Lecture 2 - Managers and External Business Environment presentation 2 slides per page.pdf

MGMT 1001: INTRODUCTION TO MANAGEMENT Lecture 2 – Environment of Business and Managing Globally (Chapters 3 & 4) Professor Dwayne Devonish Learning objectives At the...

MGMT 1001: INTRODUCTION TO MANAGEMENT Lecture 2 – Environment of Business and Managing Globally (Chapters 3 & 4) Professor Dwayne Devonish Learning objectives At the end of this lecture, students should be able to to::  Identify Id if and d understand d d the h different diff components off the external and internal business environment  Understand the interdependent relationship between management and the environment  Understand why and how organisations go i internationally i ll  Understand the importance of culture in the managing global business 1  Managers and the Business Environment Organisations do not operate within a vacuum, but they operate within an external context or environment environment.. Various forces and aspects of the this environment affect the way in which organisations function and operate.. operate The external environment can present several challenges or opportunities for managers managers.. Managers must be aware of and actively assessing their external business environment. environment. THE ENVIRONMENT OF BUSINESS The General Environment The Internal Environment External Environment The Specific/Task Environment 2  External Environment The external environment comprises comprises::  “those “h f factors andd forces f outside id the h organisation that affect the organization’s performance" (Robbins & Coulter, 2007 2007,, p.73) 73) The external environment has two main layers/components layers/components: y / p :  The General Environment  The Specific (Task) Environment The General Environment The outer layer of the business environment and i l d includes social- social i l-cultural l l (d (demographics), hi ) political/legal, economic, technological, and international (global) factors that may indirectly affect the organisation organisation.. Globalisation is rapidly p y changing g g the ggeneral environment of business. business. 3  General Environment: The Political/Legal Refers to the laws, government regulations, policies and political activities that may affect policies, organisational policy or practice practice.. Examples in the Caribbean Caribbean::  the 24- 24-hour work week? 2009? 2009? – Legislative changes needed to facilitate this system  Liberalisation agreements (e. (e.g. Economic Partnership Agreements) – force businesses to be more competitive in the market Economic Refers to the general economic condition or health of a country or region (Daft & Marcic, 2001), 2001), includes interests rate, unemployment rates, inflation, etc etc.. Examples in the Caribbean: Caribbean: Devonish and Phillips (2008 2008), ), based on a study of 100 Barbadian workers, highlighted changes in the economic environment which affect business and employment employment::  Increasing mergers and acquisitions (e (e..g. RBTT, First Caribbean)  Job losses and unemployment  Recent news reports in Barbados have noted increases in energy, labour, food, and raw materials are forcing retail businesses (e. (e.g supermarkets) to increase the prices of their goods and reduce costs (e. (e.g cutting back on staff?) 4  Demographic “represents the demographic characteristics as well as the norms, customs, and values of the general population. population.” (Daft & Marcic, 2001, 2001, p.50) 50). Ch i Changing d demographicshi ini the th workforce kf are affecting ff ti management practices; practices; e.g. women now represent a dominant proportion of workforce in the region, Phillips and Devonish (2008) 2008) revealed in their research that: that:  Barbadian workers are noting that there is “large influx of migrant workers coming in taking up our jobs”.jobs”. Workplace is becomingg diverse diverse..  The labour market is becoming increasingly diverse – recruitment and selection practices must accommodate this diversity. Technological Refers to the scientific and technological developments in a specific industry or country country.. As information and communications technology improves, organisations rely more on these resources to conduct their business effectively and efficiently efficiently.. Could new technology and computerisation lead to reduced manpower? – less reliance on human labour to cut costs. costs. New technology requires training managers and employees in managing these resources 5  International/Global Concerns the external events, opportunities and challenges h ll i foreign in f i nations i which hi h affect ff domestic organisations organisations.. The international environment affects all other aspects of environment: environment: legal/political, economic,, socio socio--cultural,, and technological. technological g. International/Global Examples include:  Increases in international oil and energy prices have led to increases at the local/domestic level  Phillips and Devonish (2008 2008)) highlighted that globalisation, an international event, is leading to: to:  Increasing competition,  Rising influx of technology and external labour (mobility of l b ) andd labour),  Changes in legal and governmental policies (structural adjustment policies, increased taxes, trade liberalisation agreements) 6  Specific (Task) Environment Refers to those aspects of the environment that may have h a direct di i impact on the h organisation. organisation i i.  Customers  Suppliers  Competitors  Public pressure groups Specific (Task) Environment (2) Customers – Recipients of organisation’s outputs (products and services) organisations are affected by the needs and demands of this group group.. Suppliers – The raw materials and labour (inputs) are provided by this group group;; without these inputs, organisations cannot survive. survive. Competitors - Organisations must be aware of their competitors and their strategies to secure a market market;; competitors force organisations to be alert, responsive, and more productive. productive. Public pressure groups – Social/political groups in society can place pressure and influence the way organisations are managed.. managed 7  Internal Environment Comprises:  C l Culture  Structure  Employees  Management Relationship between the Environment and Management 8  ENVIRONMENT AND MANAGERS Managers and their organisations are affected by the h environment i iin two ways:  Degree of Environmental Uncertainty  Stakeholder Relationships Environmental Uncertainty Managers must pay a lot of attention to their environment, i as this hi di dimension i may pose hihighh degrees of uncertainty for them.  Need to respond and adapt to environmental changes Two components of environmental uncertainty uncertainty:: Degree of Change (Dynamic vs. vs. Stable) Degree of Complexity (Simple vs.vs. Complex) 9  Stakeholder Relationships Any parties within the organisation’s environment that are affected by its decisions and actions (Robbins & Coulter, 2007) 2007). These can influence the organisation as well.. well Customers, employees, unions, shareholders, suppliers, governments, media, competitors, communities, etc. etc. Stakeholder relationships can improve environmental predictability, di bili higher hi h responsiveness, i greater trust, and d increased competitiveness and performance performance.. Robbins and Coulter “Stakeholder Relationships” 10  Going International Global Attitudes/Perspectives Parochialism  Nation vviews N w the world w solelyy through g its own w eyes y and perspectives  People do not recognize that other people have different ways of living and working  Significant obstacle for global managers  Ethnocentric Attitude  A form of parochialism. p  Believes that the best work practices are those from the home country  Little or no trust in foreign companies’ decisions, abilities and knowledge 11  Global Attitudes/Perspectives Polycentric Attitude  B li Believes the th foreign f r i companies p i are r aware r off th the b bestt work rk practices for running the business  Allows foreign companies to make their own decisions or do their own business. Geocentric Attitude  Looks for the best work approaches and practices from people across the globe  Choosing the best practices regardless of origin – full global attitude Types of International Organisations Different types of international organisations are collectively called: called:  Multinational organisations – any international organisation that maintains operations in various countries (Robbins & Coulter, 2016) 2016)  Multinational organizations include include::  Multidomestic organisations – organisations where its management and decisions are decentralised at the home Lay. nationals from the country:: e.g. Nestle and Frito Lay. country host country are hired to run operations in each country.. Marketing strategies tailored for each country country – this type of organisation reflects a polycentric attitude – Products/services are matched to its consumers. consumers. 12  Types of International Organisations  Global organisations - Management and d ii decisions are centralised li d in i theh home h country e.g.: Ernst and Young. Young. - Reflects an ethnocentric attitude. attitude. Key decisions are made at headquarters and not in the host country country. y.  Transnational (borderless) organisations – Artificial geographical boundaries are removed: removed: e.g Nokia and IBM IBM.. Reflects a geocentric attitude.. No home base attitude base.. Going International: Typical Stages  Global sourcing – “purchasing materials or labor from around the world wherever it is cheapest” (Robbins & Coulter, 2007, 2007, p.98) 98) – least risk and investment  Exporting/Importing – sending products abroad to be sold, and acquiring products from abroad to be sold domestically.. domestically  Licensing/Franchising – involves organisations giving other organisations the right to use their brand name, technology, and product specifications. specifications.  Strategic alliances – partnerships between organisation and foreign company company;; knowledge and resources are shared (e.(e.g. joint venture) venture)..  Foreign subsidiary – direct investment in the host country – production facilities or offices set up in the host country – most risk and investment investment.. 13  Culture and Business National Culture and Environment National culture: culture:  the values and attitudes shared by individuals from a specific country. country.  shapes behavior and beliefs. beliefs.  has greater effect on employees than organizational i ti l culture. culture lt.  getting information about a country’s cultural differences is difficult. difficult. 14  Model of the Cultural Environment Geert Hofstede - four dimensions of national culture  individualism versus collectivism – individualism - loosely knit social framework *people are supposed to look after their own interests and those of their immediate family *wealthier countries tend to be individualistic – collectivism - tightly knit social framework *people expect others in groups in which they are a part to look after them *owe absolute loyalty to the group *poorer countries tend to be collectivistic Model of the Cultural Environment Geert Hofstede (cont.) power distance - degree of acceptance of unequal distributions of power in institutions and organizations – large power distance society accepts wide differences in power – low power distance society plays down inequalities uncertainty avoidance - degree to which people tolerate risk and unconventional behavior – low - tolerate risks and opinion differences – high - political and social mechanisms created to provide security and reduce risk 15  Model of the Cultural Environment Geert Hofstede (cont. (cont.) achievement versus nurturing – achievement - culture values assertiveness and the acquisition of money and material goods – nurturing n t in - valuel relationships l ti hi  show sensitivity and concern for the welfare of others Principles of International Business Always show respect and listen, don’t be in a hurry.. hurry Try to gain an appreciation for the differences between Hofstede’s “masculine” and “feminine” cultures.. cultures Do not feel your way, is the best way. way. Emphasize points of agreement agreement.. Discern the perceived definitions of words. words. Save face as well as giving face face.. 16  Next Week Lecture 3: Social and Ethical Responsibilities of Management Management 17