Effectively management of people can produce substantially enhanced economic performance. A plethora of terms have been used to describe such management practices: high commitment, high performance, high involvement, and so forth. I use these terms interchangeably, as they all tap similar ideas about how to obtain profits through people. I extract from the various studies, related literature, and personal observation and experience a set of seven dimensions that seem to characterize most if not all of the systems producing profits through people.
International companiesÂ are importers and exporters, they have no investment outside of their home country.
Multinational companiesÂ have investment in other countries, but do not have coordinated product offerings in each country. More focused on adapting their products and service to each individual local market.
Global companiesÂ have invested and are present in many countries. They market their products through the use of the same coordinated image/brand in all markets. Generally one corporate office that is responsible for global strategy. Emphasis on volume, cost management and efficiency.
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Transnational companiesÂ are much more complex organizations. They have invested in foreign operations, have a central corporate facility but give decision-making, R&D and marketing powers to each individual foreign market. (www.leeiwan.wordpress.com)
When operated like a business, GBS is typically world class with respect to cost and service levels as well as competitive with the external marketplace. This model allows leveraging of limited management resources with strong skill-sets across all general and administrative functions within the enterprise. A well-executed governance organization is positioned to manage multiple service delivery models across the corporation. A successful GBS organization enriches the enterprise with a deep talent pool. From an operational perspective, GBS facilitates standardization and process improvement through end-to-end process ownership. It is an excellent partner in facilitating the integration of acquired entities. (www.tpi.net)
The impact of external factors on organisations: There is a simple rhyme which goes:
Environment to each must be. All there is that isn't me.
You can see therefore that the business environment consists of all those things outside the business. The business needs to keep a watchful eye on the environment because it is continually changing. Key elements in the environment are:
1. Competition. Rival companies are continually changing what they have to offer. They may lower prices, bring out new products, engage in exciting new advertising campaigns, and a range of other activities.
2. Political factors. The action of government affects business and other organisations. Governments are continually changing the rules and the laws that affect business. This is illustrated by the way in which government rules affect schools. Simon Jenkins in an article in The Sunday Times, on 24 September 2006 illustrates this well when he wrote: 'This government tries to keep control of every school. Since coming to office its education department has issued 500 regulations, 350 policy targets, 175 efficiency targets, 700 notes of guidance, 17 plans and 26 separate incentive grant streams.'
3. Economic factors. The economy consists of businesses, individuals and government. The international economy consists of the economies of all the countries in the world. The economy consists of many markets - the market for goods, the market for services and the market for money are key parts of this. These markets determine the price that business has to pay for its resources such as labour, and raw materials. Businesses are continually affected by changes in the economy.
4. Social factors. Society is made up of all the people in a given area. It is important to be able to find out what the main trends are that are happening in society because these trends affect business. For example, changes in age patterns, such as the increasing numbers of older people in the population, determine which goods are popular. Then there are social trends which are affected by fashion - for example this year some goods will be 'in', whereas next year nobody or very few people will want to buy them.
5. Technological factors result from the development of new techniques, i.e. new types of products and new processes to make products. For example, recent years have seen a massive change in information technology which has transformed the way we run our lives. For example, today more than 90% of young people possess a mobile phone. (www.acquaint.me.uk)
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The impact of global factors on business organisations: Businesses are affected by an external environment as much as they are affected by the competitors. Global factors influencing business are legal, political, social, technological and economic. Understanding of these factors is important while developing a business strategy.
Social factorsÂ - These factors are related to changes in social structures. These factors provide insights into behaviour, tastes, and lifestyles patterns of a population. Buying patterns are greatly influenced by the changes in the structure of the population, and in consumer lifestyles. Age, gender, etc all determine the buying patterns and understanding of such changes is critical for developing strategies which are in line with the market situations. In a global environment it is important that business strategies are designed keeping in mind the social and cultural differences that vary from country to country. Consumer religion, language, lifestyle patterns are all important information for successful business management.
Legal factorsÂ - These factors that influence business strategies are related to changes in government laws and regulations. For a successful business operation it is important that the businesses consider the legal issues involved in a particular situation and should have the capability to anticipate ways in which changes in laws will affect the way they must behave. Laws keep changing over a period of time. From the point of view of business it is important that they are aware of these changes in the areas of consumer protection legislation, environmental legislation, health & safety and employment law, etc.
Economic factorsÂ - These factors involve changes in the global economy. A rise in living standards would ultimately imply an increase in demand for products thereby, providing greater opportunities for businesses to make profits. An economy witnesses fluctuations in economic activities. This would imply that in case of a rise in economic activity the demand of the product will increase and hence the price will increase. In case of reduction in demand the prices will go down. Business strategies should be developed keeping in mind these fluctuations. Other economic changes that affect business include changes in the interest rate, wage rates, and the rate of inflation. In case of low interest rates and increase in demand Businesses will be encouraged to expand and take risks. Therefore, business strategies should have room for such fluctuations.
Political factorsÂ - This refers to the changes in government and government policies. Political factors greatly influence the operation of business. This has gained significant importance off late. For example: companies operating in the European Union have to adopt directives and regulations created by the EU. The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Business must consider the stability of the political environment, government's policy on the economy etc
Technological factorsÂ - These factors greatly influence business strategies as they provide opportunities for businesses to adopt new innovations, and inventions. This helps the business to reduce costs and develop new products. With the advent of modern communication technologies, technological factors have gained great impetus in the business arena. . Huge volumes of information can be securely shared by means of databases thereby enabling vast cost reductions, and improvements in service. Organisations need to consider the latest relevant technological advancements for their business and to stay competitive. Technology helps business to gain competitive advantage, and is a major driver of globalization. While designing the business strategies firms must consider if use of technology will allow the firm to manufacture products and services at a lower cost. Firms can select new modes of distributions with the help of technology. It has become easier for companies to communicate with their customer in any part of the world. (www.businessteacher.org.uk)
A review of the current issues impacting on business activities: A number of themes have emerged from employer contact through SSCs in relation to the overall business environment faced by employers:
Business closures: Reductions in orders/demand have led to the closure of many companies across all sectors. The Federation of Small Business indicated that about 280 small companies are going out of business every week during the current economic downturn although this figure is considerably less than the early 1990s.
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Redundancies: One of the most significant impacts of the recession has been business contraction as a result of reducing demand for goods and services and the consequent need to make redundancies in the workforce. It has been widely reported that Britain has experienced rising unemployment on a scale not seen in the labour market for almost three decades. Almost 250,000 people lost their jobs in the first three months of 2009 with unemployment rising to about 2.1 million or about 7.1% in March 2009.
Introduction of changes in terms and conditions of employment: Many employers have been forced to introduce changes in terms and conditions of employment, particularly in relation to the hours worked by employees. This has ranged from extended factory closures, the introduction of reduced hours working, pay freezes and across the board pay reductions. These measures have often been introduced in an attempt to avoid redundancies.
Cash flow difficulties: Debtors are holding onto cash for as long as possible; causing often severe cash flow difficulties, particularly for small businesses. In some instances these cash flow difficulties have resulted in the failure of perfectly sound businesses.
Lack of credit: Many businesses across all sectors continue to experience problems in accessing bank finance (overdraft facilities etc) to provide working capital. The shortage of credit continues to undermine the activities of many businesses. Those businesses that are in the strongest financial position currently will be best placed to negotiate with the banks in the future.
Fall in the value of sterling: This is an issue that appears to be affecting businesses in different ways. On the one hand the value of sterling is impacting on the cost of imported goods and manufacturing inputs, leading to a squeeze on margins. Businesses are working closely with customers to explain the need to pass on these increased costs, but ultimately these will be passed down the supply chain to consumers. By contrast, a significant proportion of companies rely on export markets and anticipate major opportunities from improved price competitiveness arising from sterling and a strong potential to pass on increased input costs. The fall in sterling should increase tourism into the UK and benefit cultural exports. Generally speaking, the weakening of domestic currency (£Sterling) relative to the rest of the world acts to reduce import pressures (i.e. the cost to import produce effectively increases) and similarly reduces UK export prices.
Consolidation: There is evidence of a trend towards consolidation involving smaller suppliers and turning to those who are more secure financially to ensure continuity of supply and service. This trend is therefore adversely affecting smaller businesses.
Reduced margins: Pressure on margins from customers is creating a more difficult trading environment. For example, the food and drink market is still strong, but primary producers and processors are coming under margin pressure from national supermarket chains. For a number of other sectors such as cleaning and hospitality the proposed increase in the National Minimum Wage planned for October 2009 is also likely to squeeze company margins.
Public expenditure: It is anticipated that public spending will have to be reigned-in at some point in the medium-term as the Government will have to repay the debt currently being incurred to fund the economic recovery plan. It is not only the Government (Civil Service), health, social care and justice sectors that are likely to be affected by public expenditure cutbacks. Sectors such as construction, particularly in the infrastructure and public non-residential sector, are also expected to be affected.
Environmental agenda: There is concern that the green agenda will also be sidelined due to the recession. In particular the voluntary aspects of the environmental agenda are unlikely to receive the drive anticipated from businesses due to competing financial pressures.
Improve costs and efficiency: There is an added emphasis on the need to reduce costs and improve efficiency, building on work already in progress. (www.readingroom.lsc.gov.uk)
Conclusion: There are lot of challenges in today's global business environment. Although the challenges are great the benefits for overcoming these challenges are also great. Businesses can streamline operations and reduce costs by doing so. New partnerships can be established across borders which can reduce material costs. IT has also facilitated this move and businesses utilise these systems to simplify communication. Although companies are usually set to benefit there is a risk that countries are to lose out. Poorer countries would have to offer a more attractive package for big businesses to invest and build infrastructure in their countries. The management team and managers should face all these challenges technically, logically & practically.