Business Environment and importance of theory and history in Management free essay sample

All of those factors both internal and external, which influence function of a business. Internal factors include items such as the company’s product or services. Employees, assets and marketing. External factors include competitors, stockholders, customers and economic conditions. The business environment can affect both its employees and its productivity. i. e, studies have shown that workers in a situation where morale is high will produce a great deal more than workers in unsatisfactory conditions. The business environment is affected by various factors like: Economical factor, Demographic factor, Ecological factor, Geographical factor, Internal and External factors, etc. In order to run an organization effectively and efficiently the manager must first thoroughly understand the nature of the organization’s environment. THE INTERNAL ENVIRONMENT: The environment that has a direct impact on the business. Here there are some internal factors which are generally controllable because the company has control over these factors. It can alter or modify such factors as its personnel, physical facilities, and organization and functional means, like marketing, to suit the environment. The important internal factors which have a bearing on the strategy and other decisions of internal organization of the organization are discussed below: Value system The value system of the founders and those at the helm of affairs has important bearing on the choice of business, the mission and the objectives of the organization, business policies and practices. Mission and vision and objectives Vision means the ability to think about the future with imagination and wisdom. Vision is an important factor in achieving the objectives of the organization. The mission is the medium through which the objectives are achieved. Management structure and nature The structure of the organization also influences the business decisions. The organizational structure like the composition of board of directors , influences the decisions of business as they are internal factors . The structure and style of the organization may delay a decision making or some other helps in making quick decisions. Internal power relationships The relationship among the three levels of the organization also influences on the business. The mutual co-ordination among those three is an important need for a business. The relationship among the people working in the three levels of the organization should be cordial. Human resource The human resource is the important factor for any organization as it contributes to the strength and weakness of any organization. The human resource in any organization must have characteristics like skills, quality, high morale, commitment towards the work, attitude, etc. T he involvement and initiative of the people in an organization at different levels may vary from organization to organization. The organizational culture and overall environment have bearing on them. Company image and brand equity The image of the company in the outside market has the impact on the internal environment of the company. It helps in raising the finance, making joint ventures , other alliances, expansions and acquisitions , entering sale and purchase contracts , launching new products, etc. Brand equity also helps the company in same way. Miscellaneous factors The other factors that contribute to the business success or failure are as follows: Physical assets and facilities: Facilities like production capacity, technology are among the factors which influences the competitiveness of the firm. The proper working of the assets is indeed for free flow of working of the company. Research and development: Though RD department is basically done external environment but it has a direct impact on the organization. This aspect mainly determines the company’s ability to innovate and compete. Marketing resources: Resources like the organization for marketing, quality of the marketing men, brand equity and distribution network have direct bearing on marketing efficiency of the company. Financial factors Factors like financial policies. Financial positions and capital structures are also important internal environment affecting business performances, strategies and decisions. THE EXTERNAL ENVIRONMENT: It refers to the environment that has an indirect influence on the business. The factors are uncontrollable by the business. There are two types of external environment. Micro Environment: The micro environment is also known as the task environment and operating environment because the micro environmental forces have a direct bearing on the operations of the firm. â€Å"The micro environment consists of the factors in the company’s immediate environment that affects the performance of the company. These include the suppliers, marketing intermediaries, competitors, customers and the public†. The micro environmental factors are more intimately linked with the company than the macro factors. The micro forces need not necessarily affect all the firms in a particular industry in the same way. Some of the micro factors may be particular to a firm. When the competing firms in an industry have the same micro elements, the relative success of the firms depends on their relative effectiveness in dealing with these elements. Suppliers: An important force in the micro environment of a company is the suppliers, i. e. , those who supply the inputs like raw materials and components to the company. The importance of reliable source/sources of supply to the smooth functioning of the business is obvious. Customer: The major task of a business is to create and sustain customers. A business exists only because of its customers. The choice of customer segments should be made by considering a number of factors including the relative profitability, dependability, stability of demand, growth prospects and the extent of competition. Competition not only include the other firms that produce same product but also those firms which compete for the income of the consumers the competition here among these products may be said as desire competition as the primary task here is to fulfill the desire of the customers. The competition that satisfies a particular category desire then it is called generic competition. Marketing Intermediaries: The marketing intermediaries include middlemen such as agents and merchants that help the company find customers or close sales with them. The marketing intermediaries are vital links between the company and the final consumers. Financiers: The financiers are also important factors of internal environment. Along with financing capabilities of the company their policies and strategies, attitudes towards risk, ability to provide non-financial assistance etc. are very important. Public: Public can be said as any group that has an actual or potential interest in or on an organization’s ability to achieve its interest. Public include media and citizens. Growth of consumer public is an important development affecting business. Macro Environment: Macro environment is also known as General environment and remote environment. Macro factors are generally more uncontrollable than micro environment factors. When the macro factors become uncontrollable, the success of company depends upon its adaptability to the environment. Some of the macro environment factors are discussed below: Economic Environment: Economic environment refers to the aggregate of the nature of economic system of the country, business cycles, the socio-economic infrastructure etc. The successful businessman visualizes the external factors affecting the business, anticipating prospective market situations and makes suitable to get the maximum with minimize cost. Social Environment: The social dimension or environment of a nation determines the value system of the society which, in turn affects the functioning of the business. Sociological factors such as costs structure, customs and conventions, mobility of labor etc. have far-reaching impact on the business. These factors determine the work culture and mobility of labor, work groups, etc. Political Environment: The political environment of a country is influenced by the political organizations such as philosophy of political parties, ideology of government or party in power, nature and extent of bureaucracy influence of primary groups etc. The political environment of the country influences the business to a great extent. Legal Environment: Legal environment includes flexibility and adaptability of law and other legal rules governing the business. It may include the exact rulings and decision of the courts. These affect the business and its managers to a great extent. Technical Environment: The business in a country is greatly influenced by the technological development. The technology adopted by the industries determines the type and quality of goods and services to be produced and the type and quality of plant and equipment to be used. Technological environment influences the business in terms of investment in technology, consistent application of technology and the effects of technology on markets. ROLE OF THEORY AND HISTORY IN MANAGEMENT Practicing managers are increasingly seeing the value of theory and history in their work. In this section, we first explain why theory and history are important and then identify important precursors to management theory. Some people question the value of history and theory. Their arguments are usually based on the assumptions that history has no relevance to contemporary society and that theory is abstract and of no practical use. In reality, however, both theory and history are important to all managers today. WHY THEORY? A theory is simply a conceptual framework for organizing knowledge and providing a blueprint for action, although some theories seem abstract and irrelevant, others appear very simple and practical. Management theories used to build organizations and guide them toward their goals, are grounded in reality. Practically any organization that uses assembly lines (such as Daimler Chrysler, Black and Decker, and Fiat) is drawing on what we describe later in this chapter as scientific management. Many organization including Monsanto, Texas instruments, and Seiko, use the behavioral perspective (also introduced later) to improve employee satisfaction and motivation. And naming a large company that does not use one or more techniques from the quantitative management perspective would be difficult. For example, retailers like Kroger and Target routinely use operations management to determine how many check-out stands they need to have. WHY HISTORY? Awareness and understanding of important historical developments are also important to contemporary managers. Understanding the historical context of management provides a sense of heritage and can help managers avoid the mistakes of others. Most courses in U. S. history devote time to business and economic developments in this country, including the industrial revolution, the early labor movement, and the Great Depression, and to such captain of U. S. industry as Cornelius Vanderbilt (railroads), John D. Rockefeller (oil), and Andrew Carnegie (steel). The contributions of those and other industrialists left a profound imprint on contemporary culture. Mangers at Wells Fargo clearly recognize the value of history. For example, the company maintains an extensive archival library of its old banking documents and records, and even employees a full-time corporate historian. As part of their orientation and training new managers at Wells Fargo take courses to become acquainted with banks history. Similarly, Shell Oil, Levi Strauss, Ford, Lloyd’s of London, Disney, Honda and Unilever all maintain significant archives about their past and frequently evoke images from that past in there orientation and training programs, advertising campaigns, and other public relation activities.