Environmental Influence

Management and Society

Environmental Influences on Management

Management is influenced by a number of different factors. Some are related to the nature of the organization (organizational influences) and others to outside sources (external environmental influences). In both cases, the environmental influences are the context within which specific personnel decisions are made.

1. Organizational Influences: Defined as all elements inside an organization that are relevant to its operations which control is beyond the management, such as:

• Nature of the organization
• Nature of the industry
• Level of the technology of an organization
• Long-range strategy of organizations

1. External Influences: Defined as all elements outside an organization that are relevant to its operations. Organizations take inputs (raw materials, money, labour, and energy) from the external environment, transform them into products or services, and then send them back as outputs to the external environment. The elements of external environmental factors are:

• Economical
• Technological
• Social
• Political and legal
• Ethical

Economical Factors

Some economical factors influence an organization. They are:

Capital: Almost every kind of organization needs capital—machinery, buildings, inventories of goods, office equipment, tools of all kinds, and cash. Some of this may be produced by the organization itself, as when a business builds its own machinery or a church group prepares a church supper. Capital is one of the most important prerequisites to establish an enterprise. Availability of capital facilitates the organization to bring together the land, machinery, and raw materials. This results in an increase in profit, which ultimately contributes to capital formation.

Labour: Another important input from the economic environment is the availability, quality, and price of labour. In some societies, untrained common labour may be plentiful, while highly trained labour may be in short supply. The price of labour is also an important economic factor for an enterprise, although automation mitigates high labour costs. The relatively high wages in the United States and many European countries often create cost problems for producers in these countries. Many items can be produced at a lower cost in countries such as Mexico, Korea, and Taiwan.

Price Level: The input side of an enterprise is clearly affected by price-level changes. If prices go up fairly rapidly, as happened in most parts of the world in the 1970s and early 1980s, the turbulence created in the economic environment on both the input and output sides can be severe. Inflation not only upsets businesses but also has disturbing influences on every kind of organization through its effects on the costs of labour, materials, and other items.

Government Fiscal and Tax Policies: Another important input to the enterprise is the nature of government fiscal and tax policies. Although these are, strictly speaking, aspects of the political environment, their economic impact on all enterprises is tremendous. If taxes are levied on sales, prices will rise and people will tend to buy less. If heavy taxes are placed on real estate, people may find it too expensive to own a house and may opt for cheaper and less comfortable living quarters.

Customers: One of the most important factors for the success of an enterprise is its customers. Without them, a business cannot exist. To capture customers, a business must try to find out what people want and will buy.

Technological

One of the most pervasive factors in the environment is technology. It is science that provides knowledge, and it is technology that uses it. The impact of technology is seen in new products, new machines, new tools, new materials, and new services. A few of the benefits of technology are greater productivity, higher living standards, more leisure time, and a greater variety of products. However, the benefits of technology must be weighed against the problems associated with technological developments, such as traffic jams and polluted air and water.

Categories of Technological Change:

• Increased ability to master time
• Increased ability to generate, store, and transport
• Increased ability to design new materials
• Mechanization or automation of physical processes
• Mechanization or automation of certain mental processes
• Extension of human ability to store information
• Increased understanding of individual and group behavior
• Increased understanding of diseases and their treatment

Social

In any classification of environmental elements impacting a manager, it is extremely difficult to separate the social, political, and ethical environments. The social environment is made up of the attitudes, desires, expectations, degrees of intelligence and education, beliefs, and customs of people in a given group or society.

Political and Legal

As pointed out earlier, the political and legal environment of managers is closely intertwined with the social environment. Laws are ordinarily passed as the result of social pressure and problems.

Ethics in Management

All persons, whether in business, government, a university, or any other enterprise, are concerned with ethics. Ethics is defined as “the discipline dealing with what is good and bad with moral duty and obligation.” Business ethics is concerned with truth and justice and has a variety of aspects such as the expectations of society, fair competition, advertising, public relations, social responsibilities, consumer autonomy, and corporate behavior in the home country as well as abroad.

Challenges for Today's Management

A number of critical changes and challenges are faced by managers today. Let’s compare today’s work environment with that of ten years ago. Below is a list of six to eight items, along with their rationale.

1. Globalization: Certainly, the emergence of a ‘borderless’ world has had a tremendous impact on how organizations behave. They are no longer insulated from foreign competition, forcing them to examine cost efficiencies, structure, job design, human capital, and other sources of competitiveness.

2. Technology: Tremendous technological advances in the last decade have significantly impacted organizational behavior. The Internet has enabled small, start-up companies to become global organizations. It has given organizations access to larger, more diverse markets and has helped reduce costs.

3. Mergers and Acquisitions: Many organizations seek to increase market share and profitability through mergers and acquisitions. However, the complexity of these integrations often impacts employees in newly merged organizations, leading to conflicts and potential failures.

4. Workplace Diversity: Changing demographics have made the workforce more diverse, necessitating careful planning to create a welcoming and comfortable work environment for all employees.

5. Organizational Structures: Increased competition has driven organizations to focus on cost efficiencies and effectiveness. This has resulted in a focus on ‘value-added’ services to distinguish themselves from competitors.

6. Work-Life Balance: Many employees now prioritize personal time over career advancement. Organizations have responded by offering flexible work hours, remote work opportunities, extended vacations, and other benefits to retain talent.

7. The Rate of Change: Change is now a constant in organizational environments. Flexibility, market awareness, and tolerance for ambiguity are necessary for survival and success.

8. Increased Competition: Globalization and technological advances have intensified competition, requiring radical changes in strategy, structure, and operations.

9. Increased Ethical and Social Responsibility: Consumers now have more access to information and demand ethical and socially responsible behavior from organizations. Failure to meet these expectations can lead to reputational damage and loss of trust.