ibay business policy

TOTAL ENVIRONMENT OF A FIRMTOTAL ENVIRONMENT OF A FIRMTOTAL ENVIRONMENT OF A FIRMTOTAL ENVIRONMENT OF A FIRM

• From the viewpoint of top management, the environment which the firm operates consists of a rich kaleidoscope of cultural, political and economic factors.

• These serves as a combination of constraints and opportunities within which the internal make up of the firm impinges on it as constraints or strengths, weaknesses or capabilities.

• For purpose of establishing the company’s policies and goals, therefore, top management must fully understand and take into account all these external and internal environmental considerations, lest the goals may turn out to be far from being realistic.

THE TOTAL ENVIRONMENTOF THE FIRM

•Once top management has set the company’s goals, it must establish its strategic plan toward achieving these goals. As noted in the preceding chapter, this plan is basically a strategy for “getting from where we are now to where we want to be.”

•Again, it is essential that, during the planning process, top management should be fully cognizant of the firm’s capabilities as well as the weaknesses (“to know where we are now”), and to understand where the firm stand at all times in relation to its environment.


• Change also takes place within the firm itself – in those areas where top management in fact, has control over: its financial structure, the physical plant or factory, the capabilities of its management and its workers, and so on.

• These changes must be considered hand-in-hand with the external environment in accordance with the goals and the overall targeted plan established by top management.


Educational factors Socio-cultural factors Economic factors Administrative and political factors International factors

FACTORS AFFECTING THE ENVIRONMENT OF THE FIRM

EDUCATIONAL FACTORS

an integral part of the environment

the literacy level and the percentages of the population that belong to the different educational strata for one, bear upon the marketing approach for the products which the firm is to produce.

EDUCATIONAL FACTORS

the types-even qualities of goods will be in demand vary according to individual tastes, which in turn are shaped by the educational backgrounds of the prospective consumers.

media and techniques used in advertising these products are also largely dictated upon by these same factors.

EDUCATIONAL FACTORSEDUCATIONAL FACTORS

percentages of literacy and educational levels also affect the type of workers and managers the firm will be able to hire in the course of working towards its goals.

EDUCATIONAL FACTORS

there is little the individual firm can do to affect the external educational environment

but there is much the firm can do about the educational levels of its workers and managers. (e.g., literacy and technical training)

EDUCATIONAL FACTORS

personnel development must thus be an important part of any long range plan if the firm wishes to strengthen its ability to achieve its set goals.

SOCIO-CULTURAL FACTORS

socio-cultural factors that are present in the country should be given critical consideration by top management because these influence both the firm’s external environment as well as its internal system.


Four socio-cultural factors:

1. The legacy of the frontier: a spirit that has fostered a sense of opportunity pervading American industrial and community life;

2. Faith in business and in the individual: a faith reflected in the high esteem the American national community gives the businessman;


3. Belief in change: a belief whereby a successful experiment is not allowed to crystallize into mere custom and that an unsuccessful experiment is accepted as an occupational risk, valued for the experience that was gained in the process; and

4. The idea of competition: an ideal that leads “even those companies which are not operating in a highly competitive market to run their enterprises as though they were…” (American managers) know that their firms must maintain their competitive positions if they are to provide their people with a continuing career.


Although, socio-cultural factors that work within the firm greatly affect management style, practices and the contents of the operating policies, this should not preclude top management from drawing up company policies and objectives, designing strategic plans, organizing, formulating operating policies, controlling operations, etc.


“view toward change”

--- As a country develops, its culture changes accordingly. Development, by definition, means change, and the most important aspect of change is neither economic nor technological but the change in people. And, change in people ultimately means change in culture, in the attitudes, in the value system.

ECONOMIC FACTORS

The size of the market is inevitably a critical factor. This relates to present products, as well as to other products and/or services into which the firm might diversify. Hence, corporate goal-setting and the strategic planning effort must depend closely on prospects for future growth in GNP, in per capita income, and on income distribution. Every effort must be made to look as far into the future as possible to anticipate this. A government’s five-year plan, for instance, can be of great assistance.

ECONOMIC FACTORS

Experience has shown, however, that governments tend to overly optimistic in operating their development plans. Such plans are often drafted by dreamers and readjusted politicians. Thus, the firm cannot base its plans on the assumption that the government will be realized. It will have to make a critical appraisal of the development plan.

Of particular importance, beyond GNP growth is the popular growth. This is usually underestimated, resulting in increased consumption decreased investment, slower growth, lower per capita income, and a sharper but broader-based pyramid of income distribution. All these results are critical to the demand for different types of products and services and to many other aspects of the environment.

ECONOMIC FACTORS

Competition is multi-faceted. The existence and potential growth of competition are economic factors which are of primary importance in developing a firm’s strategy.

The amount of competition versus cooperation between firms in the same field is partially a socio-cultural factor, while the government’s attitude toward monopoly or oligopolistic agreement is a political factor. Top management must be lightly sensitive to each of these, particularly to the latter.

ADMINISTRATIVE AND POLITICAL FACTORS

Operational aspects of a business firm that need a permit from the government:

1. Start a company2. Buy land for factories3. Utilize foreign exchange import equipment

or raw materials4. Export goods and services5. Enter into an agreement with a foreign firm6. Increase prices


The government gets involved in labor negotiations. The government has a monopoly on the importation of many critical items, etc. Government laws, policies, and the ways in which these are administered in effect become crucial to the firm’s operations. On top of these, since permits and other pertinent actions cannot usually be obtained by writing a letter, the chief executive officer (or his assistant) must normally attend to these in person, instead of using his time as an effective internal manager. This is, hence, a major cause of inefficiency in management.


In many developing countries, however, the environmental factor that is of overwhelming importance to industrial managers is the attitude of the government toward private enterprise per se, which at times threatens the actual survival of the firm.


It is important for the manager to remember that the political climate is only a part of the total environment acting upon his firm.

Political factors operating in the environment should not, therefore, overwhelm management

It should not prevent the utilization of scientific management.

It merely means that the goals and strategy of the firm must take this aspect of the environment into proper perspectives in order or be realistic and as effective as possible.

INTERNATIONAL FACTORS

International environmental factors are those which affect a firm’s ability to most efficiently import equipment and goods, to export part or all of its production, and to enter into agreements with the foreign companies so as to gain access to technology, patent rights, management know-how, financing and markets.

ENVIRONMENTAL CONSTRAINTSENVIRONMENTAL CONSTRAINTSENVIRONMENTAL CONSTRAINTSENVIRONMENTAL CONSTRAINTS

EDUCATIONAL FACTORS

Literacy level

Specialized vocational and technical training and general secondary education

Higher education

Special management program

Attitude toward education

Education match with requirements


View toward industrial managers and management

View of authority and subordinates

Inter-organizational cooperation

View toward achievement and work

Class structure and individual mobility


View toward wealth and material gain

View toward specific method

View toward risk-taking

View toward change

ECONOMIC FACTORS

Market size

Central banking system and monetary policy

Fiscal policy

Economic stability

Organization of capital markets

Factor endowment

Social ahead capital

Competition


Relevant legal rules of the game

Defense policy

Foreign policy

Political organization

Government attitudes toward private enterprise

Political stability


View toward foreigners

Nature and extent of nationalism

General balance of payments position

International trade patterns

Memberships and obligations in international financial organizations

International organization and treaty obligations


Power or economic bloc grouping

Relevant legal rules for foreign business

Import-export restrictions

International investments restrictions

Profit remission restrictions

Exchange control restrictions

THE TOTAL ENVIRONMENT OF A FIRM

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ibay business policy

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