BBA Managers Environment Study Material Notes 

BBA Managers Environment Study Material Notes : Concept of environment general societal environment factors Economic environment Technological environment political leal environment Socio-cultural environment Competitive environment Nature of environment complexity environmental variability Impact of environment Changing Indian business environment industrial policy changes international trade policy changes :

MCom I Semester Contemporary Change Issue Study Material Notes

Managers  and Envrionment 

Managers have to perform their functions in the organisation. The systems approach of managing suggests that an organisation, being a subsystem of broader societal system, has to work within the framework provided by the society and its various constituents. These constituents are combined to constitute environment for the organisation, Looking into the role of environment in managerial functions, management ecology has been developed. Ecology is a concept borrowed from the field of biology, in which the term refers to the study of the organism in relation to its environment. Thus, management ecology is the study of management environment. The analogy between biological ecology and management ecology is, however, imperfect. The reason is that in contrast to biological organisms, human organisations show a greater propensity to change and modify their environments than of adapting to them or being subject to them. Therefore, individual and his organisational environment are in a complex state of interaction with each other, and the organisation itself is in a state of interaction with its environment. Thus, managing an organisation effectively requires a thorough understanding of its environment.

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Concept of Environment

Environment is classified as external and internal because an organisation works within the framework provided by the various elements of society. All such elements which lie outside the organisation are called external environment or simply as environment. At the same time, organisation may create environment internal to it which affects the various subsystems of the organisation. Here, we are concerned with external environment which is referred to environment without any suffix or prefix. Environment includes all the conditions, circumstances, and influences surrounding and affecting the total organisation or any of its part. Thus, the environmental forces are quite broad. For example, Barnard observes that.

This is quite a broad description of the environment of the organisation. However, the simple notion that the environment is everything that lies outside the organisation is not a useful one, since precisely where an organisation ends and its environment begins is not easy! to determine. Moreover, it is the perceived environment that is important. Parts of the environment act upon the internal elements of the organisation, including the managers. Not anything outside the organisation is relevant to explaining what goes on within. At many points, an organisation becomes intertwined with elements technically outside it-persons and organisations that are its clients, customers, or suppliers, for example. Thus, organisations are not only part of the environment for other organisations, but also interpenetrate the internal environment. For example, a manufacturing unit and its dealers may take advertising campaign together to promote a product manufactured by it.

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Specific (Task) Environment

The individual organisations, while operating in the general en while operating in the general environmental setting, may cuy iniluenced by nor can they respond to all forces in the same way. While the ral environment is the same for all organisations in a given society, the specific environment is different for each organisation. Thus, specific environment may be defined as the forces outside the organisation directly relevant to the decision making and transformation process of the individual organisation. It is made up of the groups and institutions beyond an organisation’s boundaries which provide immediate inputs, exert significant pressure on decisions or make use of the organisation’s outputs.

The distinction between general and specific environment, however, is not always clearcut. What is a general environmental force for one organisation may be specific for another. Even beyond the specific environment, there may be forces which affect and are affected by the organisation. Thus, the environment is a continuum in which relevance is a matter of degree.

Managers Environment Study Materia

ENVIRONMENTAL FACTORS

As discussed earlier, external environment consists of those factors which lie outside the organisation. There may be a number of factors in the environment and these can be classified in various ways. Since orientation towards relevant environmental factors differ for various organisations because of the reasons mentioned earlier, there may be lack of unanimity on such factors. For example, Duncan has classified the relevant environment for an organisation into five categories: consumer component, supplier component, competitor component, socio-political component, and technological component.2 On the other hand, Glueck has grouped the environmental factors into six broad categories: economic, government/legal, market/competitive, supplier/technological, geographic, and social.3 Such classifications suggest that environmental factors can be classified in various ways. However, the classification of these factors must be in such a way that it presents some framework by which to view the total situation with which the managers confront. This should provide managers a sharp focus on the relevant factors of the environment. Managers make decisions in the light of the various environmental factors as perceived by them. This requires the classification of environmental forces which distinguish each element from others so that managers can pinpoint the impact of each on their organisation. However, it can be emphasised here that environmental factors are intertwined; they affect each other For example, ecnomic factors of a country are likely to be affected by the political and legal factors of the country. In the same way, economic aspect may also determine technological factors but is also affected by the latter. This interrelational features makes the classification scheme even more flexible. However, an analytical classification of various environmental factors may be :

1 Economic environment,

2. Political-legal environment,

3. Technological environment,

4. Socio-cultural environment, and

5. Competitive environment.

The four types of environmental factors are basic which ultimately determine the nature of competitive environment which is more relevant to managers and their organisations.

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Economic Environment

Economic environment is by far the most important environmental factor which the business organisations take into account. In fact, a business organisation is an economic unit of operation. Since the measurement of organisational performance is mostly in the form of financial terms, often, managers concentrate more on economic factors. The economic environment is also important for non-business organisations too because such organisations depend on the environment for their resource procurement which is greatly determined by the economic factors. As such, the understanding of economic environment is of crucial importance to management.

Economic environment covers those factors which give shape and form to the development of economic activities and may include factors like nature of economic system, general economic conditions, various economic policies, and various production factors.

Various factors of economic environment are as follows:

1. Economic System. The economic system of a country determines the organisations have to face different constraints and controls by the economic factors. In three alternative economic systems-capital, mixed, and socialistic-organisations have to face different types of control ranging from total freedom to total control. An economic system puts certain restrictions over the functioning of the organisations. Second, it provides lot of protection to an organisation depending on its nature. For example, public sector organisations are protected from private organisations, local organisations from foreign organisations, small organisations from large organisations, and so on.
2. National Income and its Distribution. National income is defined as the money value of economic activities of a country during a particular period, normally one year. National income determines the purchasing power of people and consequently the demand for products. Distribution of national income determines the types of products that may be demanded by the people. There is disparity between States so far as the distribution of income is concerned. Naturally, this suggests that carrying of economic activities will be more beneficial in certain regions while other regions may provide more constraints, though the total economic activities may be determined by other factors also.
3. Monetary Policy. Monetary policy regulates the economic growth through the expansion or contraction of money supply. There are three basic objectives of Indian monetary policy:

A to provide necessary finance to the industries, particularly in private sector: (id to control the inflationary pressure in the economy; and (iii) to generate and maintain high employment.

4. Fiscal Policy. Fiscal policy deals with Generally, the fiscal policy is adopted for cal policy deals with the tax structure and governmental expenditure, optimal allocation of resources so as to attain rapid gia Poncy is adopted for: (1) mobilising maximum possible resources: in the distribution of income; and (iv) maintena so as to attain rapid growth; (iii) attainment of greater equality There are two aspects of fiscal policy relev come; and (iv) maintenance of reasonably possible stability of prices. vects of fiscal policy relevant to management. First, how tax structure is affecting the growth of individual organizations of individual organisations and the industry as a whole. Second, how government’s spending affects economic activities.
5. Natural Resources. The availability of natuces. The availability of natural resources—land, minerals, fuel, etc.becomes a strategic planning factor for on tegic planning factor for organisations requiring such resources in the production process. Normally, locational patte Normally, locational pattern is decided on the basis of availability of these factors. In our country, there are plenty our country, there are plenty of natural resources-land, water, and various types. However, in the absence of their proper exploitation and use, these resources are not able to give are not able to give adequate benefits. Moreover, there is lack of certain critical factors, for example, electricity, fuel, etc. which affect the organisay adversely.
6. Infrastructural Facilities. Infrastructure provides the various supporting elements for lent functioning of the organisations. These may include transportation, comninunication, banking services, financial services, insurance, and so on. In our country, while these facilities are available in plenty and at satisfactory level at some places, there is total absence or inadequacy at other places. For example, in urban areas, these facilities are available to a reasonably satisfactory level but these are lacking in rural areas where the scope for opening more business operations is quite high. The government is emphasising the development of backward areas by giving various concessions to the organisations through creating the provisions for infrastructure.
7. Raw Materials and Supplies. An organisation requires continuous flow of raw materials and other things to maintain its operations. The price of materials, frequency and regularity of supply, and other terms and conditions are important considerations in this respect. All these factors, in turn, depend on the availability of natural resources, infrastructural facilities, and general economic development of the country.
8. Plant and Equipment. An organisation invests money in plant and equipment because it expects a positive rate of return over cost in future. The revenue from the use of the plant and equipment should be sufficient so as to cover the invested money, operating costs, and generate enough profit to satisfy the organisation. Greater uncertainty in these would make the cost of plant and equipment a more important strategic factor. The availability of plant and equipment is dependent on the technological development of the country and the government’s approach towards foreign technical collaboration.
9. Financial Facilities. Financial facilities are required to start and operate the organisation. The external sources of finance are share capital, banking and other financial institutions, and unorganised capital markets. The recent changes in the Indian capital market indicate the availability of plenty of finance both from the financial institutions as well as from general public. In fact, the organisation and working of Indian capital market can be compared favourably with many industrially advanced countries. The availability of finance coupled with various incentives attached is a facilitating factor. However, such facilities have been utilised by the few large-scale and medium-scale organisations.

10 Manpower and Productivity. While the availability of factors of production affects the of the country as well as individual organisations, the level of productivity to the organisational efficiency and profitability. The productivity of both human and Prysical factors is dependent on many factors, for example, the type of technology used. the production process applied, the organisational processes, and the use of managerial techniques.

While analysing the economic environment, the organisation intending to enter a particular business sector may ask the following questions:

1 Does the economic system allow to enter the business sector sought? Communist countries economic systems have lot of such barriers.

2. What is the stage of economic growth and what is the rate of growth? Is it maturing. declining, or at take-off stage?

3. What is the level of income-national and per capita? Does it offer market of large size?

4. What are the ‘incidents of taxes, both direct and indirect, in general and on specific products?

5. What are the infrastructural facilities available and what are bottlenecks therein?

6. Are critical raw materials and components available and at what costs?

7. What are the sources of financial resources and what are their costs?

8. Is adequate manpower-managerial, technical, and workers-available and what are their salary and wage structure? What is the level of their productivity?

Managers Environment Study Materia

Political-legal Environment

Political legal environment is an important element particularly in a mixed economy like ours and affects directly the working of business organizations. This performs two roles: promoting and restraining. The promoting role of political and legal environment includes the stimulation of business through the provisions of various facilities and incentives, protecting the markets, taking direct roles in the development of the business, and purchasing from business organisations. The government through various legislations has provided various incentives for the development of business in backward areas, giving special incentives to small scale sector and similar other incentives and protection. The political legal environment, however, works as restraining force by limiting the scope of business operations. Every manager is enriched by a web of laws, regulations, and court decisions. In fact, there is relatively little that a manager can do in the organisation that is not in some way concerned with, and often specifically controlled by, a law or regulation.

Political-legal environment depends on: (1) political stability, like impact of changes in the form and structure of governmental administration, civil war, declaration of emergency, etc.: (it) political organisations, like political parties and their ideology, degree and extent of bureaucratic delays, red-tape, etc.; (iii) defence and military policy, like impact of defence

licy on industrial development, expenditure on defence, etc.; and (iv) legal rules of the ne of business-their formulation, implementation, efficiency and effectiveness. In analysing political legal factors, the organisation may ask the following questions:

1 How does the political system influence the business?

2. What are the approaches of the government towards business? Are they restrictive or facilitating?

3. What are facilities and incentives offered by the government? the legal restrictions in entering a particular industry segment either

4. What are the legal restrictions in licensing requirement or it being reserved to a specific sector such as because of licensing requirement or it the public sector or small-scale sector?

5. What are the restrictions in importing estrictions in importing technology, capital goods, and raw materials?

6. What are the restrictions in exporting products and in exporting products and services? What are the export obligations?

7. What are the restrictions on the pricing and distribution of goods?

8. What are the procedural formalities required in setting a business?

Managers Environment Study Materia

Technological Environment

Technological environment is important for business as it affects the type of conversion adopt for its purpose. The technological environment refers to the sum towledge providing ways to do things. It may include inventions and techniques the ways of doing things, that is, designing, producing, and, distributing products. A given technology affects an organisation in the given technology affects an organisation in the way it is organised and faces competition. The strategic implications of technological environment are as follows:

1 It can change relative competitive cost positions within a business;

2. It can create new markets and new business segments; and

3. It can collapse or merge previously independent businesses by reducing or eliminating their segment cost barriers.

The technological environment of the country is fast changing either because of import of technology from foreign countries or because of technology generated out of research and development within the country. The government is quite liberal in regard to the import of appropriate technology from foreign. It is also encouraging the development of internal technology though various incentives to the business organisations concenred as well as through other institutions and laboratories of Council of Scientific and Industrial Research and other technical institutions. Thus, the managers have to work in an environment where technological change is the order of day. Its result is that they have to be more conscious to take the advantages of such changes.

In analysing technological environment, the organisation may ask the following questions:

1 What is the level of technological development in the country as a whole and specific business sectors?

2. What is the pace of technological changes and technological obsolescence?

3. What are the sources from which technology can be acquired? 4. What are the restrictions and facilities for technology transfer and time taken for absorption of technology?

Managers Environment Study Materia

Socio-cultural Environment

Socio-cultural environment is quite comprehensive because it may include the total social factors within which an organisation operates. In fact, the political legal environment is closely intertwined with socio-cultural environment because laws a social pressures and problems. The socio-cultural environment of business can be defined as follows:

Socio-cultural environment consists of attitudes, beliefs, desires, expectations, education, and customs of the society at a given point of time.

Thus, socio-cultural environment, in its broad sense, includes many aspects of society and its various constituents. From business organisation’s point of view, it may include: a expectations of the society from the business; (l) attitudes of the society towards business and its management; (ill) views towards achievement of work; (iv) views towards authority structure. responsibility, and organisational positions; (D) views towards customs. traditions, and conventions; (vi) class structure and labour mobility; and (vth level of education.

The various elements of soci-cultural environment affect the working of the organisations mainly in three ways: organisational objective setting, organisational processes, and the products to be offered by the organisation. Through these, they affect the total functioning of the organisation. The socio-cultural factors affect the basic objectives of the organisation by prescribing the norms within which the organisational objectives are formulated. For example, to what extent, social responsibility will be an organisational objective is determined by the various social factors in which the organisation functions. Similarly, organisational processes are also designed keeping in view the various social and cultural factors otherwise they will not work. For example, the various control and decision processes in our social organisations are based on the basic values of joint family system and caste system. Similar is the case with other organisational processes. Social and cultural factors also affect the goods and services that can be offered by the organisation. Since the organisation works as mediator for converting inputs into outputs, and these outputs are given to the society, it can produce only those things which are accepted by the society.

Often, the social and cultural factors are not considered adequately by the managers in formulating or implementing their strategies. The result is that their sound strategies in all other aspects may fail. Many products, even by well-established manufacturers, have failed because these could not match the social values. Similarly, many products which may not seem to be economically well may succeed because of their social and cultural values. Further, the organisations have to follow social expectations in their objective setting and working. However, the social and cultural factors are also subject to change, though the change is gradual and steady which can be forecasted with comparative ease once the managers get an insight of these factors.

In analysing social and cultural factors, the organisation can ask the following questions:

1 What are approaches of the society towards business in general and in specific areas?

2. How do social, cultural, and religious factors affect acceptability, or otherwise, of a product?

3. What is the life-tyle of people and what products fit that lifestyle?

4. What is the level of acceptance of, or resistance to change?

5. What are the values attached to a particular product? Do people see possessive value or functional value in the product?

6. Do people buy specific products for specific occasions necessitated by social and religious requirements?

7. What is the propensity to consume and to save?

Managers Environment Study Materia

Competitive Environment

As pointed out earlier. organisations. The present pl scene. In the present era of fight for me economics and competitive forces tha industries. Therefore, understanding an organisation which is serioud competitive environment, three out earlier, competitive environment is the most relevant for business stions. The present phenomenon of competition has changed in Indian business present era of fight for market share, competition is rooted in underlying Competitive forces that go beyond established combatants in particular fore understanding of competitive environment is of vital importance for hich is serious for developing competitive advantages. In analyzing three basic factors should be undertaken:

1 Industry setting,

2. Industry attractiveness, and

3. Industry structure.

Industry Setting. An industry is defined as a group of organisations that o product or class of products that are close substitute to each at are close substitute to each other. A close substitute product has a high cross elasticity of demand and performs almost similar functions. tea and coffee. The demand-supply pattern of an demand-supply pattern of an industry depends on certain conditions that shape industry structure which, in turn, inidustry structure which, in turn, influences industry conduct and finally industry performance. Industry setting deals with Industry setting deals with the pattern of an industry. Porter, an eminent scholar of strategic management, has strategic management, has classified the industry setting into five categories:

1 Fragmented industries,

2. Emerging industries,

3. Industries undergoing a transition to maturity,

4. Declining industries, and

5. Global industries.

In each type of industries, conditions underlying demand and supply structure, conduct, and performance will differ.

Industry Attractiveness. Industry attractiveness is determined by the following factors:

1 Nature of demand, and

2. Industry performance.

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Nature of Demand. The analysis of demand in terms of total market size in which the organisation is presently operating or plans to enter gives the scope of its present and future business. If the industry demand is increasing because of certain factors like increase in population, increase in income, change in tastes, etc. the industry becomes attractive. On the other hand, if the demand is decreasing either because of industry being at declining life-cycle stage, or because of substitute products, it is not attractive. In demand analysis, pattern of demand is another important factor. Demand may be affected by seasonal and cyclical phenomena. To the extent, industry demand is affected by seasonal and cyclical phenomena, it becomes less attractive. Industry Performance. Industry performance is seen in terms of profitability, efficiency, growth, and technological advancement. Some industries may be highly profitable; some may have low profitability. For example, knowled e-based industries like information technology are highly profitable while commodity-based industries like steel, cement, sugar, etc. have low profitability. Similarly, efficiency, growth, and technological development may vary from industry to industry.

Industry Structure. Industry structure consists of nature of competition. based on number of competitors and their roles in industry and product differentiation as shown in Figure 4.1.

Pure monopoly exists when only one organisation provides a certain product/ service in a country or geographical area, e.g., railways, nuclear energy, etc. Such a monopoly may be because of regulatory reason. Pure oligopoly consists of few organisations producing

Industry structure types essentially the same product, e.g., oil companies in India. Differentiated oligopoly consists of few organisations producing the same product but there may be product differentiation based on product features, quality, styling, etc. e.g., heavy commercial vehicles manufacturing by TELCO and Ashok Leyland. Monopolistic competition consists of many competitors with each competitor differentiating its product on certain dimensions, e.g., consumer products. Pure competition may consist of many competitors without product differentiation, e.g., stock market, commodity market, etc.

Apart from analysing industry, it is also necessary for an organisation to identify its competitors’ strengths and weaknesses on a regular basis so as to develop suitable competitive strategy.

NATURE OF ENVIRONMENT

Environment provides both, opportunities and threats. In order to know whether there is an opportunity or threat, we have to look at the nature of environment in terms of its complexity and variability.

Managers Environment Study Materia

Environmental Complexity

Environmental complexity is referred to the heterogeneity and range of activities which are relevant to an organisation’s operations. Thus, more diverse the relevant environmental activities and more these are, the higher is the complexity. The heterogeneity relates to the variety of activities in the environment affecting the organisation. Complexity or noncomplexity of environment is a matter of perception. The same environment one organisation perceives as unpredictable, complex, and evanescent, another organisation might see as static and easily understood.

Organisations dealing with non-complex environment have one advantage in the sense that there are fewer critically important information categories necessary for decision making. When the environmental sectors are same and limited, the organisations are not required to process complex information for their actions. Moreover, the volume of information processed is low though there might be large sector of environment. As against this, organisations working in complex environment have to process a large variety of information.

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IMPACT OF ENVIRONMENT

Today’s managers are extremely concerned with environmental variables affecting their organisations. Every organisation has to work within a framework of environmental forces, and there is a continuous interaction between the organisation and its environment. The interaction suggests a relationship between the two. This relationship can be analysed in three ways: First, the organisation can be thought of an input-output system. It takes various inputs-human, materials, capital and technical—from the environment. These inputs are transformed to produce outputs-goods, services and profits—which are given back to the environment. Thus, the organisation merely performs the function of inputoutput mediator. In this process, what kind of inputs should be taken or outputs given will be determined by the environment in its interaction with the internal factors of the organisation. Second, the organisation can be taken as the central focus for realising the contributions of many groups, both within and outside the organisation. When these groups contribute to the well-being of the organisation, they must have a legitimate share in organisational outputs. These groups may be employees, consumers, suppliers, shareholders, government, and the society in general. Thus, the organisational functioning will be affected by the expectations of these groups and the organisation has to take these factors into account. Third, the organisation can be treated as operating in environment presenting opportunities and threats to it. Thus, how an organisation can make the best use of the opportunities provided or threats imposed is a matter of prime concern for it.

Any single approach by itself is insufficient to explain the complex relationship between the organisation and its environment. Moreover, these approaches are not inconsistent to each other; they are complementary. Thus, an organisation will be affected by the environment in which it works. Such effect will be on the various aspects of management, as presented in Figure 4.3.

1 The environment-organisation interaction has a number of implications for managers: The enviromental forces may affect different parts of the organisation in different use different parts interact with their relevant environment different  For example, the technological environment may affect the orga department. Further, these forces of the environment may have some parts but indirect effect on others. For example, any change in policy of government may affect the finance department directly but production and marketing indirectly because their programmes mal the light of new situation, though not necessarily.

2. The environmental influence process is quite complex process is quite complex because most things influence all other things. For example, many of the environmental forces may be among themselves and making the impact on the organisation quite Moreover, the impact of these forces on the organisation may not be quite deterministic because of interaction of several forces. For example, the organisa structure will be determined on the basis of management philosophy and empoyce attitudes. But the organisation structure becomes the source for determining the employee attitudes. Thus, there cannot be direct and simple cause-effect relationship rather much complexity is expected.
3. The organisational response to the environmental forces may not be quite obvious and identical for different organisations but these are subject to different internal forces. Thus, there is not only the different perception of the environmental forces but also their impact on the organisation. Key factors determining responses to environmental impact may be managerial philosophy, life cycle of the organisation,
4. The impact of environmental forces on the organisations is not unilateral but the organisations may also affect the environment. However, since the individual organisations may not be able to put pressure on the environment, they often put the pressure collectively. Various associations of the organisations are generally formed to protect the interest of their members. The protection of interest certainly signifies the way to overcome unilateral impact of the environment on the organisations. The nature of organisation-environment interaction is such that organisations, like human species or animals, must either adjust to the environment or perish.

CHANGING INDIAN BUSINESS EN

Managers Environment Study Materia

VIRONMENT

We have seen earlier that environment is dynamic and changes occur continuously. In the Indian business scene, many changes have been introduced in the liberalisation process of economy which began in 1990s and still continues. Some major changes are as follows:

Managers Environment Study Materia

Industrial Policy Changes

1 Very few industries requiring licences

2. Liberalisation in FERA

3. Almost no control under MRTP Act

4. Role of public sector getting diluted

5. Liberalisation of foreign direct investment

6. More freedom in capital market

International Trade Policy Changes

1 Globalisation of economy

2. Continuous lowering down of import tariffs

3. More items of import under general category

4. Emphasis on export but not through financial incentives

Structural Adjustment

1 Phasing out of subsidies

2. Gradual dismantling of administrated price mechanism

3. Public sector disinvestment

4. Exit policy for businesses

5. Smoother way for merger and acquisition

All these changes have increased competition both from multinational corporations as well as from Indian organisations. The new as well as emerging situations are posing great challenges before Indian managers. Therefore, it will be worthwhile to discuss the existing and emerging challenges which Indian managers are facing and are likely to face in future.

Managers Environment Study Materia

Challenges Before Indian Managers

Economic liberalisation in India along with rapid technological advances throughout the world has changed the way the business is being done in India. How this change has posed the challenges before the managers can be gauged by quoting the views of Arun Bharat Ram, Senior Managing Director of SRF Limited. His view is that:

“Around 25 to 30 per cent of existing companies might be forced to stop operations in the country in the next 2-3 years. This trend is likely to take place because of the increasing change in Indian economy which has moved from a regulated and protected regime towards a more open and competitive economy. In this changing perspective, only those who have the capacity to compete and survive would emerge and take over the place of old ones.

This view can be supported by the fact that many companies which were once leaders in their respective businesses almost do not exist today, for example, Orkay Silk Mills Limited, Metal Box India Limited, Hind Cycles, Limited, Sen Raleigh Limited, etc. These are just few names and the list of such companies is very large. The only reason for their failure is that they could not equip themselves adequately to face the challenges posed by the changing environment. Because of this changing environment, Indian managers have to face challenges of the following types:

1 Globalisation of economy,

2. Increasing quality consciousness,

3. Emphasis on knowledge management,

4. Mergers and acquisitions,

5. Changing workforce profile, and

6. Newer organisational designs.

Managers Environment Study Material

GLOBALISATION OF ECONOMY

Today, world has become a global village and the economy has been globalised in which seographical boundaries of a country have only political relevance: the economic relevance has extended beyond these boundaries. Today, the market classification does not take into account national parameters but global parameters. In this globalisation process, many multinationls like Exxon, Mobil Oil, Coca Cola, Avon, IBM, etc. earn more than 50 per cent of their total revenues from foreign operations.

2. Language Diversity. Globalisation has problem in the form of language diversity. Language is a medium of expression but employees from different countries have different languages, Though English is a very common language, it does not serve the purpose adequately as it does not cover the entire world. While employees coming from different countries may be encouraged to learn the language of the host country for better dissemination of information, it does not become feasible in many cases. An alternative to this is to send multilingual communication. It implies that anything communicated to employees should appear in more than one language to help the employees in understanding the message correctly. This system of communication puts extra burden on the communication channels.
3. Workforce Diversity. Workforce is the building block of an organisation but there is workforce diversity in global companies. Based on their place of origin, employees of a global company may be divided into three groups: (a) parent-country national-permanent resident of the country where the company is headquartered, (b) host-country nationalpermanent resident of the country where the company’s operations are located, and (c) third-country national-permanent resident of a country other than the parent country and the host country. Workforce diversity implies that various categories of employees bring not only their skills and expertise but also their attitudes, motivation to wrk or not to work. and other personal characteristics. Therefore, it is a challenge before managers how to integrate these diverse employees with the organisation. Because of diversity, managing such employees with pre-determined management practices may not be effective but a contingency approach is required so that management practices become

INCREASING QUALITY CONSCIOUSNESS

With the increased competition at the global level and discerning customers, more and more organisations are becoming conscious about the quality of their products/services. Indian organisations are preparing themselves according to this trend as each of them faces the challenging competition from global as well as local competitors. Quality is a sense of appreciation that something is better than something else. From operational point of view, quality means focusing on the creation of increasingly better products/services at progressively more competitive cost. Increasing quality consciousness has generated the adoption of the following practices:

1. Emphasis on total quality management,

2. Emphasis on kaizen,

3. Moving towards six sigma, and

4. Quality certification.

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Emphasis on Total Quality Management

In the globalised economy, there is very high emphasis on quality both for products and services. This emphasis has generated a new concept known as total quality management. The concept of total quality management (TQM)’ which originated in Japan, has spread throughout the world and has attracted the attention of Indian corporate sector only recently because of globalisation of economy, increased competition, and greater expectations of discerning customers. Fiegenbaum has defined TQM as follows:

“TQM is an integrated organisational approach in delighting customers (both internal and external) by meeting their expectations on a continuous basis through everyone involved with the organisation working on continuous improvement in all products, services, and processes along with proper problem-solving methodology.”

Total quality management comprises the following processes :

1 Quality Process. Quality process involves the understanding of who the customers is, what his needs are, and how these needs can be satisfied. Thus, quality process comprises different steps through which complete satisfaction is provided to the customer.

2. Continuous Improvement. There is continuous process of improving the product quality and its delivery. The process comprises the plan-do-check-act (PDCA). Practice of PDCA cycle generates numerous opportunities for further improvement. Management of PDCA cycle involves continuously evolving policies, objectives and methods to achieve goals, education and training to employees, implementation, checking causes for low quality, taking appropriate actions, and preventing recurrence.

1 Create constancy of purpose of improvement of product and service.

2. Adopt the new philosophy that increasing quality is necessary for corporate survival.

3. Cease dependence on mass inspection to ensure quality from the start.

4. End the practice of awarding business on price tag alone; develop long-term relationships with suppliers to ensure supply of quality products/services.

5. Constantly and forever improve the system of production and service.

6. Institute modern methods of training on the job.

7. Institute leadership to motivate employees for continuous learning to improve quality.

8. Drive out fear so that employees can seek any information about total quality management practices.

9. Break down barriers between staff areas to ensure mutual cooperation among different departments and units.

10. Eliminate slongans, exhortations, and targets for the workforce to ensure employees’ attention on quality.

11 Eliminate numerical quota to ensure that only quantity is not emphasised.

12. Remove barriers to pride of workmanship.

13. Institute a vigorous programme of education and training.

14.Take action to accomplish the transition to total quality management.

In applying total quality management in an organisation, management faces certain problems because there are two types of barriers which work against TQM. These are as follows:

Managers Environment Study Material

Emphasis on Kaizen

Kaizen is a Japanese term which means continuous improvement or improvement over improvement. It is based on the assumption that there is always scope for improvement and therefore, it is never-ending process. Kaizen has its emphasis on process-oriented thinking and management system that supports and acknowledges people’s efforts for improvement. Kaizen involves a wide range of areas-customer orientation, total quality improvement, zero defect, just-in-time, new product development, productivity improvement ductivity improvement, worker discipline, suggestion system, small group activities, cooperative labour-management relations. The message of kaizen is that not a single day should go without some kind of improvement being made somewhere in the company, aizen differs from innovation in the sense that the former is simply an improvement in existing systems and procedures while the latter involves addition of some kind of catures to make the systems more value added. It is mostly one-shot action. Kaizen involves personnel at all levels of the organisation-top level, middle level, supervisors, and workers.

For adopting kaizen in an organisation, the role of top management and human resource department is crucial. Top management should initiate the actions by committing to kaizen, develop systems, procedures, and structures suitable to kaizen, and provide climate for the participation of people in the process. The role of human resource department is to prepare personnel at various levels to participate in kaizen by providing them relevant training. Kaizen has been introduced in Japan and practised there in most of the companies. However, the Western concept of improvement is somewhat different. For example, Jose Lopez, Production Director of Volkswagon of Germany, comments that, “Kaizen is yesterday’s text; today, it is the message of ‘quantum leap to generate value for customers. Improvements of 5, 6 or 7 per cent are not enough; it is 30 to 50 per cent improvements that must be made.”10

Managers Environment Study Material

Moving Towards Six Sigma

The recent trend in managing and improving quality and processes related to these is moving towards six sigma, a concept popularised by General Electric, a US company, during 1990s. Six sigma uses statistical techniques to improve business processes and can be used in both manufacturing and service sectors. The basic features of six sigma are as follows:

1 It is a structured method for improving business processes. The method, called DMAIC (define, measure, analyse, improve, and control), is supported by an assortment of statistical tools.

2. It measures statistically how well a business process is performing. A process that performs at six sigma produces only 3.4 defects out of every million opportunities to produce a defect. The processes that perform at lower sigma levels produce more defects per million opportunities. It is possible that a process may produce at even higher level than six sigma implying still lower defects, but six sigma has become popular as the standard for excellence in process performance.

3. It involves an organisational mindset in which people make decisions based ondata, look for causes of problems, define defects based on customers rather than internal requirements, seek to control variation, and track leading indicators of problems to prevent them from happening. Generally, for applying six sigma in an organisation, a project team is constituted with many professionals. It has a martial art convention for naming many of its professional roles as shown in Table 4.1.

Managers Environment Study Material