The Changing Modern Business Environment - Essay Example

The Changing Modern Business Environment Name Institution Module Instructor Date “It is not the most dominant species that survive, but the ones most responsive to change” Charles Darwin Introduction The turn of the 21st century has brought with it irreversible change to the world of business and management. Globalization, climate change, global warming, political developments, technological developments and demographic changes among others have all combined to redefine the business environment and how modern day businesses run their affairs. These changes are not one-time occurrences but rather gradual developments that take place over long and sometimes short of period time. However, some of these changes are so rapid meaning that for businesses to remain relevant, they have to make rapid changes. These changes bring with them new opportunities and new challenges. Firms that successfully manoeuvre through the new business environment will succeed while those that do not will ultimately fail. The changes that have taken place since the beginning of the new millennium only serve to indicate that the years ahead will be radically different from the past. Organizations must be prepared not only to change but change continuously and face the ever present uncertainties as this paper seeks to prove drawing support from relevant sources. Change drivers of the 21 century Globalisation Globalization is one of the most widely used words in the modern world of management. Managers and business leaders are constantly talking about a globalized world and the world becoming a global village. But what is globalization? In his book ‘ReOrient: Global Economy in the Asian Age’, Per A.G. Frank says globalization is “either a conceptualized modern phenomena involving the breakdown of borders, the emergence of new technologies and a mix of different cultures or a phenomena with a long history which dates back to the first known connections between countries and people in the world…” (Hermann 2012). A number of question arise out of this. Some people are concerned what is the use and the risks involved in removing boundaries that were in place before. Were these boundaries not put up for a reason? The motivations for putting boundaries and removing them now through globalization must be evaluated carefully. In the business platform, globalization is most influential in labour mobility, market segmentation, political climate, legal requirements, tax regimes, business financing, distribution networks, infrastructure, inflation, purchasing power parity, GDP among amny others. Geographic and national boundaries all signify unique regions with different business environments. The removal of such boundaries has unending impact on businesses especially though operating across borders. The full impact of globalization has not been realized yet. Business leaders are yet to come to terms to thinking globally. Thinking globally, according to Keillor & Kannan (2011) means that one must realise that one’s actions could have an impact on persons thousands of miles away. Leaders must be able to see their roles and place in the bigger picture. Ordinarily, business leaders are concerned with growing their profits and market share by focusing customers, competitors, suppliers and the immediate geopolitical and socioeconomic environment. In a globalised, there are multiple influences on businesses. A war in Somalia could impact the supply of oil to countries in Europe and affect the cost of doing business in Europe. In a globalized world every activity in every corner of the world has a far reaching ripple. This means that organizations must be able to place themselves in the bigger picture and respond to new challenges and opportunities. The interpretations of life or phenomena culturally could result in conflicting views thereby affecting business decisions (Gertsen & Soderberg 2011). Globalization is being felt on three major fronts. One of them us that people are moving more freely meaning that there is labour mobility globally. This implies diversity and the need for organizations to be culturally diverse by hiring members from different ethnic and cultural backgrounds. Furthermore, as firms expand operations into foreign markets, they are faced with new cultures and new communities with whom they run their subsidiaries with. To remain relevant, they have to adapt such cultures. Narrative models have been tried in learning new cultures in foreign markets and they have that they are very useful in social cultural interactions between expatriates and locals (Gertsen & Soderberg, 2011). Secondly, improved communication through the internet and other mediums means that consumers are more aware of other competing brands in the market and can access them more easily through online shopping. The third significant way is that interaction of cultures and more travel is breeding a new global culture that has pushed behind traditional cultures. New moral and ethical standards are being created by these new cultures meaning in a few years, ethical requirements for firms will have changed entirely. Given that culture is dynamic and always evolving, managers and business leaders have to be on toes to keep up with cultural changes to come and remain relevant in the market. Technology It is in business that technology has had the most profound impact. Business IT solutions being offered by a wide range of firms such as Sun Microsystems, IBM and Cisco have simplified some major business processes. A number of software programmes have been developed to aid business leaders and managers in making informed decisions and even run and manage their accounts more effectively. This has affected greatly the costs in business in terms of investment in IT infrastructure and even training of employees. Companies that are not ready to embrace IT are literally facing extinction. Ever since the invention of the internet, business transactions changed eternally. E-Commerce has revolutionised the retail industry for instance. Globally recognised brands such as e-Bay and Amazon were the pioneers in this industry almost two decades ago. The two brand now dominate the online retail industry and even threaten the conventional brick and mortar retail stores (Schermerhorn et al, 2012). In Australia, supermarket chain store giants have been forced to go online in a bid to keep with competition from online retailers. Online sales now command a considerable fraction of the all sales globally. Firms in other industries have had to have an online presence through websites. Such websites provide an interaction platform with their clients. Websites also form major marketing avenues through marketers can get feedback from their clients through blogs and display their products in online catalogues (Schermerhorn et al, 2012). Personalised marketing through emails and social media cannot go unmentioned. The social media marketing facilitates network marketing dominated by some major global brands in the world such as Organo Gold, GNLD and Tianshi. The service industry has also taken up ecommerce very well. Individuals can do banking transactions online at the click of a mouse and even on mobile phones. Developing countries have also not been left behind. Some of these countries have developed technologies to suit their societies. A good example is the mobile money payment service called Mpesa provided in Kenya and other east African countries (Saylor, 2012). Such cultural specific technologies area going to dominate the near future. With the coming of the android mobile operating systems and the iPhone, individual marketers have developed their own applications to promote better user interface and interaction with clients. IBM is one of the firms in the market that offers personalised IT solutions and hardware to their clients. According to Viaggi (2013), the future of IT in business is personalised business solutions. Politics Political regimes in various countries are responsible for formulating laws. Much of these laws have far reaching implications on the management of organizations especially for the multinationals. Political decisions such as remittance of profits, tax regimes used, levels of governance, corruption levels, political stability and others can determine how business operating on those markets perform. Where levels of government are many, organizations are required to seek approval from different arms of government. In some cases, some governments have enacted policies that are directly made to suit foreign investors in a bid to attract FDI. In the case of China, India, Malaysia and other Far East countries, the political regimes in these countries have formulated laws that favour foreign investors. Such laws include subsidies programmes or setting up of special export zones where manufactures in such zones enjoy special benefits (Keillor & Kannan, 2011). The fact that more countries are posed on attracting foreign investment especially from developing countries means that competition will be high. In the recent past, China has been dominant in attracting FDI from the developed world especially in the labour intensive industries. However, other countries have joined the race for competing for FDI through formulation of better policies. Such competition is expected to heighten in the near future implying that a number of multinational based in the west will be attracted by subsidies and other policies to set up subsidiaries in foreign countries. This will drive up competition in the host market, cultural diversities. To exploit this avenue of growth, firms require capable leaders to guide them in making such changes in their strategy. International trade Oil is one the greatest traded commodities sin the global market. While its wide allows this position, a number of other products have increased in their international trade volumes. This has increased the flow of resources from the developed to the developing and less developed world. As global brands such as Coca Cola are making themselves in the some remote villages in the Sub-Saharan Africa, it is giving the people in those regions to improve their lives through quality products (Schermerhorn et al, 2012). Pharmaceutical companies have been at the fore front in enabling improvement in the quality of life and life expectancy in developed world. International trade has enabled such benefits to be extended to the less developed countries. Unfortunately, it is the same internationally trade that has triggered wars and famine. Arms trade and the trade in precious stones such as diamonds have been blamed on deaths of millions in some countries in Africa. It is therefore important that in future, organisations engage in responsible and morally acceptable trade. Business transactions with warlords and other organizations are highly discouraged. Some retailers in the developed world have suffered reprisal; after being connected to sweatshops and child labour n less developed countries. With a highly interconnected world, the future will see organizations being more closely scrutinised by governments and consumers alike. Firms need to be prepared for intense scrutiny as future technologies and increased interconnectedness allows. Competition Globalisation has literally opened up the world to make a global village. The quest for a bigger market share and higher sales has resulted into competition involving. In the recent past, the world has been treated to court battles between two mobile giants, Samsung and Apple over patent rights. Such issues are to be expected in the future as competition heightens. Marketers are more eager to protect their inventions through patents. On another angle, piracy and counterfeiting is likely to increase as some marketers seek to cash in on the popularity of other brands (United nations economic and social council, 2005). China is one of the countries with the highest rates of counterfeiting in designer brands such as Gucci. Counterfeited goods are usually below quality and can affect the brand negatively unless well addressed. Environment Currently, environmental concerns have been integrated into organizational concerns. The term sustainability is now a key concept in strategic management and is being integrated in various ways. Majority of the integration is done through legal requirements which regulate aspects of organizations such as waste disposal, pollution among others. Some countries have imposed fines and levies on manufacturers in an attempt to limit harmful emissions with mixed results (Schermerhorn et al., 2012). Australia as one of them has introduced the carbon tax. This carbon tax is supposed to influence manufactures and other businesses to limit the amount of emissions they release into the environment. Currently, the tax is set at $23 for every tonne of carbon produce meaning that the mining companies are the most affected (Wells, 2013). Generally, other businesses have been forced change in business processes and even increased operational costs. Organizations are being encouraged to turn to sustainable energy, use energy efficient business processes such as natural lighting in their offices, use of renewable energy among others through subsidies and other ways. As the push for a cleaner environment continues, organizations will be forced to continuously improve their business processes to be environmentally friendly. Options for firms It is clear that the business environment has changed and will continue to change in the next few years. The success of any business depends on how best it understands both the micro and macro environment and respond to that with a strategic plan (Lippitt 2007). From the discussions above, it is clear that the macroenvironment has witnessed the greatest change. Global politics have changed to a great extent rise with the rise of the tiger economies threatening global power balance. The place of the US is no longer guaranteed as the major source or destination of FDI. Globalization has opened up international trade and with it new opportunities and challenges. Movement of FDI is now easier and competition has increased. Countries are facing more difficulties in protecting their own industries as globalization pressures force more countries to open up their borders to foreign players. Traditional cultures are being gradually replaced with a universal culture. Take for instance the use of mobile phones. This trend is no longer a preserve of the developed world. Less developed countries have recorded impressive penetration of mobile phones and other forms of technology. To understand such a changed and continuously changing environment, microenvironment and macroenvironment analysis tools such as PEST, SWOT and Porters Five Forces analysis developed decades ago cannot be relied on. These tools do not adequately capture the influence of the environment on the business very well today and in the near future (Viaggi, 2013). There is need to widen the view of business environment evaluation in term of politics, globalization, sociocultural changes, economics, international trade, environmental changes among others. The current tools do not factor in important aspects such as globalization. This is unacceptable given that globalization is a major component in a majority of today’s multination corporations’ strategies. Following the noted shortfalls of the current market and organization analysis tool in the market, organisations are resulting to more expensive and untested business environment analysis methods. Lippitt (2007) feels that such moves have resulted to making of poorly informed decisions that are not informed by current trends. The advantage of the existing analysis tools are that they offer standard formats in result and that they can be easily analysed. Standardised analytical tools are also important as they enable organisations to make comparisons over time or against other organisations. As it is important for modern day organizations to embrace change and acknowledge that the existing tools in the market do not provide a bigger and more detailed picture of the business environment. Business leader need to understand that the environment is continuously changing and that the modes of assessment cannot remain the same. It is therefore upon the business academic world and leaders to formulate models and tools that can match up with the current issues facing modern organizations. This way, organizations will be better prepared to deal with the future. Leaders will understand the reach and impact of their decisions in the market and how specific changes in the environment are likely to impact their business. However, there are a number of computer based but less widely and less tested tools being offered by business solutions providers. It is important that business leaders accept change and search for better tools to assist them in making decisions. To cap it all, the current business environment is changing very rapidly. However, there is a shortage in business analytical tools to analyse such change for use by business leaders and managers. The available tools are out-dated and do not capture key aspects such as globalisation. The technology aspect covered in some tools does not capture the full impact of technological changes or even the magnitude. Nonetheless, this does not mean that managers can blame their inefficient on tools. In the knowledge based economy, leaders have to gather information in the best way possible, analyse and apply it in making informed business decisions. Only this that organizations will survive to the near future dominated by rapid technological change, globalization and climate change. References Al-Debei, M. & Avison, D. (2010). Developing a unified framework of the business model concept. European Journal of Information Systems 19, 359–376. Gertsen, M. & Soderberg, A. (2011). Intercultural collaboration stories: On narrative inquiry and analysis as tools for research in international business. Journal of International Business Studies (2011) 42, 787–804. doi:10.1057/jibs.2011.15 Hermann, A. (2012). Globalization and its Effect on International Business. Global Awareness Society International 21st Annual Conference - New York City, May 2012 Keillor, B. & Kannan, V. (2011). International Business in the 21st Century: Three Volumes. New York: Wiley & Sons Kennerly, M. & Neely, A. (2003). Measuring performance in a changing business environment. International Journal of Operations & Production Management Vol. 23 No. 2, pp. 213-229 Lippitt, G. L. (2007). Visualizing change; model building and the change process. Fairfax, Va.: NTL Learning Resources Corp.. Saylor, M. (2012). The Mobile Wave: How Mobile Intelligence Will Change Everything United nations economic and social council (2005). Key developments and activities at the regional level: managing globalization: key issues relating to managing globalization Schermerhorn, D., Davidson, P. & Poole, D. et al. (2012). Management. New York: John Wiley & Sons Viaggi, D. (2013). Developing Improved Tools for the Economic Analysis of Innovations in the Bioeconomy: Towards a Life Cycle-Strengths-Weaknesses-Opportunities-Threats (LC-SWOT) Concept? Wells, Sustainable Business: Theory and Practice of Business Under Sustainability. Zott, C., Amit, R. & Massa, L. (2011). The Business Model: Recent Developments and Future Research. Journal of Management Vol. XX No. X, DOI: 10.1177/0149206311406265 Read More