When organization grow and expand their businesses they have to face a whole new set of internal and external environment, this set make their corporate environment, the organizations working in different parts of the world and having business done without the traditional boundaries of access are called global organization, globalization is a modern business world and is formed by multination organization that feel attractive to provide their services and products in different countries, when companies grow they tend to expand geographically, and this expansion form the global organization, for a company to global brings new set of challenges and factors that influence the decision making by the managers.
To understand the globalization process and factors that influence a global organization in its process of globalization this paper is presented in three section, and the organization selected for study is DELL, which a among the largest technology driven organization across the globe, with their customer base almost all continents DELL enjoys the market leader position in the industry.
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First section of this study presents the features of the globalization, it also look at the main drives in the process of globalization, this section also through light on the challenges faced by the organization while going global, first section also presents the nature of competition and market structures in global marketplace. Second section presents the organization's behaviors towards the community and look at the best practices that organizations are opting for their part of corporate social responsibility, DELL has been taken as an example and their practices as corporate citizen are analyzed, final section present the main drivers in internal external environment of the organization and it has also been analyzed the at how these internal and external factors influence the decision making at organization, we have also seen that at what level, and what kind of strategies are influenced by these internal and external environment, I have also made recommendation for the linking of the organizational decision making with these drivers so that decision making can be made effective.
Globalization and its Drivers
Globalization is a modern concept and it is being adapted by large organizations, by going global organization serve their products and services in other countries as well and do not limit their operations to their country of origin, these product and services can be offered either by only having the channel of distribution only in host countries or they can have their production setup in other regions, globalization is becoming more attractive to companies as it offers the benefits of economies of scale, low costs, and in global marketplace the barrier of doing business are also reducing, that is why most of the large organization are opting for expanding their operation in emerging economies (www.oup.com, 2010).
As we are studying the technology giant DELL, which is also a global organization with its customer spread around the globe, we see that their global operation are providing them with several advantage like low cost leadership in term of low labor and parts cost, they have a production model that supports the Japanese concept of just in time management and just in time production, more over they have business model that have an intelligent distribution of vendors of parts, making them less dependent and having them provided with specialized solutions for their products, they have customers from both corporate sector and residential users, geographically spread in whole world (Leon, 2010).
Being a technology oriented organization, DELL is dependent upon technology in two dimensions, or we can say that technology has to play dual role in their success as global organization, talking about the first dimension which is development of product and service, company is highly dependent on introduction of new technology and developments in their products and a major role in this is to be played by their vendors, second dimension which the streamlining their global business with geographically spread vendors and customers, making the channel of distribution more efficient, and making sure that just in time production concept is actually applied, more over they need to interconnect all dimensions of the business so that sharing of ideas and common development and growth of products and services is possible across the organization, achieving this goal is also dependent on application of business management technologies like ERP systems (Leon, 2010).
Driver of Globalization
Always on Time
Marked to Standard
There are several drivers that make and change the face of global business environemt, for nay organization to operate successfully in global business scenario it is very important to understand and comprehend these drivers, and strategies should be made while them keeping in mind.
Development in technology has a major role to play in international businesses, not only technology is influential in development of products and services but also it has made is easy to do business without having the boundaries of geographical remoteness, looking at the example of DELL and many others, we observe that it the technology in form of ERM or other integrated systems that has made it possible to design the product in one part of the world then make its parts in different countries and assemble it in different region, it also the mericle of the technology that customer sitting in Asia can order the customized laptop from DELL USA.(www.oup.com, 2010).
Market philosophy of different geographical regions and markets play the key role in shaping up the globalized business markets, in the era of closed economies when investos were hesitant of investing in closed markets of Asia, it was not possible to do business in these sectors, not with the emergence of open market philosophy, different emerging markets are not welcoming investors and multinational companies to invest in their countries, now for a company to go global is far more easier then closed market era, and this is made possible because of open market concept(www.oup.com, 2010).
Global political scenario also plays the role in making globalization possible. There are two kind of political forces that plays their roles, one kind is international political forces that can make other countries to open their markets for investors and facilitate them, and other kind is local political forces that make sure the host country's policies are stable and rules and regulation are friendly and flexible enough to encourage the companies, political stabilization in host country also gives investors a impression that their investment is safe (Speth, 2003).
The economic conditions of the world in general and of the host country or region in specific have significant influence on expansion decisions of the organizations, if the host country is not showing healthy signs on economic scale or consumer buying power is not attractive then organizations would not invest there, similarly if global economy is under crises like what happened recently, organizations would hold their expansion plans and their focus will divert to cost cutting or survival, so we see the whole global business is affected by the global and local economic conditions (Speth, 2003).
Global Marketplace and Competition
Competition in global environment is of different nature, organizations have to face multidimensional competition, they have to compete to local players as well as other international player and this phenomenon is widely observed in FMCG sector, however global organizations have the advantage of their brand recognition over the local players.
When it comes to competition with local players we see that multinational companies have several advantages over the local competition; they are financially strong and mostly backed by strong groups, they can have access to cheap labor, and other facilities by entering into contract with diversified vendors, they can have advantages of economies of scale and when their products costs them low they can beat the local competition on price, moreover their globally recognized brand name gives them preference advantage over local players (Speth, 2003).
Globalization's Effects on Organization
The act of going global have different implications on the company, there are few functional implications that are led by strategic implications, when going global organizations have to adjust their organizational strategy of doing business to the environment that they will be facing out there, most of the time they are able to achieve the cost leadership with the help of economies of scale, more over they have to introduce customization in their product according to the needs and requirement of the targeted country, they also need to change their organizational structure (www.oup.com, 2010).
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Here we see that there are two important dimensions on which organizations have to change, first is the ratio of standardization vs. customization, sometimes organizations have to introduce the customization factor in their products, second dimension is the organizational structure, organizations which are global have to make their structure more flatter and they have to introduce devolution of power to lower level of hierarchy also that they can make quick and related decisions without wasting time.
In case of DELL we see that they have introduced customization in their products and anyone from anywhere in the world can have their products according to their needs, they have also introduced that innovative channel of distribution that supports their customization by e-commerce and also have cost in term of eliminating other channel members and selling only to direct consumer, this model gives them price flexibility and make them competitive they(www.oup.com, 2010).
Task2: Evaluation of DELL's Corporate Social Responsibility
Corporate Social Responsibility (CSR) is an emerging concept that has been formed after the emergence of the theory of stake holders that say that organization are not an isolated entities and its actions have direct effects on the people related to it, these people which includes employees, investors, vendors, customers and the people of society. Following this concept CSR says that organization should have a close monitoring of their activities and they should be working for the betterment of the general public, regardless of presence of any governing body, organizations should themselves monitor and control their activities (company report, 2010).
CSR also says that regardless of the legal status of the activity that organization is performing, if it is not in the larger benefit of the stake holder, it should be stopped even if it is legal, there are many benefits of employing this concept in today's business scenario, even if critiques says that it is a divergence from the economic role of business, CSR is not recognized to be the factor that can improve the motivation in human resources, build the brand and also construct the long term relationship with customers that can result in brand loyal and can have long term positive effects on the business. After recognition of its abilities to engage people, organizations like DELL are actively participating in developing their roles as corporate citizens and trying to guide their business practices towards common benefits of all, below we shall see that how DELL is practicing this concept.
DELL has the global vision of reaching every prospect consumer and enabling them to use most advanced and developed products on affordable prices, organization have a clear understanding of vision and all the departments are working on two objective that are derived from this vision, one is to reach every consumer and other is to make the products affordable, their business model supports this vision as they are mostly selling directly to consumer online and their products are also made affordable with the introduction of efficiency that saves cost and reduces prices (organization report,2004).
Organization also prefers to have diversified global workforce that provides them with the advantage of getting customized ideas that are directly originated from the target market as their local human resources know the need of the local market better then another, and they also support the economies where they are operating with giving jobs to the local talent.
They also have the business model that is based on having different suppliers for different parts of their products, these suppliers are also geographically separated and are present in various countries in the world, their supplier are also creating jobs for local talent and in this way DELL is indirectly supporting the economies where their suppliers are present.
DELL's Relationships with Stakeholders
Companies following the stake holders theory are focused on having good relationships with their all stake holder, and DELL like many other companies follows the same theory, they try to have good relationship with all stake holders, since employees are also the part of it, DELL have a clear policy with the name of "soul of dell" of their treatment, according to this policy every employee is treat with integrity and respect and most importantly every employee's treated equally regardless of their position in company, this create employee's emotional attachment and loyalty with the company(organization report,2004).
As mentioned in their report organization is keen to act responsible in the environment in which they are working, they have a clear understanding of what it take to be a good corporate citizen and how this can be achieved, more over they have very clear policies and guidelines for their vendors for their treatment with employees, DELL guides their partners to treat their employee with respect and integrity and makes sure by having regular reviews of vendor's organizational policies, by doing this they only themselves play a good role in creating better corporate environment but also make their partners to play their role in doing so (organization report,2004).
As customers are also stake holders to the company DELL values their relationships with customers, they build their relations with customer by providing them with state of the art products and extended customer support, they try to have a long term relations with customer by having brand loyalty and quality products and excellent customer support plays an important role in that (organization report,2004).
Acting Responsibly in Global Market
Like many other large organizations, DELL feels their responsibility towards the global environment and understand the importance of acting responsibly towards the worlds, this is not only important for their business bus also for general public that is why DELL feel it important for them and for their vendors to protect the environment from pollution and keep it safe and healthy.
In continuation of their responsible acts in global marketplace DELL have set high standards for their human resource management, DELL have good employment opportunities that are coupled with good benefits systems for the workers of other countries they also are keen to provide health and safe environment to their employees, going beyond DELL they also have strict standards for their partner's human resource practices where they are also required to make sure that their employee are provided with proper wages and are working in safe and healthy workplace (organization report,2004).
There are certain international best practices and standards related to human resource treatment that DELL makes sure to be employed by not only their organization but also by partner organization, DELL has a policy of not doing business with any organization unless their human resource practices are not up to the mark, these standards included the industry parameter regarding employee age, wage rate, health and safety measure, evaluation and rewards system, equal employment opportunity, DELL also requires their supplier to eliminate the elements from the parts provided to them which are not good for the genera environment, by applying such policies it is made sure that environment is not disturbed by due course of business(organization report,2004).
Following Host Country's Law
As global organizations are operating in different countries and different states may vary in their rules and regulations related to business operations or in general, that is why as part of the community of the host county organization are required to fully understand the law and follow it practically, for doing this organization are sometime required to change their policies and link them with the ones in host country, this adaptation at one side make is easier to do business in various regions and on the other hand this compliance gives the good impression to the government and customers (organization report,2004).
DELL has also a clear vision regarding following the host country's low, they make sure that their every business unit is operating in accordance to the regulations set by the respective authorities, they have modified their business rules according to the local requirements and they follow the policies regarding wage rate, promotion and benefits of employee, these business rules are in accordance to host country, DELL make sure that child labor is not used in any of their products, for this purpose they have clear instruction for their business partners of not using any child made part in the products or parts supplied to DELL, and company makes sure that this policy is well understood and followed (organization report,2004).
Apart from policies and procedure, DELL also encourages their employees to take part in community development programs, employee are requested to build their neighborhood by personal donations, company has made a foundation with the name of DELL foundation that teaches the host countries youth for technological developments so that they can learn and make their carriers in high tech industry (organization report,2004).
Environmental, Health and Safety
Organizational health and safety and environmental control are new buzz words for the modern businesses, organizations are required to follow certain standards for their employee safety and health, more over global awareness for environment is also increasing and organizations are facing pressure from authorities and individual bodies to make sure their business practices are not hazardous for the environment, that is most of the organizations are keen to protect their employees as well as the environment.
DELL follows the health and safety standards for their workplace that are internationally recognized and accepted that are ISO 14001 and OHSAS18001, they make sure that around the world these standards are followed in their operational hubs, more over DELL also make sure that their vendors provide their employees with healthy and same environment for work, company before signing any agreement with suppliers take the understanding that DELL has the right to inspect the workplace of the vendor and cancel the contract if health and safety measures are not proper, organization is also keen about environmental protections and it has instructions for their vendors to not put any material or part in the sub-products supplied to them that is made by any material which is not good for the environment by any means, their partners are required to innovate alternative mean of production inputs if current inputs are dangerous for general environment (organization report,2004).
Task3: Environmental Influencers on Organizational Strategy
Strategic Areas Influenced by External Forces
In today's competitive business environment where every large organization has to face many challenges internally and externally, their strategy building is not only influenced by internal objectives of business but also by the external environment, there are several business areas for which strategic decision making is required and as experts says that every organizations should take care of external environment in terms of understanding strategic fit, without have a strategic with of decision making with external environment there is high probability of failure, now we shall see that what areas are influenced by external environment.
Making the overall business strategy is the first step that organizations take, whether starting the new business or redefining the existing one, the business strategy is the guideline that take the entire business further down the road, so business strategy is the one that should be is made and is influenced mostly by the external environment, business strategy can be influenced by political scenario, economic conditions , technological advancements, social forces in the environment, legal forces in the host countries etc. however for the global organization study of these factor is more important because not knowing them can create great uncertainty (Speth, 2003).
There are several business strategies but three of them are more popular, these are called Growth, Stability and Retrenchment strategies, each of these strategies has their own tactics that can be employed to fulfill them, selection of each of these strategy is dependent upon the external environment, organization can select the most appropriate one after carefully examining the current market scenario, for example organization may follow the growth strategy is in other parts of the world buying power is good, and there is demand of such products, more over political and social factors are favorable, then organization can think of expanding, otherwise they can opt for retrenchment or stability strategy depending upon the external environment (Speth, 2003).
In case of DELL we have observed that organization have opted for growth strategy and this strategy is also coupled with cost leadership strategy, they are expanding their business in different geographical regions and their business model is efficient enough to save them costs so that they can offer their products on affordable prices.
The operational decisions of businesses are also dependent upon the external environment, right from the start, the selection of raw material, through the middle of production process and at the end where consumer and channel of distribution is involved all of the elements of value chains has to take inputs from external environment, each of the elements of value chain are decided depending upon their relation and favorability with external factors, common example of such scenario would be the decision about standardization or adaptation, if consumers are preferring the customized products and it the requirement of the host country's social values to customize the advertising then organization will have to be adaptive for both product and advertising, there are many other cases where such operational decision are influenced by external factors(Hendry, 2000).
In case of DELL we see that they are offering customized products to their customer via e-commerce, this may be the requirement by the geographically dispersed consumers and they would have to change their business model according to needs and want of the target market.
Corporate Social Policies by the organization are also one of the main and important factor that are influenced by external factors, as organization expand their business and start doing business in other countries their moral responsibility increased to act as a good corporate citizen, there are other scenarios where companies are required to employee certain standards and practices by the host nation, there may be political forces or legal requirements that force company to act in certain way and deploy the procedure that host nation may think are good for their society of eliminate certain practices that are illegal according to them(Hendry, 2000).
So it is advisable to every company to carefully study the rules and regulations of each of its target market, and then modify their business policies regarding corporate citizenship and create synergies with local authorities and bodies and own policy makers so that when policy comes out there is no unaddressed areas and no conflicts with the implementation of the corporate social practices (Rumelt, 1991).
Elements that Shape the Industry
Every organization is dependent upon their internal and external environment, we shall here see that how external environment is made and what are the key drivers of external environment that make business market and effect strategic decisions of the organization.
Innovations in the Industry
Innovations in the industry is one of the elements that shape the industry, the more innovative and dynamic industry is the more competition and uncertainty in the industry, most of the time it is technology oriented organizations that are affected by the innovation speed of the market, in the market where DELL is operating technology come and go very fast and only the innovator of the technology can get the benefit of it, other followers when they become able to adapt the technology it obsoletes, so it is the pace of innovation that shape the pace of industry(Rumelt, 1991).
Channels of Distribution
The organization needs to reach the customers in different geographical regions, for this purpose different channels of distribution are used, some companies use direct channel of distribution which involves the direct contact of the organization with customers, other organizations use intermediaries that are responsible for reaching customer, industries where channel members have more power are highly completive in term of having good partnership with intermediaries, companies like DELL are trying to shift their models with the use of technology where they can sell directly to customer, these models are useful in eliminating the power of channel members and getting the organization and customer out of the influence of resellers. However resellers and distributors are in good position to shape the competitive environment of the industry and good channel of distribution can also be used as entry barrier by large organizations (Speth, 2003).
Power of Suppliers
Organizational external environment or overall industry environment is also shaped by the other member of value chain that in suppliers, high tech industry where inputs of the products are also high tech and suppliers are low, these suppliers have more power over the organization can they can influence the decision making of the organization, on the other hand if organization is large and supplier are many or the input supplied is easily available then organization can have more power they can influence the suppliers, this power game is the shape of the industry, and every organization try to have good suppliers and try to get the exclusivity rights from them, so that these rights can be used to outdo the competition(Speth, 2003).
Governmental policies are also play their role in making the environment of any industry, these policies may vary from region to region for global organization, one practice may be advisable in one country but may not be appreciated in the other region, that is why global organizations have to keep an eye on their operations for different rules and procedures of different countries
Organization tend to select the countries that have flexible and friendly rules for the investors, so that they can have easy and smooth operations for their business, governments which are seeking investments are also interested in making their policies more flexible to attract customers(Hendry, 2000).
For organizations to go for global business and have success there it is very important to understand the global business environment, in this study we have seen that how global environment is formed to have practical understanding of this we examined the operations of DELL in global marketplace.
In first task we were asked to see that what is globalization how global markets are formed, we saw that technology, political stability, economic conditions and competition are the main drivers that make the global market, second task was related to corporate social responsibility and in this task we say that how DELL is performing their role as corporate citizen in global marketplace, third section was related to organizational external environment, we observed that business strategies, CSR practices and the whole value chain decision the key elements in the organization that are influenced by the external environment.