Management and environment
- 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