
-product acceptance by customers enhanced
-product competitive position advanced
LIMITS OF GLOBAL MARKET
-standards of individual countries is a barrier
-adaptation by individual countries is an issue.
-slow global integration
-varying scale of developments
-local sensitivities affects marketing
GLOBALIZATION, HOW THE
IMPORTS HELPS YOUR COUNTRY
-provides products / services not available in your country.
-provides cheaper products/ services to your country.
-improves the lifestyle of the population.
-generates jobs in the wholesale / retail sectors.
-enriches the population with imported culture
-educates the people about the foreign countries.
-increases the culture exposure between the two countries
GLOBALIZATION, HOW THE
EXPORTS HELPS YOUR COUNTRY
-provides an opportunity for other countries to taste your products/services
-provides an opportunity to sell your country's products/services
-creates job opportunities in your country
-brings in export income
-builds foreign exchange reserves
-more jobs , means more/ better life for the people
-creates an opportunity to learn foreign languages
- what skills and knowledge you want to gain from
HOW THE product marketing
provides a window
-to learn new languages
-to learn / understand different cultures
-to communicate with different cultures
-to learn about the geography of the countries.
-to learn about the commerce of different countries.
-to learn about the civil laws of different countries.
-to learn about the trade laws of different countries.
-to learn about the commercial laws of different countries.
-to learn about the government functioning of different countries.
-to learn about the banking system of different countries.
-to learn about the financial systems of different countries.
Positive impacts of Globalization
Globalization is the new catchphrase in the world economy, dominating the globe since the nineties of the last century. People relied more on the market economy, had more faith in private capital and resources, international organizations started playing a vital role in the development of developing countries. The impact of globalization has been fair enough on the developing economies to a certain extent. It brought along with it varied opportunities for the developing countries. It gave a fillip for better access to the developed markets. The technology transfer promised better productivity and thus improved standard of living.
Negative impacts of Globalization
Globalization has also thrown open varied challenges such as inequality across and within different nations, volatility in financial market spurt open and there were worsening in the environmental situation. Another negative aspect of globalization was that a majority of third world countries stayed away from the entire limelight. Till the nineties, the process of globalization in the Indian economy had been guarded by trade, investment and financial barriers. Due to this, the liberalization process took time to hasten up. The pace of globalization did not start that smoothly.
Economic integration by 'globalization' enabled the cross country free flow of information, ideas, technologies, goods, services, capital, finance and people. This cross border integration had different dimensions - cultural, social, political and economic. More or less the economic integration happened through four channels -
1. Trade in goods and services
2. Movement of capital
3. Flow of finance
4. Movement of people
Advantages of globalization
The gains from globalization can be cited in the context of economic globalization:
• Trade in Goods and Services - From the theoretical aspect, international trade ensures allocating different resources and that has to be consistent. This specialization in the processes leads to better productivity. We all know from the economic perspective that restrictive trade barriers in emerging economies only impede growth. Emerging economies can reap the benefits of international trade if only all the resources are utilized in full potential. This is where the importance of reducing the tariff and non-tariff barriers crop up.
• Movement of Capital - The production base of a developing economy gets enhanced due to capital flows across countries. It was very much true in the 19th and 20th centuries. The mobility of capital only enabled savings for the entire globe and exhibited high investment potential. A country's economic growth doesn't, however, get barred by domestic savings. Foreign capital inflow does play an important role in the development of an economy. To be specific, capital flows either can take the form of foreign direct investment or portfolio investment. Developing countries would definitely prefer foreign direct investment because portfolio investment doesn't have a direct impact on the productive capacity expansion.
• Financial Flows - The capital market development is one of the major features of the process of globalization. We all know that the growth in capital and mobility of the foreign exchange markets enabled better transfer of resources cross borders and by large the global foreign exchange markets improved. It is mandatory to go in for the expansion of foreign exchange markets and thus facilitate international transfer of capital. The major example of such international transfer of funds led to the financial crisis - which has by now become a worrying phenomenon.
Thus, globalization has the fair and rough share of its impacts and thus we can surely hope for more advancement in the global economy due to this process.
the environmental forces that influence the globalization of business
Globalization or (Globalisation) refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import quotas. Globalization accompanied and allegedly contributed to economic growth in developed and developing countries through increased specialization and the principle of comparative advantage. The term can also refer to the transnational circulation of ideas, languages, and popular culture.
"a widely-used term that can be defined in a number of different ways. When used in an economic context, it refers to the reduction and removal of barriers between national borders in order to facilitate the flow of goods, capital, services and labour... although considerable barriers remain to the flow of labour... Globalization is not a new phenomenon. It began towards the end of the nineteenth century, but it slowed down during the period from the start of the first World War until the third quarter of the twentieth century. This slowdown can be attributed to the inward-looking policies pursued by a number of countries in order to protect their respective industries... however, the pace of globalization picked up rapidly during the fourth quarter of the twentieth century..."[
four basic aspects of globalization:
• Trade and transactions: Developing countries increased their share of world trade, from 19 percent in 1971 to 29 percent in 1999. But there is great variation among the major regions. For instance, the newly industrialized economies (NIEs) of Asia prospered, while African countries as a whole performed poorly. The makeup of a country's exports are an important indicator for success. Manufactured goods exports soared, dominated by developed countries and NIEs. Commodity exports, such as food and raw materials were often produced by developing countries: commodities' share of total exports declined over the period.
• Capital and investment movements: Private capital flows to developing countries soared during the 1990s, replacing "aid" or development assistance which fell significantly after the early 1980s. Foreign Direct Investment (FDI) became the most important category. Both portfolio investment and bank credit rose but they have been more volatile, falling sharply in the wake of the financial crisis of the late 1990s.
• Migration and movement of people: In the period between 1965–90, the proportion of the labor forces migrating approximately doubled. Most migration occurred between developing countries and Least Developed Countries (LDCs). The flow of migrants to advanced economic countries was claimed to provide a means through which global wages converge. They noted the potential for skills to be transferred back to developing countries as wages in those a countries rise.
• Dissemination of knowledge (and technology): Information and technology exchange is an integral aspect of globalization. Technological innovations (or technological transfer) benefit most the developing and Least Developing countries (LDCs), as for example the advent of mobile phones.
In some developing countries labor policies provide less protection than in developed countries. One example is the use of sweatshops by manufacturers. Clothing makers such as The Gap were accused of contracting with factories that used child labor in violation of local and US law.[
In the USA, the National Labor Committee proposed the Decent Working Conditions and Fair Competition Act, which would legally require companies to respect human and worker rights by prohibiting the import, sale, or export of sweatshop goods. Specifically, these core standards include no child labor, no forced labor, freedom of association, right to organize and bargain collectively, as well as the right to safe working conditions.
Business process outsourcing
In rich countries, business process outsourcing has been a double-edged sword; it enabled cheaper services but displaced some service-sector jobs. However, in lower-cost locations such as India, the outsourcing industry is the "primary engine of the country’s development over the next few decades, contributing broadly to GDP growth, employment growth, and poverty alleviation".
World Bank figures indicate that the number of people living on less than $1 per day-the international standard for extreme poverty-dropped from 1.25 billion (29%) in 1990 to 986 million in 2004 (18% of the larger total population).[
Critics allege globalization increased income inequality, both between and within nations. On 7 out of 8 metrics, income inequality increased in the twenty years ending 2001. Also, "incomes in the lower deciles of world income distribution have probably fallen absolutely since the 1980s". The article was skeptical of the World Bank's claim that the number of people living on less than $1 a day had held steady at 1.2 billion from 1987 to 1998, because of biased methodology.
A chart that gave the inequality a very visible and comprehensible form, the so-called 'champagne glass' effect,
was contained in the 1992 United Nations Development Program Report,
Concept of Business Environment
Environment refers to all internal and external forces. They have a bearing on the development, performance and outcomes of an organization. They influence attainment of goals.
Business is environment specific. It is neither self-sufficient nor self-contained. It operates in a dynamic environment. Internal environmental forces provide strengths and weaknesses to the business. External environmental forces shape opportunities and pose threats for the business.
Various authors have defined business environment as follows:
According to Keith Davis:
Business environment is the aggregate of all conditions, events and influences that surround and affect it.
According to V. P. Michael
Business environment is the sum total of the environmental factors which provides an atmosphere for business.
According to S. P. Robbins and Mary Coulter
Environment refers to institutions or forces that affect the organization’s performance.
Internal environmental forces are located within the business organization. They consist of goals, policies, culture, resources and structure of business. They also consist of stakeholders such as customers, suppliers, competitors, market intermediaries, labor unions and pressure groups they are controllable by the business organization.
External environmental forces are located outside the business organization. They consist of political, economic, socio-cultural and technological forces. They cannot be controlled by the business organization. They are uncertain and complex.
Both internal and external environmental forces play an important role in influencing the outcomes of business organization.
The characteristics of business environment are:
1. Complex: Business environment is complex due to its unpredictability. Complexity provides uncertainty to business environment .
2. Dynamic: Business environment is dynamic. It is continually changing. Technological changes greatly influence it. Globalization has brought competition everywhere.
3. Multi-faceted: Business environment is multi-faceted. Different people perceive environmental changes differently. A particular change in the environment can ve an opportunity for one business organization. But it can be a threat for another business organization.
4. Far-reaching impact: Business environment exerts far-reaching impact on business organizations. It impacts their capacity to achieve goals. It provides strengths, weaknesses, opportunities and threats to the business organization.
Organization- Environmental Relationship
Organization is an open system composed of people, structure and \technology for achieving goals in a dynamic environment.
Organization is environment specific. It operates in a rapidly changing environment. It is neither self-sufficient nor self-contained. It is the product of its environment. It constantly interacts with its environment.
Environmental influences on organization occur through uncertainty, competition and technological changes in the environment. Organizational outcomes are influenced by environment.
Environment refers to internal and external forces which influence the performance and outcomes of an organization. Such forces influence the organization’s ability to attain goals.
Organizational environment is complex, dynamic and multi faceted. Organization must understand the elements of its environment. It should anticipate and predict the forces in the environment. it should continually adapt to changing environmental forces.
Organization has exchange relationship of inputs outputs with environment. Environmental relationship is important to organizations due to the following reasons:
1. Environmental Adaptation: Environmental forces change rapidly; organization should monitor its relationships with the environment. It should maintain dynamism through continuous adaptation to environmental changes.
2. Strategic Thinking: Strategies provide long-term direction and scope. The analysis of environmental relationships helps foster strategic thinking in the organization. Current strategies can be altered. New strategies can be formulated. Opportunities and threats to the organization can be identified.
3. Competitive Analysis: The analysis of environmental relationship helps an organization to learn what competitive organizations are doing. Counter strategies can be developed. Alliances can be formed with other organizations for mutual gains.
4. Lobbying: Lobbying is pressurizing to protect rights and interests. The analysis of environmental relationship helps organizations to detect changes. They can form pressure groups to influence such changes. They can form pressure groups to influence such changes. Nepal Chamber of Commerce does lobbying on behalf of business organizations to influence laws and government policies.
5. Stability: The analysis of environmental relationship enables the organization to foresee the impact of environmental changes on its stability. It can develop action plans to cope with the changes to maintain stability.
Organizations must respond to changes in their environmental relationships. The mechanisms for response can be:
a) Information management to scan environment.
b) Strategic response by changing or adapting the current strategy.
c) Technology transfer to increase quality and decrease costs.
d) Research and development for innovation.
e) Alliances or combinations to increase capability and face competition.
Types of Environment
Environment consists of forces that influence the organization’s ability to attain goals. It can be classified into:
• Internal environment
• External environment
Both internal and external environment are interrelated and interacting.
It consists of conditions and forces within an organization. It is located within the organization. It provides strengthens and weaknesses to the organization. It is controllable by the organization.
Forces in the internal environmental consist of:
• Organizational scope
a) Organizational Scope
It is indicated by:
i) Organizational goals and policies: Goals are desired outcomes. They state end results. They can be multiple as well as conflicting. They form a hierarchy. Organization activities must be conducted within the framework of goals.
Policies are guidelines for managerial decision making. They follow from goals. Organizations must operate within the policy guideline framework.
ii) Organizational Structure: Structure is the design of jobs and relationships. It I concerned with the division of activities (differentiation) and coordination of efforts (integration). Organizations must function within the boundary of their structure.
iii) Organizational Resources: Resource availability sets a limit on organizational activities. They can be physical, human, financial and information. The recent developments in information technology have greatly facilitated the activities of organization.
iv) Culture: Culture encompasses shared values, norms, beliefs, customs and symbols that guide member behavior in organization. It helps to understand what the organization stands for, how it functions, and what it considers important. Culture shapes the overall effectiveness of the organization.
• Culture is reflected by mutuality of interests, collaboration and team spirit, faith in employees, autonomy in work, tolerance for conflicts, open communication, risk taking and human focus in organization.
• Stakeholders: They are important part of internal environment. They affect an organization’s activities. They are directly relevant for achievement of organization’s goals. Stakeholders form the task environment of organization.
Stakeholders have a stake in the performance of the organization. They include:
i. Customers: They can be consumers, business or institutional customers. They can money for products. Organizations develop programs to satisfy the needs of customers. Customers need sand preferences keep changing. Organization should aim for total customer satisfaction.
ii. Suppliers and allies: Organizations buy inputs from the environment s and sent outputs to the environment. They are dependent on the suppliers of materials and resources. Long lasting relationships with suppliers are essential.
Allies: Organizations develop strategic alliances with other organizations to work together in joint ventures or partnerships. Such allies provide expertise and spread risk. Such alliances directly affect the activities of organizations.
iii. Competitors: Organizations compete for customers. They must analyze competition. They should formulate a clear strategy for customer satisfaction and bigger market share. Competition s everywhere. It directly affects organizations.
iv. Government: Government regulates. Its policies and attitudes constrain or support organizational activities. It protects consumer and societal
. External Environment
The second level of the management system involves the organization's external environment. It consists of all the outside institutions and forces that have an actual or potential interest or impact on the organization's ability to achieve its objectives: economic, social, political, legal, technological and international forces.
"According to James Stoner," External environment can be defined as all elements outside an organization that are relevant to its operations."
External environment includes all of the forces outside of an organization's boundaries that are not under the control of management. Of course, the boundary that separates the organization from its external environment is not always clear and precise.
The external environment consists of two layers:
i) The Task Environment, and
ii) The General Environment.
COMPONENTS OF POLITICAL ENVIRONMENT
Political environment consists of political and legal forces that influence management.
1. Political Environment:
Forces in the political environment are related to management of public affairs. The components of political environment are:
a. Political System: It consists of ideological forces, political parties, election procedures, and power centers. A stable, efficient and honest political system is essential for the growth of management. Political instability resulting from civil war, emergencies and terrorist activities adversely affects management.
b. Political Institutions:
They consist of legislature, exercise and judiciary.
• The legislature enacts laws. They guide managerial activities.
• The executive implements the decisions of the legislature. It lays down policies, regulations and procedures that influence the activities of management. Government- business relations are crucial for the growth of business activities.
• The judiciary serves as watchdog. Their rulings influence management practices. It settles disputes and carries out judicial review.
c. Political Philosophy: It can be democratic, totalitarian or a mix of both. Democracy vests power in the hands of people. Totalitarian vests power in the hands of the state. A mix of both is based on power sharing.
2. Legal Environment:
Legal environment refers to all the legal surroundings that affect management activities. It consists of an array of acts, rules, regulations, precedent, institutions and processes. It defines what management can or cannot do.
Legal environment is concerned with:
• Protecting the right sand interests of organization, consumer’s employees and society.
• Providing grounds on which organizational activities can be carries out. It encourages or restrains activities by providing facilities to law abiders and gibing punishment to law breakers.
• Regulating activities through legal provisions. They are relating to licensing, wages, labor relations, monopoly, foreign investment, foreign exchange, environment protection, consumer protections, industrial location, imports, exports, pricing and taxation.
Management must ensure that its activities conform to the laws of the land. It must comply with legal provisions I force.
The components of legal environment are:
a. Law: It consists of an array of laws enacted by the parliament. It protects the rights and interests of consumer’s labor, business and society.
b. Courts of Law: Courts are intuitions established to solve legal disputes. Nepal has a three-tier court system. The Supreme Court is t the national level. It is the highest level of judiciary. The Courts of Appeal are at the middle level. The 75 district courts are at district level.
c. Law Administrators: Various law enforcement agencies ensure implementation of laws and the judgments of the courts of law. Government agencies, lawyers, police and jails play an important role in law administration.
COMPONENTS OF ECONOMIC ENVIRONMENT
Economic environment refers to all the economic surroundings that influence management. Important components of economic environment are:
1. Economic Systems: Economic system determines the scope of private sector participation and market forces. The models of economic system are:
a. Free Market Economy: This system is based on private sector ownership of the factors of production. Profit serves as the driver of economic engine. The competitive market mechanism guides business decisions. There is freedom of choice. Individual initiative is encouraged.
b. Centrally Planned Economy: This system is based on public ownership of the factors of production. The economy is centrally planned, controlled and regulated by the government. There is no consumer sovereignty. Public enterprises play a dominant role.
d. Mixed Economy: this system is a mix of free market and centrally planned economies. Both public and private sectors coexist. The public sector has ownership and control of basic industries including utilities. The private sector owns agriculture and other industries. It is regulated by the state.
2. Economic Policies: Policies are guidelines for action. Economic policies significantly influence and guide management actions.
Key economic policies influencing organization are:
a. Monetary Policy: It is concerned with money supply, interest rates and credit availability. It influences the level of spending through interest rates. Cheap money reduces cost. Dear money increases cost.
b. Fiscal Policy: It is concerned with the use of taxation ad government expenditure to regulate economic activities. Taxation on income, expenditure and capita are an important influence on management decisions. Government purchases, subsidies and other transfers also influence the activities of management.
c. Industrial Policy: it is concerned with industrial licensing, location, incentives, facilities, foreign investment, technology transfer, and nationalization. It influences the investment climate.
3. Economic Conditions
They indicate the health of the economy in which management operates. The factors of economics conditions are:
a. Income: The level and distribution of income affect expenditure, saving and investment. They together influence the economic conditions of organizations. Nepal has a per capita income of US $ 240. The GDP growth rate is very low.
b. Business Cycles: The stages of business cycle can be prosperity, recession and recovery. They affect the health of organization.
c. Inflation: It is rise in price level. It influences costs, price and profits of organization.
d. Stage of Economic Development: An economy can be least developed, developing and developed. Management activities are influenced by the state of economic development. Nepal is least developed.
4. Regional Economic Groups:
They promote cooperation and free trade among members by removing tariff ad there restrictions. They provide opportunities to member countries and threats t non-members countries. Example is:SAARC, ASEAN, EU.
COMPONENTS OF SOCIO-CULTURE ENVIRONMENT
1. Social Environment: It refers to all the social surroundings that influence management. It consists of factors related to human relationships.
Organizations operate within the society. They primarily exits to satisfy societal needs. Social factors influence the policies practices and activities of organizations.
Important factors in the social environment consist of: demographics, social institutions, pressure groups and social change.
a. Demographics: Demography is concerned with human population and its distribution. Demographic forces consist of:
• Size, distribution and growth of population
• Age mix of population
• Urbanization of population
• Migration of population
b. Social Institutions: They consist of family, reference groups and social class.
• Family: Two or more persons related by blood, marriage or adoption who reside together constitute a family. The family as a asocial institution greatly influences decisions and activities of management.
• Reference Groups: They consist of groups that have a direct or indirect influence on the attitudes and behavior of consumers. They can be sports, musical and cinema personalities. They can be professionally successful people. They:
*expose to new behaviors and life style;
*Influence values and attitudes;
*Provide norms for behavior.
• Social class: It is the rank within a society determined by its members. It can be classified into upper, middle and lower. Members of a class share similar values, interests and behavior. Organizational activities are influenced by the behavior of various classes in the society. Organizations need to their activities to meet the needs of specific social classes.
c. Pressure Groups: They are special interest groups. They sue the political process to advance their position on an issue of social concern. They pressurize and lobby government and organizations to protect their interests through change in laws, policies and practices.
d. Social Changes: Change is making things different. Social change implies modification in relationships and behavior patterns in a society. Life style and social values promote social change.
Life style is a person’s pattern of living reflected in his activities, interests and opinions. It affects product choice. Management should adapt their activities to changes in life style.
2. Cultural Environment
It refers to cultural surroundings that influence management. Culture is the complex whole which includes values, norms, beliefs, and customs. Symbols and works of arts and architecture. It is created by society. It is handed down from generation to generation.
Culture is learned behavior. It changes over time. It is made up of subcultures based on religion, language, caste and ethnicity. Cultural factors influenced by:
a. Influencing the Type of products: the type of food people eat, beverages they drink, clothes they wear, and the building materials they use for construction of houses vary from culture to culture.
b. Creating Attitudes towards Work and Leisure: Work motivation, profit motivation, meaning of body gestures, and attitudes toward time vary from culture to culture.
C.Influencing Values and Beliefs: Values are basic convictions. Beliefs are descriptive thoughts held about something based on knowledge, opinion or faith. Culture influence values and beliefs.
Management should be culturally sensitive. Cross-cultural changes brought about by globalization and information technology significantly influences management.
COMPONENTS OF TECHNOLOGICAL ENVIRONMENT
Technical environment refers to all technological surroundings that influence management. Technology consists of skills, methods, systems, and equipment. It includes inventions and innovations. It makes work more efficient.
Technology influences management by bringing about changes in jobs, skills, life styles, products, production methods and processes. Automation, computerization, robotics, production, biotechnology, new materials and artificial intelligence have all influenced management. Information technology affects every function of management.
Technology reaches people through organization. Factors in the technological environment consist of:
1. Level of Technology: The level of technology can be appropriate or sophisticated. It can be labor-based or capital-based. The level of technology influences management.
* Labor-based technology: Human labor is mainly used for the operations.
* Capital-based Technology: Machinery is mainly used for operations. Technology is represented by automation, computerization, mobilization, etc. The technology can be high, intermediate or low.
2. Pace of Technological Change: Technology is a dynamic force. Its pace of change is accelerating. Management should adapt to the changing technological forces. It should also upgrade the skills of human resources to effectively cope with the demands of technological changes.
Technological change influences management in the following ways:
• It can make existing industries obsolete.
• It can rejuvenate the existing industries through product improvements or cost reductions.
• It can create entirely new industries.
• It can increase government regulations.
• It can create need for technological up gradation.
3. Technology Transfer: Sources of technology can be within the organization, within the country or foreign countries. Technology transfer implies technology imported from technologically advanced foreign countries. The speed of technology transfer is important.
Technology transfer can be through:
a) Globalization: Global companies are the key sources of technology transfer in developing nations. The modality can be franchising, technical collaboration, subsidiary establishment or contract.
b) Projects: Turn-Key projects based on global bidding serve as a sources of technology transfer.
c) Trade: This consists of sale of equipment or machines by the manufacturer.
d) Technical Assistance: Bilateral and multilateral donors provide international consultants who bring new technology with them.
e) Training and publications: They provide opportunities to learn about new technology.
Technology transfer influences management by:
• Increasing efficiency and decreasing costs.
• New product development and product improvements.
• Improving production systems and processes
• Better satisfaction of customer needs.
4. Research and Development (R & D) Budget: R& D is the essence of innovation. Expectations for improved technology are increasing. Customers expect new products of superior quality which are safe, comfortable and environment-friendly. This calls for increased research and development budget.
Government and industry collaboration in R& D effort is also an important aspect of technological environment. Industries can also collaborate with universities.