Open System Model of Management, What Is SWOT Analysis - Assignment Example

Open System Model of Management Briefly describe and explain this model and discuss the added effect of globalisation for business in general Organisation is a sum total of its constituent parts, which give it a unique identity. In an open system, an organisation is completely aligned with its environment, allowing an influx of ideas, information, and resources to produce definite outcomes. It is an organisation in a state of dynamic equilibrium with the environment, and functions quite like an ‘orchestra’. The orchestrated organisation borrows resources from outside to produce output. An open organisation always remains in a mode of evolution because of its flexible structures and channels of communication. As such, the managers are capable of effecting better management practices. By their very definition, open systems organisations are affected by external factors, which in turn, affect their internal factors. In fact, the external factors have a definite impact on internal structures, culture and processes of the organisation. On the contrary, in a closed system, no resources and information are allowed to permeate the boundary of the organisation. Over a time period, the organisation tends to lose alignment with the immediate environment, and runs the risk of extinction. In a closed system, there is only one way to solve a problem in terms of cause-effect relationship. On the other hand, in the open system, a manager can use various methods and resources to achieve the desired outcomes (Millet, 1998). The organisational boundaries in an open system management model are blurred. In contrast, an organisation with closed system has non-permeable, distinct boundaries with a complete check on flow of resources and information. The organisations under open system model are also amenable to cultural changes. Open system model organisation accepts the variability and complexity of its internal factors. An open system organisation is best aligned to deal with dynamics of global changes. Globalisation seeks to work towards common world market, through dismantling of national trade boundaries and regulatory and protectionist mechanism. Globalisation is bringing the winds of free competition across the world. While organisations are threatened on their home turfs, they have to reach out to overseas and distant markets. The changing product requirement, in changing market landscape makes it necessary for organisations to adopt a flexible approach. A global organization functions in multi-national settings, diverse cultural climates and different competitive scenarios. An organization has to continually introduce changes in its style of working, set up new production processes and provide changed output as per the market needs. Since an open organisation has dynamic interface with the environment, it is not impervious to change and is rather receptive to changing environment through their fluid, flexible, yet formalised structures. The globalized system also calls for organisations to be directly involved with the environment and to imbibe newer technologies, innovations and new processes and procedures. The organisations also have to attune themselves to changes in the market and changing demand patterns. This calls for dismantling of the organisational boundaries, bureaucratic bottlenecks and setting up of structures that support the flow of information ‘to and fro’ from the organisation. Only open organisations support free flow of resources and knowledge, an important factor of the changing global trade scenario. Evaluate the Open Systems Model in relation to the present day credit crunch and threatening recession, explain how this model can help businesses to deal with the negative effects of a recession. An open system model takes in resources from the environment to produce the desired outcomes. The present day credit crunch has seriously debilitated the potential of the companies to invest in resources, and raw materials. Companies functioning on the closed system model, find it all the more difficult to survive the credit crunch. It has also severely marginalised the growth strategies of organisations. Organisations are increasingly looking up to cost cutting measures, which includes sourcing input materials from cheaper global resources. The open system model of companies can compare their structures, systems, and processes to their rivals and likewise effect changes in them to make their processes more cost effective. These companies can make a comparative analysis with competitors and cut down on wasteful processes and inputs rendering the organisations lean and mean. These companies are always better informed about the availability of cheaper resources. Outsourcing provides cheaper alternative in face of rising manufacturing costs. Cheaper outsourcing options can be utilised by outsourcing some of the high-cost bearing processes. The open system model organizations scan the external factors and bring about likely changes in their functioning. It is, thus, more aware of the market forces and devises its internal and external strategies according to the prevalent conditions. It is not immune to recession rather such an organisation can feel the recessionary tendencies at all levels of the hierarchy thus generating a common ethos in the entire organization to meet the contingency. The company is, thus, in a dynamic equilibrium with the environment. It can downsize, and right size, according to the needs of the market. During the recessionary period, it is easier for the companies to effect mergers and acquisitions. The recession also gives the open system model organisation, an opportunity, to diversify by locating the availability of niche markets globally. Organisations can, thus, optimise their production of conventional and new product line. Since production volumes decrease during the recessionary period, it gives the organisations the opportunity to focus on Research and Development and improvement in processes. An open system model always stays abreast of the technological and scientific development in areas concerning its product line. One of the most lucrative fallouts of the recessionary trends is the availability of quality human resources. The organisation can take in specialists to streamline its niche segment products. Thus, the company can make a discernible impact on the quality of the products. Quality rather than quantity can become the catchphrase for action. Quality increases the prestige, and the value of the products, and that of the organisation, in turn. The open system model company can leverage the prestige gained in the post-recessionary period. Thus, we see that open system model is more prone to survive and grow relative to the closed system model. Describe the SWOT analysis and explain how it can benefit a company to attain and maintain a competitive advantage within the market place SWOT Analysis SWOT is an acronym for strengths, weaknesses, opportunities and threats. SWOT analysis is a widely used strategic management tool. Organisations, often, base and pursue their strategies on the results of the SWOT analysis. It is a methodology to identify the strategies, to create the organisation specific business goals, that best fit, align, and match the company’s resources and capabilities. Diverse and large amounts of information can be studied in tabular form. SWOT analysis is based upon external and internal analysis. The key factor to be considered in the internal analysis is company’s organizational culture, operational capacity, patents and trade secrets. The external analysis studies changes in customers’ preferences, competitors, market trends, suppliers and partners, economic, political and regulatory environment. External analysis yields the opportunities and threats that an organisation faces, or is likely to face. External analysis is more oriented towards ascertaining the market conditions, the position of the organisation vis-à-vis the competitors. It helps the top and middle management to evaluate and measure the competitive dynamics and strategies of the competitors and how they affect the organisation’s capability and performance. The strategies adopted after the SWOT analysis leads to gaining of competitive advantage. A company can be considered to be enjoying competitive advantage, if its profitability is greater than the average profitability of the industry. SWOT provides insight into the areas where the business can grow and foresight to see looming threats (Zahorsky, 2009). Non-profit organisations also use the SWOT analysis for decision-making. A comparison based on these is referred to as SWOT analysis. SWOT analysis enables the managers to create functional-level, business-level, global and corporate level strategy to create competitive advantage for the company. The internal analysis of the company yields its Strengths and Weaknesses. Strengths of an organisation allow it to differentiate its products either through quality or lower costs. The strengths include superior technology and better workforce. On the other hand, weaknesses of the organisation lead to inferior performance and inferior products. These are impediments in the way of a company achieving its targets. Success is a measure of keeping the weaknesses in check while leveraging the strengths. The Opportunities and Threats are evaluated through the external analysis. Opportunities mean to take advantage of peculiar market conditions that are conducive to a business. These are externally prevalent, conditions that help the company towards achieving its objectives. Threats arise when market conditions puts the profitability of the company in danger. The companies also follow conversion strategies for converting weaknesses into strengths. Post-SWOT analysis the companies make functional and business strategies that help it attain cost leadership, differentiation, a niche market or a combination of these. Competitive advantage is the superiority enjoyed by a company in the market either due to product differentiation or low cost. It is attained by a judicious and efficient use of a company’s resources and capabilities. Strategies are built on the distinctive competencies and attained through use of resources and capabilities. In other words, competitive advantage, based on low cost or differentiation, is attained through superior efficiency, superior customer responsiveness, superior innovation and superior quality. Once the competitive advantage is reached, other companies too try to attain an upper hand. The factors that disallow the competitors to gain competitive advantage is barriers to imitation, the capability of competitors and the dynamism of the industry environment. Discuss the limitations of the SWOT analysis and explain how business can provide for and temper the negative effects of the limitations. SWOT analysis is methodology that is too conceptual, theoretical, and rigid and may not take into consideration the actual conditions. SWOT analysis produces lengthy lists of factors that are given equal weighting. Actual situation is more often, different with strengths and weaknesses having varied impacts (Henry, 2008). The results of the SWOT are limited to the internal factors of an industry (Henry, 2008). The distinguishing line between strength and weaknesses is too thin and as such, it is always not possible to, differentiate them from one another. SWOT analysis is conducted over tangible factors and as such, it fails to account for intangible factors. For example, a highly trained workforce of submarine component supplier, working on a special project for supplies to submarine manufacturer, is strength of the company. However, as soon as the project is over, the same workforce can become a liability for the company. The company may have to downsize by laying off its staff. Similarly, a telephone service provider working in a regulatory environment enjoys near monopolistic conditions and there is no perceptible threat. However, as soon as the trade environment is deregulated, the company may not be able to perform, in the stiff competition, as it is used to working under controlled regulatory environment. Opportunities and strengths are also affected by the technological change. Development of hybrid vehicles is both a threat and an opportunity for automobile manufacturers. The development of a hybrid vehicle is an opportunity because it presents a viable alternative to internal combustion engine. However, it is a threat for those companies, who may not have the expertise in this area, and they stand the chance of being driven out of business. Yet, another drawback of the SWOT analysis is about discernment between strengths and weaknesses and opportunities and threats. What may be perceived as strength and opportunity by one individual can be treated as a weakness and threat by the other. The limitations of the SWOT analysis can be decreased by developing an overarching vision that incorporates both the tangible and intangible strengths, weaknesses, opportunities and threats. Another way of tempering the negative effects of limitations of the SWOT analysis is to conduct SWOT after a fixed interval, say after a month or two. This kind of dynamic SWOT analysis takes into account the changes in the internal and external factors. The management should also make an analysis of the ground level situations besides that of the SWOT. Two or more teams can be commissioned to make and the compare the different SWOT reports. A common viewpoint can be developed from the different SWOT reports. References Millet, B., (1998) Understanding Organisations: The Dominance of Systems Theory, International Journal of Organisational Behaviour, Volume 1, No.1 1998 Henry, A., (2008) Understanding Strategic Management, Oxford University Press, Oxford (UK) Zahorky, D., (2009) A Business Owners Secret Weapon: Swot Analysis A Business Owners Secret Weapon Retrieved January 19th 2008, < http://sbinformation.about.com/cs/bestpractices/a/swot.htm> Read More