Uncontrollable Factors in Macro and Micro Environment and their Impact On Shyamali Exporters Limited - Case Study Example

College Module Analysis of Uncontrollable Factors in Macro and Micro Environment and their Impact On Shyamali Exporters Limited. Organisations exist within a dynamic business environment, which continuously impacts upon the organisations operations. While organisations may attempt to control certain aspects of its environment, mainly within the microenvironment, the environment remains mostly uncontrollable. Companies operating within today’s globalised economy are affected by a wider and more turbulent globalised macro environment and therefore pose greater managerial challenges. Key micro environmental factors include company, competitors, suppliers, customers, marketing intermediaries and publics of the company. The macro-environment contains forces such as social, cultural, political, economic, technological, legal, environmental and economic factors (Armstrong & Kotler 2000). Appendix I illustrates the interaction of the Macro Environmental factors with the organisation. Essay aims at analyzing the impact of these environmental factors upon the operations of Shyamali Exports Limited, a well-established Indian manufacturer and exporter of Cushions, Quilts and home deco and accessories to the UK and other European markets. The essay also analyses the importance of market research in operating successfully in a dynamic, globalised market place. Shyamali Exports is a mid scale business operation based in Chennai – India and operates with modern machinery in designing, weaving and manufacturing home accessory products as cushions, quilts, table linen and curtains (Shyamali Exports 2005). For a company to be successful in crafting and implementing business strategies, a clear understanding of the organisational environment is required (Abell 1980). Influencing factors in the macro environment of the organisation needs to be analysed and understood so that strategies being developed will fit well with the environmental conditions. (Thomson & Strickland 2003). Macro environmental effects can be evaluated with the use of PESTLE analysis covering, Political, Environmental, Social, Technological, Legal and Economic aspects of Macro Environment (Zeithaml & Zeithaml 1984). Below PESTLE Analysis evaluates the uncontrollable macro environmental factors which affects the business operations of Shyamali Exports. Political factors bear critical impact upon the industry in terms of its current turbulent situation. Some of the positive developments in the political environment involve the liberalization of most of the closed economies and greater level of foreign trade and foreign direct investments. India is one such example and companies such as Shyamali Exports has benefited through such change. However the recent political environment has been marked with terrorism and wars, which affected Western world in an unprecedented manner. Terror attacks such as the 9/11 World Trade Center bombing, Bali resort attacks, the bombings in Middle East and the recent sub way bombings in London are all affecting business environments and trade relationships. Environmental factors are also becoming ever critical and companies are becoming increasingly responsive to the changing trends in the Natural Environmental conditions. The shortage of raw materials and scare resources such as energy sources holds critical importance. More and more people are willing to use products, which are manufactured without harming the eco system and natural environment. Environmental Disasters also impinge on business operations. The Asian Tsunami in 2004, disrupted operations in Chennai India with the massive impacts and such environmental effects can disrupt businesses. Supplier sources in Channai had been affected, in tern affecting operations of Shyamali Exports. Social factors in the macro environment consist of changing demographics, patterns of employment, lifestyles, cultural diversity and attitudes. Organisations need to react to these changes and adjust their strategies accordingly. With the shifts in demographics, more and more people consider marriage at later stages of life or remain single. Home decoration accessories have to thus take such trends in to consideration, by designing products suited to the tastes of individual home dwellers. The family units are becoming smaller. Furniture and home spaces will reflect the smaller family sizes and thus will impact upon the product requirements. Changing employment patterns such as contract employments, part time and freelance arrangements, and the job security is no longer an offer in employment. Thus, peoples propensity to spend on high end products decline. Companies should offer value prices products to meet this challenge (Armstrong & Kotler 2000). Cultural diversity is increasingly impacting upon global businesses and companies such as Shyamali Exports have incorporated culturally diverse and appealing designs by employing designers from different cultures in to their team. Younger people may prefer more abstract designs in bold colours and shapes while older generations may want lighter shades and traditional designs. With the aging population of the world increasing dramatically such preferences will have to be incorporated in to a company’s product planning. Some of the cultural trends in the current times includes “Cocooning, 99 Lives, Cashing out, Clanning, Anchoring, Being Alive, Down Aging, Small Indulgences, Fantasy Adventures The vigilant consumers and the SOS” Cocooning trend is where people are having the impulse to stay within their homes as outside world gets dangerous and unsafe. Such trends may hold favourable implications for home deco accessories, as people will want to make their home more appealing and tasteful. (Popcorn & Merigold 1997). . Technological Developments in the world are dynamic and rapid. With the advent of the Internet and developments in the telecommunication industries, the global markets have shrunk and the world has become a smaller place. Tele conferencing and telecommuting may reduce the need for travel. Shyamali Exports’ web site is an example of how companies can use such technological advances to its benefit. International trade can be made easier with products being made available for viewing online, quotations being provided online and orders processed through an online transaction processing system. Legal & Ethical Factors can also impact upon the business in an uncontrollable manner. A heightened focus on copyright materials impact upon designing and handcrafts as well. Lack of legal framework to govern the Internet transactions may impinge upon the development of web-based businesses. Legislature has so far failed in developing systems to monitor Internet transaction frauds. There is also a marked increase in consumer protection legislature and product quality standardisations. Ethical issues such as anti sweatshop campaigns which require the manufacturers of products being exported from developing countries to implement a better standard of working conditions for their employees also impact on operations such as Shyamali Exporters (Hall et al 2004). Economic trends in the Macro environment carries significant implications for organisations and should be considered in forming pricing decisions as well as overall product offers. Companies from developing world are competing for a foothold in the European markets and thus increase pressure on prices. With increased focus on differentiation and differentiation mass marketing is no longer a viable option. Product variety has to be offered, increasing manufacturing costs and reducing economies of scale. Economic impact of the ageing population should also be considered. The world in near future will be supporting over 60% of the aged population through less than 35% of productive workforce. The implications on economy in terms of generated income as well as areas of spending may change drastically (Anderton 2001). In time to come, many of the world population may become elderly citizens living in elders residences and not having a need for their own dwellings and thus not being customers for products such as home decorative accessories. Above assessment of the uncontrollable macro factors provides an insight in to the changing trends that will impact upon the company and these information should be incorporated in to the decision making process. Positive impacts should be capitalised upon while reacting to accommodate or counter the adverse effects of the macro environment. While taking a proactive stance to the changes in the environmental conditions is advisable, it should be born in mind that there is little that the companies can do to affect or change most of these macro environmental conditions which are uncontrollable (Armstrong & Kotler 2002). Micro Environmental Analysis A company’s microenvironment also contains uncontrollable elements though there is a greater possibility of control than the macro elements as organisations are directly and closed linked with its microenvironment (Duncan, Ginter & Swayne 1998). An organisation’s microenvironment is made up of the internal company, suppliers, competitors, marketing intermediaries and the Publics (Armstrong & Kotler 2000). Appendix II illustrates this interlinked microenvironment The company comprises of its internal departments as well as the top management. The changes in top management sometimes affect the company’s strategies and decisions. The Shyamali Exporters need to take in to account the impact of ethnic diversity arising from having designers from other countries in their operations. The Finance and marketing departments need to be on the same wavelength and work jointly towards strategic objectives rather than be at cross purposes (Jewel 2002). Suppliers are a critical aspect of the microenvironment and Shyamali Exporters depends upon its supplier base for timely and cost effective supply solutions. The company’s reputation for quality depends upon the reliability and quality of the suppliers. Supply chain management techniques utilised by the company will affect the manner in which the company deals with this element of the environment. Shyamali Exporters source its material mainly from the domestic market while some of the fringe materials are sourced from China. Long-term supply contracts are implemented to ensure quality, consistency and reliability (Armstrong & Kotler 2000). Marketing Intermediaries are another element of the microenvironment and represent those agents who are utilised in the process of marketing the company’s products. In the case of Shyamali Exports, there are no intermediaries utilised in exporting the product to the overseas clients. But in certain export businesses agents are used. However the products reach the final consumer through large retail firms as Marks & Spencer and Sainsburry who make up the total delivery process. Image and scale of the intermediaries affect a company’s success in marketing. High caliber intermediaries with financial strength and business acumen will be assets to any organisation (Hall 2004). Customers for Shyamali Exports comprise of large retail chains based in UK and other European countries as well as Japan. The changing needs of consumers as well as customers should be closely monitored and fulfilled. Large-scale customers as Sainsburry impact upon the pricing and volumes produced by the company and their effects are rather uncontrollable (Jewel 2002). Competitors make up a critical component of a company’s microenvironment. Their strategies should be assessed and the company offers should be modified where necessary to counter the offers of the competitors. Manufactures from India are facing steep competition from Chinese and Pakistani products which have also entered the UK market. Publics represent the last element of the microenvironment and include financial public, the media public, government, local public and citizen action publics. Shyamali Exporters’ operations are affected by actions of all these publics. For example, favourable media publicity can publicise the company’s success in foreign markets and the awards it has won for quality. Citizen action groups such as Anti Foreign products can affect adversely on companies such as Shyamali Exporters if consumers resort to boycotting foreign origin goods (Hall 2004). The importance of Market Research Business environments are dynamic and markets evolve continuously at a fast pace. A success of a business will depend largely upon being able to understand and meet the needs of consumers effectively and profitably. This is only possible with proper insight to the consumer’s needs and having in-depth understanding of the market being catered. “In order to produce value and satisfaction for customers, companies need information at almost every turn”(Armstrong and Kotler, 2000). As such, it is an established reality that market research and market information are critical aspects of a successful business operation. Market research can yield valuable information pertaining to many aspects the market and consumers including the level of competition present in the market; the size of the market; the segmentation patterns; the current distribution mechanisms, consumer’s key benefit expectations as well as the attitudes and beliefs of the potential customers. Some of these areas maybe researched using sources that are already available to the firm. Internet sources, published market research, government and other institutional data as well as company’s own primary data can provide market information that can be utilised in developing competitive business strategies. This type of market research is known as secondary research and is relatively cheap and easy to carry out. At the same time however, data gathered in this way has to treated with caution, as it may be outdated as well as irrelevant. For example, in order to assess the size of the potential market, Shyamali Exports can take the number of households as a key indices. Import data can also be accessed via Customs publications in UK. When looking at more qualitative information for gaining an insight in to consumer preferences, buying patterns and price sensitivity, the source of the data becomes the potential customers as well as end users. Data collected in this way (for the sole use of the generator) is known as primary research (Jewell 2002). Such data is critical in designing a product offer that meets the consumer needs effectively in terms of style, features and price. A company should combine primary and secondary data and use demographic and economic data about the whole market, in order to anticipate demand and thereby forecast future sales trends. Thus market research provides the base figures for business forecasting through extrapolation and trend analysis techniques. Researching on the distribution channels that can be used to bring the product to the customers, the firm could analyze the existing retail channels of the competitors. This would then enable new channels to be established, widening the product presence and increasing sales volumes. Shyamali Exporters can create a new distribution channel that competitors have not yet exploited fully such as setting up an on-line store or other innovative methods of direct marketing including catalogue sales. The company can join hands with some of its large customers as Sainsburry and strike strategic alliances so that competition is kept at bay. When considering the place that marketing research gets in the process of marketing decision-making, it is evident that informed decisions cannot be made unless up to date and relevant information is available. Research component thus becomes a critical aspect of an effective marketing information system. Appendix III illustrates the interlinked market information system of a company. A well- developed Marketing Information System develops the data needed for the informed decisions that must be made to survive in a competitive market. In conclusion it can be noted how critical it is for businesses to be tuned to the business environments in which it operates and be prepared to face the impacts of the uncontrollable factors in the micro and macro environments by adapting its business strategies. In order to be effective at this, companies need market information which will allow them to anticipate the environmental conditions. By incorporating both primary and secondary sources of information, organisations are able to forecast and anticipate business climate and gear themselves towards proactive responses to uncontrollable effects of changes. Work Cited Abell, D. F. Defining the Business: The Starting Point of Strategic Planning. Englewood Cliff, New Jersey: Prentice Hall. 1980. Armstrong, G. & Kotler, P. Marketing: An Introduction. 5th ed. Singapore: Person Education Inc. 2000. Anderton, A. Economics. 2nd ed. London: Causeway Press Limited. 2001. Duncan, J. W., Ginter, P. & Swayne, L.E. Competitive Advantage and Internal Organisational Assessment. Academy of Management Executives, Vol.12, No 3. pp. 6 –16. 1998. Hall, D., Jones, R. & Raffo, C. Business Studies. 3rd ed. London: Causeway Press Limited. 2004. Jewell, B. Business Studies. 4th ed. London: Longman Publishers. 2002. PESTLE Analysis. Faculty of Professional Studies, e-learning unit. 01.01.2006. http://www.trainingessentials.org.uk/pestlesitecopy/ Popcorn. F. & Lys, M. Clicking. New York: Harper Collings. 1997. Shyamali Exports. (2005) 01. 02 2006. http://www.shyamaliexport.net/profile.html STEP - Social, Technological, Economic and Political Assessment. (n.d.). Managing Change Strategic Interactive Marketing. 01.01.2006. http://www.managingchange.com/step/economic.htm Thomson, A. A. Jr. & Strickland, A. J. Strategic Management Concepts and Cases. 13th ed. New York: McGraw-Hill Publishing Company Ltd. 2003. Zeithaml, C. & Zeithaml, V. A. “Environmental Management: Revising the Marketing perspective”. Journal of Marketing, spring 1984: 44-53. Appendix I Figure 1 – Impact of Macro Environment on Organisations Source: Authors Concept Appendix II Figure 2 – Interaction between a Company’s Micro Environment Source: Adaptation from Armstrong, G. & Kotler, P. (2000). Marketing: An Introduction. 5th ed. Singapore: Person Education Inc. Appendix III Figure 3 – A Market Information System & Interrelated Elements Source: Armstrong, G. & Kotler, P. (2000). Marketing: An Introduction. 5th ed. Singapore: Person Education Inc. p.104 Read More