Sectors And Elements Of External Environment Commerce Essay

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This report shows how external sectors and environments influenced the change of my organisation. I am currently working in the group of colleges offering finance & accounting, business, information technology, engineering and professional courses for both Malaysian and international students. It has 6,000 students studying on its campus. Introducing change in my organisation existing system and process is a difficult job. Managing change is even more difficult. No matter how good is the change, the resistance to change from employee still exists. Therefore the successful of implementing a change program depends on how well the management and employee understand the need for change and make use of good changes and intervene if a change seems detrimental.

Sectors and elements of external environment which I consider to have had the most influence on the change within my organisation are as follows:

A PEST analysis (Gerry Johnson and Kevan Scholes, 2002) referring to the political-legal, economic, technological and socio-cultural factors that influence on the change within organisation.

Social Factors

The first dynamic in PEST's analysis is social and cultural environment. Organizational leaders are concerned with things like demographics, religion, lifestyles, education and age distribution of population.

It is important for educator to understand their district demographics which is concerned with statistical data of student population. Student population can be increased dramatically through technological advances which student can study the program online through internet. Student population can also be increased due to increase in mobilization of student moving out from home area to town area. Increasing of need for finding funding sources for those students who came from low income family also is another important demographic to be considered as a change in the educational sector.

Another change in student demographics is the increasing of student from abroad studying in Malaysia universities or colleges. As a result, the enrollment of international student in my colleges has increased by 20%. It is predicted that the increase will continue within the next few years.

Technological Factors

Since 1990s, information technology has played an important role in the educational sector. The popularity of distance learning has given people chance to study for qualification or new career in their spare time. More and more people can now study degree or professional courses online. Lecturers are now required to place all teaching materials online for students to access outside the regular lectures and tutorials classes.

Due to the advances in Internet, more and more traditional schools or colleges expanded their online courses. Universities that fail to meet the demands of today's society and technologically will suffer from decreased enrollment and consequently, federal and state funding will also be decreased.

Economic Factors

Economic factors that affect businesses are income, inflation, recession, interest rate and exchange rate. Because of the economic downturn, firms and companies try to scale down the operation and cut costs. Government has come out with new economic policy to overcome the crisis but sometimes this policy is not productive.

People too, cut costs on all expenditure. Many become unemployed which force them to spend much lesser. All these affected the business of an educational sector.

Political Factors

Another factor that influences the change within organisation is the government policy on scholarship and National Higher Education Fund Corporation (PTPTN). Purpose of setting up a PTPTN education loan scheme was to provide education loan to students pursuing studies in local institution of higher learning. With the announcement of Malaysia Budget 2013, student who can settle full loan within a year starting from 1 October 2012 until 30 September 2013 is giving discount of 20% on their loan.

For those students paying PTPTN loan consistently as per their repayment schedule, a 10% discount per annum on the repayment amount will be given starting from 1 October 2012. As a result, enrollment in my colleges has increased dramatically. The PTPTN has allocated total sum of RM5.8 billion loans to students pursuing their studies within Malaysia this year. There was an increase of RM2 billion from over RM4 billion being disbursed to 210,000 students last year. This number will continue to increase as PTPTN is one of the main financers in the country, although there are also other state government agencies providing such loans. PTPTN had disbursed RM24 billion to 1 million over students in the country since 1997. Due to increasing funding in PTPTN, my organisation has reformulated its marketing strategy to focus more on recruiting local students.

Competition Factors

One of the important parts of external assessment is to identify competitors and to ascertain their strengths, weaknesses, opportunities, threats, objectives and strategies. Weaknesses of competitors can become 0pportunities, while major competitive strengths can become threats to the company. It is more advantageous for a company to collect more competitive information as it possesses a good basis for strategies formulation and implementation.


As seen above, educational sectors are affected by external factors which explored through the analysis of Johnson and Scholes; namely, political, economic, technological and socio-cultural. As such, university executives and board of directors must closely monitor things happening around them in order to design suitable strategies for their respective institutions. Only by knowing present and future movement in the external environment and responding in a proactive manner, it will be able to offer programs that meet the requirements of the market.

The advantages and disadvantages of the change are as follows:

Change in an organization is inevitable in order to maintain its survival and success. However, there are advantages and disadvantages associated with the change depending on the source of change.

Advantages of change

Change allows companies to compete better with their competitors and develop new skills or products which can bring higher profit. With implementation of a change management methodology, it allows change management teams to deal with any proposed new direction by providing adequate training and guidelines.

Change management also helps individuals to realize why change is needed so that they will accept the change and move forward. Change can be good for employee since it will bring them the opportunity to learn something new and gain new skills (Colin Carnall, 2007).

Change also creates opportunity for growth, only for those who recognize it and seize it. Without change, businesses would not be able to compete with their rivals and meet the needs of what most required by loyal customers.

With promote of open communication and discussions by change management methodology, individuals (customers, employees and stakeholders) will have a greater chance in the outcome since they have participated in the implementation of the plan. People generally do not resist to things which they have involved.

Change reduces the mentality of status quo, and can help growth in a positive way. One of the problems we face today is people get used to work within their own little comfort zone and become comfortable with their status quo mentality. People used to work in the same way and always thought that problem can simply be solved by applying same practices.

Change can help in managing risk and creating contingency systems to safe-guard successful movement and succession. Risk management is a process of identifying risk, measuring, developing, selecting, implementing and managing options for addressing. This process is designed to reduce or eliminate any risk that may occur during the operation.

Change can also promote flexibility. Flexibility is very important for a business to continue surviving in a rapid changing environment. Therefore, a business must be able to make changes occasionally from plans to strategies. Only by being able to change and having the option to change will make our business more flexible. Flexibility is needed to accommodate the change as business is always uncertain and risky.

Impact of change can be both positive and negative. Negative internal and external driving forces can be responded by choosing an appropriate change technique. "Driving forces" are situations which businesses are affected by either a positive or negative way. There are two driving forces i.e. internal and external driving forces. Internal driving forces are situations which occur inside the business generally within the control of the company. Examples of internal driving forces are plant and machinery, capacity of technology, organizational culture, management system, etc. External driving forces are situations which occur outside the company and usually beyond the control of the company. Examples of external driving forces are economy, demographics, competition, political, etc.

Change creates opportunity to develop strategic planning and tactical maneuvers. Strategic planning determines where an organisation is going over the next year or more. What are we trying to accomplish? Change helps to improve the efficiencies of an organization, to focus its resources on overall goals.

Change in business is good, but if change is not managed well, it will destroy the organisation. Managers often imagining the possibilities of outcome and the positive impact could have on their organization without realizing that the change might not be suitable to their organisation.

Disadvantages of change

Change result might not achieve the key goals of the organisation. Many companies emphasize on continuous improvement by implementing change hoping that the change can improve its' ability to achieve key goals. However, planned result may not be achieved at the end of the change process. Every organisation can be improved further but a manager must always ask the question, "How the intended change can improve my organization's current ability to achieve our key goals?"

Benefit- to- cost ratio. Change is never free and always has opportunity cost; spending equipment budget on new computers which means we have to put aside the plan of upgrading the computer systems and there are intangible costs associate with it such as quality and customer satisfaction during the period of adjustment. Determine whether the benefit of change can outweigh the cost of change before implementing it.

Internal Resistance. Generally, people resist change is due to lack of knowledge about changes and fear of the unknown. No matter how much the benefit of the change might give, the resistance to change still exists. The key tools used in managing this problem are completely honesty and timely communication with our work team, clear communication of the purpose of the change, and patience with our team as they need time to gone through an inevitable adjustment phase.

Choosing wrong solution. Organizations will always initiate change as and when they face problem. But it is dangerous to assume the root cause of problem without investigating it and implement the solution prematurely. This approach incurs additional cost of change without producing the intended benefit; furthermore, it can generate problems in areas which were already functioning well.

A bad change management plan can also affect an organization negatively. Change management is just to manage change. If the change is carrying out without a proper plan to deal with every single step of change i.e. before, during and after, the change strategy could fail at any time which could possibly bringing down the entire company.


While change can be risky, the benefits still far outweighing the potential pitfalls. Change allows organizations to continue surviving in an uncertain market.

The sources of resistance to change and how did the management try to combat them are as follows:

Sources of resistance to change can be categorized into individual and organisational responses.

In each organization, there are four types of people responded to changes:

People that initiate changes.

People that accept changes.

People that reject changes

People that indifferent towards changes.

I have been conducted an analysis of resistance to change in my organisation. There are many factors that caused such a phenomenon to organisational changes but I only select those factors that are most relevant to my organisation:

Lack of understanding around the objective for a change. Analysis indicated that the main reason for employee resistance to change was that employees did not clearly understand why change was needed for the particular project. Employees did not have answer from Management for questions like, "what should I do in the process of change?"How will the proposed change impact my daily work?" "How will I gain from the change?".

Employee comfort with status quo and fear of unknown. The current management, processes and its systems seemed fine and acceptable by employees. They felt comfortable with what they are doing now. They were opposed to the change because they were afraid of being forced out of the comfort zone. The comfort zone conditions them to follow known path, and fear change.

Corporate history and culture. Organizational culture grows over time. Employees are comfortable with the current organizational culture and current performance. Employees were not sensitized to change initiatives, as many had been implemented and failed. The change was seen merely as "flavor of the manager," and employees expected it goes away like those occurred in the past.

Change creates opposition to new technologies, processes and requirements. Some employees resisted the change because they felt that the change will increase their job load, adding unwanted job, responsibility and accountability although change can improve performance and process measurement of their work. Some employees opposed to new systems, processes or technologies because they felt that the change will not solve the problem.

Employee fear of job loss. Employees view change as a threat to their job which may cause them losing their job. Some employees even think that the change will remove the need for their job, while others were not sure of their skills and abilities will meet the requirement of the new environment.

The top-four reasons for manager resistance to change were:

Fear of losing power and control. The main reason of resistance to change from manager was fear of losing power. Managers view change as an elimination of power and control. Some managers even think that they are no longer having power in negotiation and decision making.

Overload of current activities and increasing daily tasks pressures. Managers felt that change was not a relief but an additional burden to their current job load. The change initiative seemed like an extra work and extra burden when the pressures of daily tasks were already high. In many change projects, managers were required to continue carrying out their current duties in addition to the new duties of implementing the change.

Managers are lack of required skills and experience to manage the change effectively. Managers were fearful of new demands and responsibilities being placed to them by the new business systems, processes or technologies. New demands will probably need new skills and enormous experience. However, some managers may not possess the required skills. As a result, they were not comfortable with their role in managing the change.

Disagreement with the change. Some managers disagreed with the change. They did not feel that by implementing a change will simply solve the problem. Managers who did not involve in the design and planning stages will tend to resist the solution. Some resisted the change just because of the solution does not come from their idea ("not invented here").

There are several actions that the management can take which will reduce the resistance to change due to uncertainty and insecurity to work. (John P. Kotter and Leonard A. Schlesinger, 2008) explained that there are six different approaches for dealing with resistance to change as follows:

Education and communication. Management must explain to employees why change is needed, identify and deliver the benefits of change to individuals and departments, and willing to answer all questions as and when they arise. Topics like 'why am I doing this and how is it going to benefit me?' Or 'what are the risks and issues that I will have to face?' must be covered and answered. Communication between management and employees can be carried out in the form of discussion, memorandum, one to one meeting, formal reports, scheduled meetings, etc.

Participation & Involvement. Every employee must participate in the change plan. This participation starts from top to bottom; hence a good leadership styles is essential for successful change process. One pessimist on the leadership team can jeopardize the entire process.

Facilitation & Support. Managers must manage the change in a way that employees can cope with it. Managers must responsible to facilitate, and to help employees to understand the reasons of change. This can be done by providing special training and counseling.

Negotiation and Agreement. Successful implementation of change should be acknowledged by way of compensation and recognition. Managers can offer incentives to employees not to resist change or change resistors can also be offered incentives to leave the company early before the expiration of the contract of service.

Manipulation and Co-optation. Managers can resort to manipulate information, resources and favors to overcome resistance. This also involves selecting resisting individual to participate in the change effort and giving them desirable role in the change process.

Explicit and Implicit Coercion. Managers can explicitly and implicitly coerce employees into accepting change by telling them that change was not a choice to them and must be committed. Every employee affected by change program must be accountable for implementing his or her individual change activity. Failing of meeting that responsibility will be reprimanded. Managers sometimes dismiss or transfer employees who against the change.


Overlooking any one of the above items diminishes the chance of successfully implementing the change program.