Macro Environmental Analysis and Perceived Task Environment - Research Paper Example

MACRO ENVIRONMENTAL ANALYSIS AND PERCEIVED TASK ENVIRONMENT of Table of Contents Table of Contents 2 Introduction 3STEEP Analysis 3 Influence of Macro Environmental Analysis 5 Influence of Perceived Task Environment 6 Conclusion 8 References 9 Introduction The changing environment of the corporate sector has created many new challenges for the firms operating in the international market place (Ander & Kapoor, 2010). According to Ghoshal (2009), as business firms are trying to expand into new markets and develop better opportunities for growth and development, the influence of the external environment is also growing on them. The organizational conditions in the contemporary scenario are mostly based on the need for managing the external factors. In this report, the influence of macro environmental analysis and the perceived task environment will be analyzed on American automobile company Ford. Ford is also one of the largest automobile producers of automobile in the international market. STEEP Analysis STEEP analysis mainly includes five essential factors namely social, technological, economical, environmental and political. Figure 1: STEEP Analysis (Source: Morris, Schindehutte & Allen, 2011, p - 731) Social: The social issues faced by Ford and the automobile industry are mainly related to the cultural values and codes reflected by the organization. Goerzen & Beamish (2008) noted that the growing population and the demand for better transportation system has increased the scope of business for automobile firms. However, the increased cost of living and the rising fuel prices are major worries for the consumers in context of purchasing automobiles. Technological: Technology is one of the driving forces of the business firms in the existing scenario. The growth and development of technological aspects has allowed the organizations to expand their market space over internet and also enhance their operational performance with the help of robotics (Morris, Schindehutte & Allen, 2011). However, the opportunity cost of the firms is increasing and the technicality in the operations is also reducing the control of the management on the production functions of the company. Economical: The economical condition of the international market place was largely shaken with the recent global financial crisis of 2007-08. Amidst these economical instabilities, Ford was already facing financial crisis as their profits were falling (Hellriegel & Slocum, 2011). Apart from these, other economical complexities include currency fluctuation, taxation, government policies, etc are also major economic hurdles for the company in the international market. Environmental: The environmental concerns for the automobile organizations are growing rapidly. With the increased demand for vehicles, companies such as Ford have also increased their production process resulting in increased energy usage and creation of industrial waste which is hampering the natural environment. Moreover, the amplified amount of vehicles in the market has also increased pollution in the atmosphere. Goerzen & Beamish, (2008) noted that the rising use of fuel has also caused natural imbalance and the automobile industry is also responsible for the same. The environmental actions of the organizations directly affect the brand image of a firm and also their relationships with their stakeholders. Political: The political influence governs the operations of the business firms in most of the geographical markets around the world. Factors such as FDI and globalization also depend on the control of the government over the markets. Apart from this, taxation policies, employee management processes, judicial formalities are also politically governed aspects which influence the operations of the organizations. Influence of Macro Environmental Analysis From the above given STEEP analysis, it can be noted that the macro environmental factors have major influence over the business operations. It can be noted that the political factors are related with the strategic as well as the operational activities of a firm. The policies of the government related to taxation or other financial aspects have a long-term influence on the business process whereas the employee management processes and union based laws are focused on the operational process of organizations. In context of Ford, the company had faced major issues in uniting their multinational activities before Alan Mulally joined as their CEO (Hellriegel & Slocum, 2011). Different set of rules for management of the organization and the criteria for operating within the markets had reduced the efficacy of management of Ford. One of the most essential macro environmental factors that influence the business performance and growth is the economical conditions of the market and the firm. As suggested in the STEEP analysis, the global recession of 2007-08 had a major impact on the revenue earning process of Ford and many other companies around the world (Ghoshal, 2009). However, Ford had their issues to be solved first. The operational cost of the company was rising as the demand for the products started to fall in their major market places. The company was also carrying the burden of non-performing segments for the sake of traditional values which was weighing heavily on the financial performance of the company (Ander & Kapoor, 2010). The decision making process of a company is largely based on the revenue earning process and the financial performance of the firm helps in making decisions regarding the management of other essential activities such as human resource functions or the supply chain management process. On the other hand, the human resource activities of a company are mainly based on the social structure and the relationship of the management with the company. The multinational operational base of Ford has increased the cultural diversity within its workforce and thus the HR management of the firm needs the knowledge of handling the cultural and ethnic differences among the employees of the company (Hellriegel & Slocum, 2011). These are some of the basic influences of the macro environmental factors on the business process of Ford. Influence of Perceived Task Environment The perceived task environment is a framework that helps the organization in scanning the environmental factors and to measure its influence on the organizational activities. The perceived task environment focuses on the strategic approach of an organization for reducing the impact of changing environment on the business process. Figure 2: Perceived Environmental Change (Source: Goerzen & Beamish, 2008, p - 1296) Based on the above diagram, the framework of performing a perceived environmental task analysis can be gathered. The perceived environmental analysis begins with the evaluation of the internal and the external factors of a firm and based on its comparison, a perception is formed regarding the influence of the changes in the environment. This perception forms the basis of the strategic decision making and change management processes of a firm. In context of Ford, the STEEP analysis reflected the external factors of the firm whereas the internal activities of the company are mainly directed towards increasing the eco-friendliness of the business activities and to fulfill the needs of their customers and stakeholders. Ford has designed their internal management in a centralized manner which helps them in relating the contribution of each subsidiaries and business departments towards the organizational objectives (Ghoshal, 2009). Their employee management process is based on thorough communication that ensures appropriate flow of knowledge among the functional departments and helps in aligning the operational activities with the strategic decision making process (Ander & Kapoor, 2010). It can be noted that the internal management of Ford is largely dependent on their communication process and the process of information exchange which further fortifies theory strategic decision making processes. Conclusion Identification of the macro environmental factors and their influence on the business performance is a crucial and inherent segment of business decision making. The study’s of Ford’s external analysis and their related decision making approaches helped in understanding the factors which influences the business performances and its functional departments. The growing challenges in the business environment and the steep competition within the global automobile industry are also important contributors towards the decision making process of Ford. All these external factors lay down the framework for future actions and decisions of a company. References Ander, R. & Kapoor, R. (2010). Value Creation in Innovation Ecosystems: How the structure of technological interdependence affects firm performance in new technology generation, Strategic management Journal, 31, 306-333 Ghoshal, S. (2009). Global strategy: An organising framework. Strategic Management Journal, 8, 425-440. Goerzen, A. & Beamish, P.W. (2008) Geographic scope and multinational enterprise performance, Strategic Management Journal, 24, 1289-1306 Hellriegel, D., & Slocum, J. (2011). Organisational Behaviour. Canada: Cengage Morris, M., Schindehutte, M. & Allen, J. (2011) The entrepreneur’s business model: Toward a unified perspective. Journal of Business Research, 58, 726-735. Read More