Macro environmental factors that affect firms - Free Essay Example

Sample details Pages: 5 Words: 1558 Downloads: 3 Date added: 2017/06/26 Category Management Essay Type Analytical essay Did you like this example? These factors are not within the control of management of business but still affects the business up to large extends. These factors are almost uncontrollable. The organization has to fit into this environment to survive in this competitive scenario. Don’t waste time! Our writers will create an original "Macro environmental factors that affect firms" essay for you Create order These factors of macro environment also affects the factors within the organization i.e. factors of micro environment. There are many factors in the macro-environment that will affect the decisions of the managers of any organization in this whole world. Tax changes, new laws, trade barriers, demographic change and government policy, political changes are all examples of macro change. To analyze these factors managers can categories them using the PESTEL model. Political factors: This refers to government policy, For example: the degree of intervention in the economy. What goods and services a government wants to provide? Up To what extent does it believe in subsidizing firms? What are its major priorities in terms of business support? Political decisions can impact on many vital areas of business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system. Economic factors: This inclu des interest rates, taxation changes, economic growth, inflation and exchange rates. For example: Higher interest rate may deter the investment because it costs more to borrow. Inflation may provoke the higher wage demands from employees and raise costs. Higher national income growth may boost the demand for a firms products. Social factors: Changes in social trends can impact on the demand for a firms products and the availability and willingness of employees to work. For example: In the UK, the population has been ageing. This has increased the costs for firms who are committed to pension payments for their employees because their staffs are living longer. It also means some firms like ASDA have started to recruit older employees to tap into this growing labor pool. The ageing population also has impact on demand. For example: Demand for sheltered accommodation and medicines have increased whereas demand for toys is falling. Technological factors: New technol ogy creates new products and new processes. MP3 players, computer games, online gambling, i-pods and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way the businessmen do business as a result of better technology. Technology can reduce costs; improve quality and leads to innovation. These developments can benefit consumers as well as the organizations which providing the products. Environmental factors: Environmental factor includes the weather and climate change. Changes in temperature can impact on many industries which include farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness these external factors are becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries like the travel and transportation industries (For e xample: more taxes being placed on air travel and the success of hybrid cars.) and the general move towards more environmental friendly products and processes is affecting demand patterns and creating business opportunities. Legal factors: These are related to the legal environment in which firm operates. In recent years in the UK there have been many beneficial legal changes that have affected firms behavior. The introduction of age discrimination and disability discrimination legislation, an increase in the minimum wage and greater requirements for firms to recycle are examples of the recent laws that affect an organisations actions. Legal changes can affect a firms costs and demand. IMPORTANCE OF BUSINESS ENVIRONMENT Firm to identify opportunities and getting the first mover advantage: Early identification of opportunities helps an enterprise to be the first to catch them instead of losing them to competitors. For example: Maruti Udyog became the leader in the small car market since it was the first to recognize the need for small cars in India. Firm to identify threats and early warning signals: If an Indian firm finds that a foreign multinational company is entering the Indian market it should gives a warning signal and Indian firms can meet the threat by adopting, by improving the quality of the product, reducing cost of the production, engaging in aggressive advertising, and so on. Coping with rapid changes: All sizes and all types of industries are facing increasingly dynamic environment. In order to effectively cope with these significant changes, managers must understand and examine the environment and develop suitable courses of action. Improving performance: The enterprises that continuously monitor their environment and adopt suitable business practices are the ones which not only improve their present performance but also continue to succeed in the market for a longer period of time. THE ORGANISATIONAL EXTERNAL BUSINESS STRATEGY By using the PESTEL framework a manager can analyze the many different factors in a firms macro environment. However, it is important not to just list PESTEL factors since this does not in it tell managers very much. What managers need to do is to think about which factors are most likely to change and which will have the greatest impact on them i.e. each firm must identify the key factors in their own environment. Managers must decide on the relative importance of various factors and one way of doing this is to rank and score the likelihood of a change occurring and also rate the impact if it did The higher the likelihood of a change occurring and the greater the impact of any change the more beneficial this factor will be to the firms planning. External Strategies of different organization Economic factors :- Vodafone: The growth of Asian countries like India and china, have had massive effects on Vodafone. Vodafone can relocate production there to benefit from lower costs; these emerging markets are also providing enormous markets for them to aim their product at. With a population of over 1 billion, for example, the Chinese market is not one that anyone would want to ignore, at the same time Chinese producers should not be ignored either. Social factors :- McDonaldà ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¾Ãƒâ€šÃ‚ ¢s: Important strategic decisions are a key factor to Mac Donaldà ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¾Ãƒâ€šÃ‚ ¢s success with consideration for both internal and external factors. When considering the foreign market, companies need to consider there are risks. There must be local marketing to appeal to the local consumers and also to build relationships and trust (Bateman Scott, 2004). Therefore, the strategic planning for marketing has to be effective enough. McDonaldà ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¾Ãƒâ€šÃ‚ ¢s caters its menu in other countries to the cultures of the regions. For example, in India, the non-vegetarian menu includes chicken and fish items only. Beef is not on the menu in India because are considered sacred. Political-legal factors:- American auto makers, the electric car and California: Electric cars For whatever reasons, several of the auto manufacturers in the USA began developing which they leased to satisfied customers. Then, California decided that it would be a good idea to mandate to American auto makers that if they expected to sell their cars in California they would have to invent some new technology reducing carbon dioxide. Presumably, California expected to see an increase of the electric cars being sold by auto makers. What happened is quite the opposite and the auto makers took a hard look at their electric car program, uncertain how to market a clean vehicle without admitting the piston engine vehicles are dirty, realizing that much of the profit from a piston engine vehicle comes with the replacement of the parts and not so with electric cars and finally, realizing that a State, not even the State of California can make them build technology they dont have, nor can any state even make them keep building the technology they do have, and so, the auto makers killed their own electric car program and this was the impact of a political-legal environment. Technological factors:- NOKIA: The starting models of Nokia had some technical problem with battery backup. People who were using those handsets often complain which had spoil the reputation of the Nokia completely. The sales and market price of Nokia fell down drastically. Then management took serious consideration to these problems, and modifies all the handset with latest technology. Nokia had been successful to regain the trust of its consumers and as a result it enjoys monopoly in market. Environmental factors:- Tesco: In 2003, there has been increased pressure on various companies and managers to acknowledge their responsibility to society, and act in a way which benefits society overall. The main societal issue threatening food retailers has been environmental issues, a key area for companies to act in a socially responsible way. Hence by recognizing this trend within the broad ethical stance. Tescos corporate social responsibility is concerned with the ways in which the organization exceeds the minimum obligations to stakeholders specified through regulation and corporate governance. Graiser and Scott (2004) states that in 2003 the government has intended to launch a new strategy for sustainable consumption and production to cut waste reduce consumption of resources and minimize environmental damage. The latest legislation has created a new tax on advertising highly processed and fatty foods. The so-called à ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ'†¹Ãƒâ€¦Ã¢â‚¬Å"fat tax directly af fected the Tesco product ranges that have subsequently been adapted and affecting relationships with both suppliers and customers.

Ayurved An Intuitive Concept That Is Wholly Dependent On...

Health and wellness is an intricate concept that is wholly dependent on social and cultural beliefs. This includes how people perceive their health status and how they seek treatment. In Western society, especially North America, conventional medicine is usually the choice of treatment (Elder, 2011). However, conventional medicine does not meet the needs of every individual. In order to create a health care system that is diverse and culturally competent, alternatives to conventional medicine must be discussed and integrated into the existing health care framework. One plausible option is ayurveda. Ayurveda is a holistic approach to care that encompasses mind and body. Because of its cultural depth and comprehensive approach to wellness, ayurveda should be considered as an alternative form of practice or used concurrently with conventional medicine. Historically, ayurveda can be linked to India. The Hindu culture practiced ayurveda faithfully. However, there was no tangible evidence of such practices until there was a historic meeting in the Himalayas where it was decided that literature would be created to support ayurveda (Tillotson, Caldecott, Bajracharya, 2011). There were numerous doctrines created to address every point of health and wellness from internal medicine to surgery (Tillotson, Caldecott, Bajracharya, 2011). Over thousands of years, ayurveda has pervaded much of eastern civilization. Western society has started to incorporate alternative medicine in

Strategies and Decisions International Market Expansion

Question: Discuss about the Strategies and Decisions for International Market Expansion. Answer: Introduction: Joint venture is now considered as an important tool for the expansion of business in international market. Joint venture of the business enables the companies to access the required resources and capabilities of each other which are necessary to achieve the goals by bringing new products, services and technologies in the market. The partnership of two companies is helpful in expanding the business not only in local area but also in international market. This report has been described about the joint venture of two multinational companies Anglo American and Alrosa. The target country of these companies is USA. The strategy of the companies through joint venture is to seek resources in the new country (Hollensen, 2007). Both the companies are famous metal and mining companies. The descriptions of both of the companies are as follows: Anglo American is the famous global mining company which was founded in 24 May 1999. Headquarter of the company is London. The company is engaged in the mining and exploration of costly base metals and ferrous metals. The main mining business of the company includes thermal coal, iron ore, metallurgical coal, manganese, phosphate nickel, minerals and many precious metals and minerals (Forbes Media, 2017). Alrosa is also a famous mining company across the world which was founded in 19 February 1992. Headquarter of the company is in Mirny, Russia. The businesses of Alrosa are production, processing, marketing, exploration and sale of diamonds. The company is operating different segments of market such as social infrastructure, diamond transportation, trading, construction activity, electricity production and many other activities (Forbes Media, 2017). Internationalization strategy It is not easy to enter in the international market. There are many rules and regulations which have to be followed by the companies while entering in the international market. USA is the developed country. It is well known that there are many resources available for the mining companies but it is very critical for the companies to enter in the USA market. For the expansion, especially in the international market, good partnership, proper research and resource, are very necessary (Cateora, 2008). Research of the target market is very important for the success of the business. Both the companies can use the unique strategy for the expansion of the mining business in USA market. The mining industries can face many risks in the international market such as rules and policies, impact of climate change etc (Ingram, 2015). Along with this, tax and regulations are different in USA from Russia and UK. So, it is very important to do proper research about the market while going to start the mi ning business. By the research, it can be seen that there are the good scope for mining business in USA. There are many resources available in USA for the mining industry as USAs mining sector has increased its area in 21st century. The companies can find innovative ways for mineral extractions by special initiatives in the USA market. Along with this, there are USA laws and regulatory agencies which provide framework to increase sustainability for mining activities. Companies also have to consider the impact of formal and informal institutions for the formation of the companies (Ahammad Glaister, 2010). Major implications of formal and informal institutions for formation In present time, joint venture is becoming the essential form of expansion of business in the international market. In joint venture, two or more companies decide to share their assets for future business operations. Joint venture can be the cause of lower business risks, efficient exchange of important information and reduce the conflicts because of cultural and legal differences. The main aim of joint ventures of Anglo American and Alrosa is to expand the mining business in USA market. According to the research, target country is differing in terms of legal regulations, capital and securities market regulations. So, in joint ventures, it can impact on the both of the companies which are going to expand the business in USA market. Both formal (legal and regulatory) and informal (culture) institutions of the country impact the decision of joint venture significantly. Formal and informal rules impact the cross-borders joint ventures (Chen Mujtaba, 2007). In case of formal institutions, there is the strong impact of USA foreign direct investment on the new joint venture of the companies. Anglo American and Alrosa are seeking resources in USA for their business expansion. But, both the companies have to face the impact of foreign direct investment in terms of export and import activity. The FDI of USA promotes free trade between the countries and has positive attitude towards the expansion of foreign company in the country. FDI basically focuses on the economy of the country and allows free trade between the countries. Thus, there is a positive relation between USA foreign direct investment and the joint venture of cross border. Along with this, democratic rules, government stability, and bureaucracy are the important factors of FDI that support the joint venture of cross border. There is low level of corruption in the USA market so both of the mining companies will not face any kind of risk related to fraud in the country. With this, the export and import activities will not be so critical and tough for the companies in USA. So, expanding the mining business with the joint venture in USA market will not be so difficult of Anglo American and Alsrosa. Further, companies have to face lower transaction costs to enter in the market but it will be in positive manner (Jinjarak, 2007). Although, joint venture is good for the expansion of any business but there are many factors that impact the companies decisions to enter in the international market. There are the differences in the countries in terms of investor protection, legal and regulations. Anglo American and Alsrosa choose USA market for expansion, but both of the companies have to understand the culture and environment of the foreign market. For the institutional developments, companies have to understand the culture of target country. Informal institutions may impact the decisions of the companies by the different culture. Cultural differences can be the obstacles for the companies in terms if growth and success. It can be the cause of failure in the new market also. Cultural clashes can be the reason of failures of such business agreements. Different culture and religions can impact the entry of companies in the USA market. Language, culture and region differences can be the main point which has to unders tand by Anglo American and Alsrosa while expanding in USA market (Lee, Shenkar, Li, 2008). Managing joint ventures Managing a joint venture successfully is a difficult task. Anglo American needs proper planning while going to do joint venture with the Alrosa. The company needs to do process with the important agreements, policies and procedures to make sure about the future business operations. There are some points about the management of joint venture. Companies are needed to choose the governance structure while deciding to manage the joint venture. The attorney should be prepared by discussing both of the parties. To manage the joint venture effectively, both of the companies must choose the director by mutual selection. The director can be chosen by voting procedures and independent director should be selected. Both of the companies should be agree on large capital expenditures, creations of assets and sales of material assets in the joint ventures. Strategic plan and annual operating budget should be decided mutually. To resolve the disputes among the companies in joint venture, the common methods such as mediation and litigation should be used. For the functional activities related to production and manufacturing, the companies should use research and development agreement while involving in development program (Lupton Beamish, 2009). By adopting these processes, both Anglo American and Alsrosa will be able to manage the joint venture to expand in USA market successfully. Conclusion The report is basically discussed about the expansion of Anglo American and Alsrosa through joint venture. The main target country of the companies is USA. From the above discussion, it has been analyzed that the partnership of two companies is helpful in expanding the business not only in local area but also in international market. But it needs proper planning related to agreements, rules and policies. Both the companies are from different countries and they are going to expand in totally different country in terms of rules, regulations and culture. It is well known that there are many resources available for the mining companies but it is very critical for the companies to enter in the USA market. Both formal (legal and regulatory) and informal (culture) institutions of the country impact the decision of joint venture significantly. So, for the expansion, especially in the international market, good partnership, proper research and resource, are very necessary. References Ahammad, M.F., Glaister, K.W., (2010), Motives for Cross Border Mergers and Acquisitions: Perspective of UK Firms, Nottingham Trent University, Working Paper Cateora, P.R., (2008), International Marketing (13th), NY: Tata McGraw-Hill Education Chen, L. Y. Mujtaba, B., (2007), The Choice of Entry Mode Strategies and Decisions for International Market Expansion, Journal of American Academy of Business, Cambridge, 10(2), pp. 322-337 Forbes Media, (2017), #1,673 Alrosa, accessed on 24th January from https://www.forbes.com/companies/alrosa/ Forbes Media, (2017), #715 Anglo American, accessed on 24th January from https://www.forbes.com/companies/anglo-american/ Hollensen, S., (2007), Global marketing: a decision-oriented approach, (4th), Financial Times Prentice Hall Ingram, T., (2015), Mining companies urged to switch focus to expansion, accessed on 24th January from https://www.smh.com.au/business/mining-and-resources/mining-companies-urged-to-switch-focus-to-growth-20150626-ghyyox.html Jinjarak, Y., (2007), Foreign direct investment and macroeconomic risk, Journal of Comparative Economics, 35(3), pp. 509-519 Lee, S., Shenkar, O., Li, J., (2008), Cultural distance, investment flow, and control in cross-border cooperation: Strategic Management Journal, 29, 1117-1125 Lupton, N.C., Beamish, P. W., (2009), Managing Joint Ventures, accessed on 24th January from https://aom.org/uploadedFiles/Publications/AMP/May09ManagingJointVenturesbyBeamish.pdf