Chapter - Management - Environmental constraints on managers

The Specific Environment

The specific environment: The part of the external environment that is directly relevant to the achievement of an organizations goals. It includes those external forces that have a direct and immediate impact on manager’s decisions and actions. The main specific environments include customers, suppliers, competitors, and public pressure groups.

  • Public pressure group: Groups that attempt to influence the actions of organizations.

Social Cultural conditions: managers must adapt their practices to the changing expectations of the societies in which they operate. As societal values, customs, and tastes change, mangers must also change.

How Organizations go Global

 One way managers use to get into a global market without investing a lot of money is called global sourcing

Global sourcing: Also called global outsourcing, refers to the purchasing of materials or labour from around the world, wherever it is cheapest. The goal of this strategy is to take advantage of lower costs in order to be more competitive.

  • Importing and exporting: An organization can go global by exporting its products to other countries, by making products at home and selling them abroad, or through importing which consists of selling products at home that are produced abroad.
    • Exporting: An approach to going global that involves making products at home and selling them abroad.
    • Importing: An approach to going global that involves acquiring products made abroad and selling them at home.
  • Licensing & franchising: some businesses use franchising or licensing in the early stages of doing international business. Both licensing and franchising involve one organization giving another the right to use its brand name, technology, or product specifications in return for a lump sum payment or fee usually based on sales.
    • Licensing: An approach to going global primarily used by manufacturing organizations to make or sell another company’s products where one manufacturer gives another organization the right to use its brand name technology, and /or product specifications.
    • Franchising: An approach to going global, primarily used by service organizations, in which a manufacturer gives another organization the right to sell a product using specific business methods and practices that are standardized. This method is used when one organization wants to use another companies name and operating methods.  
  • Strategic Alliance: This approach to going global is typically exercised once a business has gained experience in the international markets and requires more direct investment.
    • Strategic Alliance: an approach to going global that involves a partnership between a domestic and a foreign company in which both share resources and knowledge in developing new products or building production facilities. Partners also share the risks and rewards of such alliance.
    • Joint Venture: A specific type of strategic alliance used as an approach to go global, in which the partners agree to form a separate, independent organization for some business purpose.
  • Foreign subsidiary:  Another approach to going global that involves making a direct investment in foreign country through the establishment of a separate independent production facility or office. A foreign subsidiary can be managed as an MNC (domestic control), a TNC (Foreign control), or as a borderless organization (global control) This arrangement involves the commitment of the greatest amount of resources and posses the greatest amount of threat.

Managing stakeholder relationships

  • Stakeholder: Any constituent in the organizations external environments that are affected by, and/ or have an effect on the organizations decisions and actions. These groups either have a stake in, and/ or are significantly influenced by what the organization does.
  • Shareholders: Shareholders are also stakeholders in an organization whom own one or more stock in a company.
StudyUp Author: James Bagshaw
Business Administration, Accounting and Management Technology
Major: Business Administration

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