In this section we will discuss various influences of the environments that are external to organisations.
⇒ Organizational Environment:
⇒ The external environment is defined as ‘those events and conditions surrounding the organisation that influence its activities.’ There is a wide ranging set of external environmental influences: customers, competitors, suppliers, distributors, as well as technological, economic, demographic, political and legal. All of these influences affect the way organisations behave and shape the strategic direction that is adopted. These influences also present numerous and diverse opportunities and threats that must be exploited or mitigated by organisations.
Impact of Globalisation on Organisations and Managers:
⇒ World economic, political, legal and technological changes, as well as newly formed international relationships have had a significant effect on managers within organisations. There are a number of economic alliances that merit the attention of global managers today:
(1). European Union (EU) : The EU (which includes most Western European nations, such as France, Greece, the United Kingdom, Denmark, the Netherlands, Belgium, Ireland, Italy, Luxembourg), has emerged with a political, economic and monetary union among the member countries. Barriers between borders have been lowered, and goods and services now move more freely between countries.
(2). North American Free Trade Agreement (NAFTA): This agreement (which came into effect on January 1, 1994) has also reduced tariffs and barriers to trade, and has linked customers and economies between the United States, Canada and Mexico.
(3). Asia-Pacific Economic Cooperation Forum (APEC): This agreement emerged with the objective of joint economic development of the Asia-Pacific basin countries.
(4). Caribbean Community (CARICOM): This community is pursuing agreements for free trade within Latin American countries.
(5). World Trade Organisation (WTO): The WTO is responsible for monitoring the reduction of import duties that will be phased in over the next several years. The founding members of the WTO include Canada, the European Union, and the United States. The WTO has faced a number of challenges from various leaders who are concerned about the economic consequences of freer trade.
(6). Mercosur: this free trade agreement came into effect on January 1, 1995, and has as its primary objective, the elimination of 80 per cent of goods traded between Argentina, Brazil, Uruguay and Paraguay. It has been proposed that a South American Free Trade Area (SAFTA) negotiate with NAFTA to form an Americas Free Trade Area (AFTA). A number of other free trade areas are in existence in the Americas: The Andean Pact (Bolivia, Ecuador, Colombia, Peru, and Venezuela); The Central American Common Market (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua); the G-3 group (Colombia, Mexico and Venezuela), and The Caribbean Market (several of the Caribbean islands).
(7). Other areas: There are a number of other free trade associations throughout the world, some of which include: ASEAN Free Trade Area (Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam); the Economic Community of Central African States (many nations in equatorial Africa), and the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates).
- SAARC: South Asian Association for Regional Cooperation. It becomes obvious, when we consider the growing number of alliances between nations, that the world is becoming a single interdependent entity. Global managers face a variety of challenges in this ‘global village’: increased heterogeneity across organisational populations necessitates continuous learning, increased flexibility and successful management of change.
We will probably be able to add to this list; however, the following global attributes are sought after by many organisations:
- Adapts well to different business environments
- Respects different beliefs, values and practices
- Solves problems quickly and effectively in new environments
- Communicates well with people from different cultures
- Speaks more than one language
- Understands different government and political systems
- Conveys respect and enthusiasm when dealing with others
- Possesses high technical expertise for the job
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