Introductions
It is important for managers of organizations operating in different economic sectors to create conducive working environment for their workforce. To ensure such environment Anca &Vega (2007) argue that a certain degree of flexibility in the firm should be integrated in order to guarantee that employees are able to work to their maximum potential in executing their duties for the wellbeing of the firms.
Organizations doing business in different economic sectors operate within a network of relationships. These relationships are categorized as internal, external and distal stakeholders. Internal stakeholders include customers, suppliers, distributors, shareholders and competitors.
Internal stakeholders comprise various business units and functional departments of an organization. On the other hand, distal stakeholders relate to the various parties who influence a firm’s growth indirectly such as the customer advocacy groups, legal groups and governmental agencies.
Therefore, management students and working managers should acquire and develop a comprehensive understanding on how to create beneficial and sustainable relationships with the various internal and external stakeholders.
In addition, managers of organizations operating in a global environment are inevitably faced by numerous challenges due to existence of cross-border differences such as cultural divergence, politico-legal differences, commercial differences and monetary issues. According to Daft, Murphy & Willmott (2010), firms operating in diverse economies with unique and distinct cultures have to integrate a considerable degree of flexibility and genuine socio-cultural and political tolerance in order to deal with cultural diversity successfully.
Therefore, establishment of a strong organizational culture founded up on progressive values and virtues is important for success of a global firm. The purpose of this paper is to conduct research in organizational environment, organizational culture and management of organizations in a global environment.
The organizational environment
There is a direct relationship between an organization and its environment. Shaikh (2006) defines an organizational environment as the aggregate of all different conditions that surround, influence and affect operations of an organization. In their day-to-day activities, organizations interact and carry out transactions with different individuals and groups within their business environments.
According to Shaikh (2006), the effectiveness with which a firm establishes cooperative and harmonious relationships with its environments determines whether an organization succeeds or not. The organizational environment is complex in that it presents both opportunities and challenges to an organization.
For example, there are various constraints originating from an organization’s environment that firms have to deal with. These constraints have a significant influence on how firms’ management teams make their decisions.
There are two main categories of environmental factors that affect a firm’s operation. These include internal and external environmental factors. In their operation, firms are able to control internal factors in order to be congruent their overall business environment.
However, organizations do not have control over external factors (Reddy 2008). Therefore, managers must constantly seek to understand external environmental factors in order to make prudent business decisions.
Internal environment of an organization is composed of a wide range of factors that determines its strengths and weaknesses. A firm’s strength entails various inherent characteristics of an organization that contribute towards its competitive advantages. On the other hand, weaknesses entail the inherent limitations that inhibit the firm from attaining its full competitive advantages.
The main internal features that define a firm’s internal environment include organizational resources, operational capability, financial capability, research and development capability, technological capability, and marketing capability.
As a result, managers are required to formulate strategies and policies that are inline with its internal environment. To achieve this, managers are required to conduct an intensive environmental analysis. Environmental analysis gives managers understanding regarding different environmental aspects.
According to Manab, Gene & Srivastava (1997), a proper environmental analysis enables firms’ management teams to be effective in their strategy formulation and general decision making.
When conducting environmental analysis, firms’ management teams should take into consideration a number of elements such as social, technological, political and economic elements. Manab, Gene & Srivastava (1997) observes that analysis of the social environment enables managers to develop a comprehensive understanding of critical aspects such as population’s characteristics, a society’s lifestyle and value system.
This knowledge enables an organization’s management to formulate strategies that are in harmony with a society’s needs. Furthermore, understanding a society enables firms to develop policies and strategies that contribute towards improvement of its well-being.
According to Kapil (n.d), firms have a social responsibility towards the society within which they operate. In their decision making process, managers should ensure that their objectives align with its corporate social responsibility (CSR).
Kapil (n.d) asserts that a firm’s decisions should reflect its organizational norms and values. Some of these responsibilities entail eliminating unethical business practices. This means that a firm should be able to eliminate chances of developing a bad reputation by engaging in practices that contradict a society’s values and beliefs.
For example, during 1990s Microsoft Incorporation had developed a bad reputation. This arose from a general belief by the public that the firm had unimpressive participation in philanthropic activities despite the fact that it was making abnormal profits at the expense of the society.
Upon realization of this, Bill Gates, the founder of Microsoft Incorporation increased his philanthropic activities by donating US $ 3.35 to Gates Learning Foundation which is committed at offering computers and software to learning institutions in low income areas and the William Gates Foundation which offers grants to human service and health organizations.
Currently Bill Gates and his wife are fully engaged in philanthropic activities. As a result, the firm has regained a great reputation in the society (Harrison 2008). Apart from improving the welfare of the society, social responsibility entails a wide range of aspects such as ensuring that the working environment is safe and secure, fair employee remuneration and protecting its consumers.
By understanding its social-cultural environment, a firm is able to avoid restrictive legislation. A firm can achieve this by listening to the complaints of the society. For instance, as a result of increased complaints by the society regarding firms’ negligence towards dealing with white-collar crimes in the US, the US government instituted a number of sentencing guidelines which are aimed at ensuring that firms adhere to their corporate responsibility.
The guidelines also stipulate the penalties and punishments that firms are subject to in the event of failure to comply (Harrison 2008).Therefore, acquiring an in-depth understanding of the society increases the efficiency with which a firm undertakes its corporate social responsibility.
The social-cultural environment also has an effect on the profit making capacity of a firm. This arises from the fact that a society essentially comprises of a company’s’ customers. This means that changes in a society’s social-cultural settings can affect a firms’ profitability.
For example, changes in a society’s demographic characteristics may affect demand for a firm’s products or services. This may lead into a decline in a firm’s profitability and hence its ability to sustain its employees as well as solvency. This in turn may result in to poor customer motivation and hence poor productivity.
In addition, changes in demographic make up may provide necessary clues regarding the most profitable sector to undertake investment in. For example, most baby boomers are entering their retirement age.
As a result, there is a high probability that there will be a significant growth in leisure and health maintenance industries. According to Harrison (2008), understanding the society’s demographic structure may enable a firm to be efficient in forecasting the demand.
Political forces have an effect in the operations of a firm in various ways. These entail existence of legislations that promote business operations such as intellectual property laws, labour laws and friendly taxation laws. Presence of binding intellectual property rights and laws motivates firms to undertake research and development consistently.
This is because such laws ensure that a firm’s innovation is not exploited leading to loss. Furthermore, the success of a firm is dependent on the nature of the political environment. If the political environment is stable, then the probability of the firm succeeding is high.
Therefore, in executing their duties, it is critical for managers to take into consideration environments in which their firms operate. Consideration of the organizational environment is important in the process of formulating organizational strategy and designing organizational structure (Daft, Murphy & Willmott, 2010).
In addition, analysis of the broad organizational environment can enable a firm to be effective in identifying the risks and challenges that it is bound to encounter. The firm is also able to take advantage of opportunities presented by its environments.
Organizational culture
As mentioned earlier, an organization should have a comprehensive understanding of the environments within which it operates. An organization’s culture is equally critical in determining whether an organization succeeds or not. In fact, some of the main components of an organization’s internal environment that managers should consider entail an organization’s culture in relation to the culture of the society within which it operates.
Virtually all organizational activities involve dealing with people within and outside an organization. Generally, a society of people gradually adopts a given way of life that defines their value system, beliefs, how different duties are allocated and shared between and among them and the way they react to various situations.
Similarly, organizations by virtue of having people who share common goals and objectives, embrace distinct value and belief systems as well as duty-allocation mechanisms which make up what is termed to as their organizational culture.
Organizational culture refers to the set of beliefs, attitudes, experiences and values that shape a firm as an entity. Alternatively, organizational culture also entails norms and values held by various groups within an organization. In their operations, values held by an organization represent goals that an organization is committed to attaining.
Organizational values show how employees are expected to behave in order to achieve these goals. This helps in sustaining external interactions with other stakeholders such as financiers, suppliers and the customers.
One of the most important organizational cultures that firms should integrate is the brand congruent culture. This culture commits various stakeholders including employees and others towards full achievement of an organization’s goals. Employees in such an organization mainly prefer working as teams.
Considering the competitive nature of the business environment, it is also important for firms to develop entrepreneurial culture. In this type of culture, the management team is more concerned with nurturing employees’ creativity and innovativeness.
This culture enables an organization take advantage of opportunities emanating from its immediate business environments and elsewhere. Nurturing such an organizational culture can contribute towards development of a strong relationship with stakeholders such as the financiers.
This is hinged up on the fact that financiers gain confidence in a firm’s ability to utilize their credit prudently by venturing into new profitable market segments.
According to Select Knowledge (n.d), developing a strong organization culture can contribute towards improvement in employees relationships in a number of ways. One of these ways involves developing a learning culture. This culture involves identifying different skills and knowledge required by the employees and developing a training program to cater for these needs.
Through integration of a training program, the employees become more loyal to the firm and more productive. This is because an organization’s training program contributes towards employee career development.
As a result, employees feel more obligated to offer their best to the firm. This in turn limits the rate of employee turnover which is adversely expensive.
Existing societal culture has profound effects on the operations of a firm. For example, a society that is collectivist in nature is characterized by a high degree of commitment by the society towards groups. This means that such a society greatly values teamwork.
This means that a firm operating in such a society will be more efficient in its operation if it has incorporated the concept of teamwork. According to Baldwin (2008), organizational culture is very complex.
It is composed of a wide range of components that include company structure, job contents, employment conditions, working conditions, management behavior, social change, legislation, and employee training.
For a firm to be successful, managers should ensure that an effective culture is integrated within their organizations. According to Jain (2005), a firm with a strong organization culture is able to institute behavioural consistency amongst its employees.
Despite the fact that employees have their own culture which originates from the society, ensuring that their actions are right is paramount in communicating the values that the firm holds.
To achieve this, managers have to instill effective value and belief systems by ensuring that the employees have a concrete comprehension of the organization culture. This arises from the fact that their actions does not only affect internal stakeholders but also external stakeholders including customers, authorities, shareholders and suppliers, as well as, competitors.
Managing global firms
In an effort to attain their profit maximization objective, firms in different economic sectors are increasingly integrating the concept of internationalization. The objective is to take advantage of opportunities presented by the global market.
To achieve this, firms are integrating different modes of entry such as establishment of subsidiary firms, and formation of mergers and acquisitions. However, to be successful in global markets, firms’ management teams must be effective in formulating and implementing various management strategies. This arises from the fact that global markets are complex (Smart & Tierney 2000).
Global firms experience different business environment compared to the domestic business environment. As a result, they have to develop policies and strategies that are inline with a host country’s business environment. To be successful, firms must ensure that they integrate an effective management style.
One of the ways through which a firm that has established a subsidiary firm in the foreign market can attain this is by adopting a decentralized management style. This will give the managers of the subsidiary firm with a reasonable degree of autonomy with regard to decision making.
The resultant effect is that the subsidiary firm will be effective in exploiting opportunities presented by its immediate business market (Roche, 1992).
Global firms also experience a challenge as a result of existence of cross-border differences such as culture (Schoenmaker & Sander, 2004). To succeed in this market, the managers have to conduct a comprehensive analysis of the culture within the society.
This will prevent the firm from formulating strategies that are not acceptable within the host country. In addition, the firm must develop and market products that are not against a society’s beliefs and values. The resultant effect is that the probability of a firm succeeding is increased.
Considering the fact that in some cases a global firm may not have good understanding of the business environment in the host country, it is important for the firm to establish a relationship with local agents. The local agents can help the firm be effective in negotiating business transactions. This will enable the firm to be effective in undertaking business transactions.
Despite giving the subsidiary firms a substantial degree of autonomy, the parent company has to ensure that there is proper coordination in the operations of the subsidiaries. One of the ways through which a firm can attain this is by integrating emerging information communication technologies.
Information communication technology can enable a global firm to coordinate its subsidiaries which are dispersed in different countries. For instance global firms can establish a database in which all information regarding the firm and its subsidiaries is stored (Cheng & Hitt 2004).
Conclusion
The above analysis illustrates that firms have to develop a comprehensive understanding of business environments in which they operate in order to be successful. Understanding its environment increases effectiveness of its business policies and strategies.
This is due to the fact that success of a firm is dependent up on the efficiency with which it takes advantage of the opportunities in the market and how it deals with market challenges.
In addition, firms’ managers have to take into consideration culture of the society in which it is operating. Failure to consider societal culture can lead towards a firm’s development of a bad reputation.
The success of a firm is also dependent on the organizational culture established. This arises from the fact that the probability of the firms attaining their goals and objectives is also affected by an organizational culture. For example, integration of learning culture through employee training programs increases the employees’ level of motivation.
On the other hand, entrepreneurial culture increases the employees’ commitment towards innovation. As a result, a firm’s competitiveness through research and development is increased. This further affects its relationship with other stakeholders such as the suppliers, customers, and financiers.
When managing global firms, it is important for managers to integrate a decentralized management style. This will increase efficiency with which firm’s subsidiaries exploit immediate market opportunities.
In addition, a certain degree of coordination between its subsidiaries and the parent company should be instituted. This can be attained through integration of information communication technologies.
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