Management and environment

1. MCED

2. Contents
1.Management and environment
1.1 The External environment
1.2 The Internal Environment
2.Principles of planning
3.Importance of planning
4.Limitations of planning

3. 1.Management and Environment
“Environment” means all factors which are external to and
beyond the control of individual business enterprises and their
managements
Following types of factor/environment affect management
1. The external environment/Macroeconomic factors
2. The internal environment/Microeconomic factors

4. 1.1 The External Environment
 Factors that indirectly impact the organization, its
operation and working condition is known as the
External environment or macro environment.
 The macro environment consists of four elements
(1) Socio-cultural Environment
(2) Economic environment
(3) Political-legal Environment
(4) Technological Environment

5. Socio-cultural Environment
It includes the means of communication, the
country’s infrastructure, its education system, the
purchasing power of the citizens, family values, work ethics
and preferences, attitudes etc.
Economic Environment
Economic Environment refers to the system of producing,
distributing and consuming wealth
Political-legal Environment
The country’s unique political and legal landscape
within which organizations must function. Public policy,
public opinion, public issue, governmental bodies, judicial
system are important aspects of such environment

6. Technological Environment
Technological Environment reflects the current state
of knowledge concerning the production of products and
services. Two components of the technological environment
are particularly important for managers :the process of
innovation and the process of technology transfer
The process of innovation refers to efforts in the basic
science to develop new technologies, processes methods and
products.
The process of Technology transfer involves taking the
new technology from the laboratory to the market

7. 1.2 The Internal Environment
 These are the factors within an organization that can
be controlled and affect the immediate area of an
organization’s operations.
 The micro environment consists of six elements
(1) Employees
(2) Owners and Management
(3) Consumers
(4) Suppliers
(5) Competitors
(6)Organization culture

8. Employees
Employees exert great influence on the organization. It is
imperative to find the right people for each job. Organizations
need to motivate employees positively and retain specialized
talent.
Owners and the Management
Investors are major influencers on a company’s revenue
and operations. It is important that the owners are
satisfied with the company. It is the manager's job to
balance the aims of the company and the owners.

9. Consumers
The individuals and organizations that purchase the
products/services of an organization are its consumers or
client. Organizations recognize that it is in their own
interest to keep consumers happy.
Suppliers
The Suppliers refer to those individuals and organizations
which supply raw materials, products/ services, labour,
finance and other resources company needs to conduct its
operations. It is important to keep suppliers happy to
ensure a smooth input supply system.

10. Competitors
An organization’s competitors are other organizations that
either offer or have a high potential of offering rival products or
service. A capable manager will need to constantly study and
analyze its competition if the company wants to maintain its
position in the market.
Organizational culture
Culture is the foundation of internal environment
because it largely determines the behavior of managers in
the organization
Culture refers to the values that decides what the
organization stands for, how it does things and what it
considers important.

11. 2.Principles of planning
In the words of Koontz and O’Donnell,
“Planning involves selecting enterprise
objectives, departmental goals, and programmes and
determining the ways of reaching them. Planning thus
provides a rational approach”
A number of principles are developed to guide the
efforts of managers in preparing effective plans. These
principles of planning are as follows:

12. Principle Related to Purpose and nature
o Principle of contribution to objectives
Every plan has to contribute positively toward
the accomplishment of enterprise objectives.
o Principle of efficiency of plans
Efficiency is measured by the contribution of
the plan to objectives of the enterprise minus the
costs and unsought for consequences in formulating
and implementing the plan.
o Principle of primacy of planning
Planning is the primary prerequisite for all
other functions of management. Every action of the
manager follows a planning step.

13. Principles Applicable to Structure of plans
o Principle of planning premises
If more people in an organization use common
and consistent planning premises, the enterprise
planning will be more coordinated.
o Principle of policy framework
If more policies, appropriate to the
organization, are expressed in clear terms and form
and if managers understand them, the plans of the
enterprise will be more consistent.
o Principle of timing
If plans are structured to provide a network of
derivatives plans in sequence, there will be more
effectiveness in attainment of enterprise objectives.

14. Principles Applicable to Process of Planning
o Principle of alternatives
Select the plan which is the most effective
and the most efficient to the attainment of a
desired goal.
o Principle of limiting factor
Consider limiting factor in generating
alternatives and selection from alternatives.
o The commitment Principle
Planning can cover a period over which
commitment of resources can be clearly visualized.

15. o The flexibility Principle
Building flexibility in planning is beneficial, but cost of
building flexibility needs to be evaluated against the benefits.
o The Principle of navigational change
Manager needs to periodically check events of the plan and
redraw plans to maintain the move toward a desired goal.
o Principle of competitive strategies
In a competitive arena, it is important to choose plans in
the light of what competitor will or will not do and navigate
based on what competitors are doing or not doing.

16. 3.Importance of planning
o Focuses Attention on Objectives and Results
Planning provides huge guidance to an organization by
making its objective more clear and specific.
o Reduces Uncertainty and risk
It is matter of fact that future is uncertain and risk
oriented. Hence, to avoid this uncertainty and risk every
organization has to make plan.
o Provides sense of direction
Planning saves an organization from drifting and avoids
aimless activities.

17. o Encourages innovation and creativity
Planning is forward looking and it enables an
enterprise to cope with technology and other
developments
o Helps in coordination
Planning is the best stage for the integration of
diverse forces at work. Planning establishes unity and
coordination amongst resources
o Guides Decision making
Planning provides a great scope for controlling
hasty decisions which is often taken by organization
without making up the mind.

18. o Provides a basis for decentralization
Planning helps in the delegation of authority to
lower level of management, it also helps to
improve the motivation and morale of employee by
providing targets of performances
o Provides Efficiency in operations
Planning provides a proper guidance to an
organization by bringing economy in all around
operations of organization
o Facilitates control
Planning provides basis of control to an
organization.

19. 4.Limitations of Planning
o Lack of accurate information
For planning assumptions have to be developed for
future action but future is uncertain and unpredictable. To
make reliable data and accurate premises is necessary.
o Time and Cost
Planning is a time-consuming and expensive process.
Collection of data and revision of plans involves
considerable time ,effort and money.
o Inflexibility
planning may result in internal rigidity in managerial
work. It causes delay in work performance.

20. o Resistance to change
Planning is the game of prediction. Rapid
changes may occur in macro and micro level
environment of business. planning is to be made in a
flexible way to compress the plans in the future
o Lack of ability to plan
Some managers do not believe in the worth of
planning. Lack of commitment to planning, lack of clear
and meaningful objectives, lack of top management
support are the common human weakness that create
problems in planning.

21. o False sense of security
Planning encourages false sense of security
against future risk and uncertainty. As future is
uncertain, it is unpredictable. Therefore, planning
cannot give accurate and reliable results.
o Environmental constraints
Planning is based on the anticipation of future
happenings. Since future is uncertain and dynamic,
therefore, the future anticipations are not always
true. As planning is time consuming, it is not suitable
in emergency situation because quick decisions is
desirable in emergency situation buts planning delays
the emergency demand in organization