Environmental factor


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Environmental factor

  1. 1. Assignment on Environmental Factor Affects <br />Submitted To<br />Name: <br />Lecturer in <br />Darul Ihsan University<br />Submitted By<br />Name: A.S.M. Muktadir Rahaman<br />Roll: 33117<br />Batch: 33rd C<br />Darul Ihsan University<br />Date: 15th February 2011<br />Environmental factor affects on Multinational Corporation<br />Many leaders have catchy slogans on their desks; many have learned to believe in them (Giuliani, 2002, p 69). Organizations that promote learning are better equipped to handle the ever-changing business environment. Retailers are no different. When an organization’s leadership plans for the future it must take into account principle environmental factors. A company’s ability to compete will be affected by how well the leaders have learned to identify those factors, to demonstrate their company’s significance, and to estimate the extent or magnitude of each of the factor’s impact on the corporate strategy. In this paper, I discuss the five principle environmental factors as cited by Pearce and Robinson (2002). Further, I indicate the significance of environmental factors on the overall business strategy; discuss the two factors that enable<br />Leadership to understand the extent of the overall strategy on their company’s market position and lastly I discuss the impact of four external factors on the internal environment.<br />Environmental Factors<br />Competitors<br />Every business has external peers that perform similar functions within their professional discipline. These peers are considered competitors and they are rival producers of goods or services. These competitors contribute to the overall industry by their ability to deliver goods and services of high caliber at competitive prices. Competition is good from a market perspective as it gives consumers choices and provides the businesses and opportunity to create a niche. In Ellis’ Fast Company article (2002), he cites six strategies to apply in strategy formulation. Number 4, understands your competition’s weakness and then exploits it. He cites Blockbusters late fee drill as an example of how a new competitor, Netflix, could influence customers to try their product over Blockbuster. With Netflix, there are no late fees, and you can keep a movie for as long as you like. Competitors are purchased as a strategic move to gain market share for example in Chainstoreage.com article (2004) “Whole Foods<br />Market, Inc is cited spending $38 million in stock to acquire Fresh and Wild Holdings Ltd, a U.K. natural and organic food chain.”<br />Creditors<br />Most businesses purchases goods and services much like a consumer. However, they do so to large extent on credit as they are able to get discounts or other incentives to buy in bulk. When businesses buy goods and services on credit the business that holds the note or paper is referred to as a creditor. A firm’s power and prestige in domestic markets may be significantly enhanced with the right credit resources. Enhanced prestige can translate into a better negotiating position with other creditors, suppliers, distributors and other important groups (David, n.d.).<br />Customers<br />Customers are an essential part of any business, without the customer there would be no need for the business. Regardless of the product or service provided, a business must be able to leverage their marketing and production to ensure they satisfy consumer demand. Hammonds (2003) cites Zuboff and Maxmin (2000) in his Fast Company article “People, have changed more than the commercial organizations. A new opportunity is found in that chasm that separates individuals and organizations. In it lies the key to a new economic order with vast opportunities. Companies that learned to change with their customers will benefit from expanding consumer confidence and increased buying.<br />Labor Market<br />Just as customers are a key element of business success so are the employees that an organization hires to represent their interests. Having quality human resources is very important. The lack of talented people can cripple a company and foster a negative customer experience, which could potentially lead to customer dissatisfaction. To grasp the impact of company’s employee turnover level, you must first have a sense for the performance levels of the leavers and whether you could have had any influence over an employee’s decision to depart. However, in these times of high employee mobility and two-career couples, some employees may leave a firm for reasons unrelated to their jobs (Becker, Huselid & Ulrich, 2001, p 98). Turnover is one reason organizations must tap into the labor market to fill open positions. A strategic Human Resources partner can be a key asset in developing a plan to address future employee needs. <br />Suppliers<br />The role of the supplier is similar to that of the creditor in that the business is relying on a third party to supply customer demand. In the case of the supplier an organization could be procuring parts, services or other tangible goods to create or enhance a product or service for sale. Bargaining power of suppliers affects their ability to raise prices. Suppliers are likely to be powerful if: they have few competitors, each individual purchase represents only a small amount of their company’s sales, there are not good substitutes of the product purchased, and the product or service is unique (Dobbins, n.d). Suppliers play a key role in such transactions; poor production or planning could devastate the sale of a business. <br />Economic<br />The economy has a significant impact on the viability of a corporate strategy. For example in retail, if Florida has an ice storm in the winter and all orange crops are destroyed, the price of oranges and orange juice will increase. This is a small example of how one localized disaster can affect the price of a commodity. According to Develop Vision and Strategy (n.d.), a micro level assessment considers the industry and market in which a company competes, the customers who purchase its products, the competitors, and competition who threaten it, and the suppliers on which depends. On a larger scale, if the business plan is not successful and the firm sustains losses over multiple business cycles, the management may reduce staff as a means to lower expenses. The reduction in workforce increases the local unemployment, which has the ability to negatively influence revenues and the tax base of a local economy.<br />Political<br />The current political climate can influence the types of legislation that can influence corporate spending or tariffs on goods and services. Political factors can be restrictive or beneficial. Restrictive factors are those factors that limit profits; such as constraints placed on enterprise through fair-trade laws, antitrust laws, tax laws, minimum wage legislation or pollution laws as cited in Develop Vision and Strategy (n.d.) and Pearce and Robinson, (1985). Examples of this would be luxury taxes on big-ticket items or capital gains taxes. Governmental influences are of particular interest to those enterprises that operate in foreign countries where the political environment is volatile and information is scarce.<br />Social<br />Certo (1997, p. 51) defines social responsibility as a managerial obligation to take actions that protects and improves both the welfare of society as whole and the interests of the organization. In recent years there have been multiple corporate ethical issues that<br />Have influenced social views on corporate America. The number of high profile scandals, from Enron to MCI WorldCom, has adversely affected public’s perception of corporate strategy as it relates to decisions that affect shareholder and employee interests.<br />Technological<br />Technology factors are the scientific advances, which influence the competitive position of the enterprise. Maintaining awareness of new technologies decreases the probability of becoming obsolete and promotes innovation. Advancements in technology can impact the transformation plan in many ways. New technology as cited in Develop Vision and Strategy (n.d.) can change the demand for a product, render current manufacturing processes obsolete, and reduce costs to undercut competitors, produce new products and a host of other possibilities.<br />Conclusion<br />According to Pearce and Robinson (2002), the external environment of a business consists of two interrelated sets of variables that play a principal role in determining the opportunities, threats and constraints that a firm faces. Variables originating beyond and usually irrespective of any single firms operating situation (economic, political, social and technological forces) form the external environment. Variables influencing a firm’s immediate competitive situation (competitive position, customer base, suppliers, creditors, and labor market) constitute the external operating environment. These two sets of forces provide many of the challenges faced by a particular firm in attempting to attract or acquire needed resources, and when striving to profitably market its goods and services.<br />References<br />Becker, B., Huselid, M., & Ulrich, D. (2001). The hr Scorecard: Linking people, strategy, and performance. <br />Boston: Harvard Business School Press.<br />Certo, S. (1997). Modern management. Upper Saddle River, NJ: Prentice Hall.<br />Ellis, J. (2002). Strategy [Electronic Version]. <br />Fast Company, 64, 66. Retrieved August 25, 2003, from http://www.fastcompany.com/magazine/64/jellis.html.<br />David, F. (n.d.). Strategic management: Comparing business and military strategy.<br />Retrieved August 30, 2003, from Yahoo.com via<br />http://myphilip1.pearsoncmg.com/abdemo/abpage.cfm?vbcid=3166&vid=1211.<br />Develop Vision & Strategy. (n.d.). Retrieved August 31, 2003, from<br />http://arr.uta.edu/eif/dru_diss/a13_tx.html<br />Dobbins, C. (n.d). Strategic planning: External environmental scanning. Retrieved<br />August 28, 2003, Purdue University, Center for Food and Agricultural Business<br />Website: http://www.agecon.purdue.edu/extension/sbpcp/resources/escan.pdf<br />