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THE PARABLE OF THE BOILED FROGAll organizations are faced with a series of environmental changes and challenges. The principal difference between the effective and the ineffective organization is how well it responds, something that was encapsulated several years ago in one the most popular of management fables, the parable of the boiled frog. What is now referred to as the boiled frog syndrome is beside on the idea that if you drop a frog into a a pan of hot water, it leaps out. If, however, you put a frog into a pan of lukewarm water and turn the heat, up very slowly, it sits there quite happily not noticing the change in the waters temperature. The frog, of course eventually dies. The parallels with the management and development of any organization are or should be obvious. Faced with sudden and dramatic environmental change, the need for a response is obvious, Faced with a much slower pace of change, the pressures to respond are far less (this is the we are doing reasonably well and can think about doing something else at some time in the future phenomenon), with the result that the organization becomes increasingly
Concept of Environment1. Refers to all external forces which have a bearing on the functioning of business. 2. Environment factors are beyond the control of individual industrial enterprise & their managements. 3. Environment gives opportunity or threat to the firms.
Characteristics Environment1. Environment is complex 2. Environment is dynamic 3. Environment is multifaced. 4. Environment has a far reaching impact.
External & Internal Environment External environment includes all factors outside, the control of organization which provide opportunities or pose threats to the organization. The internal environment provides strength or weakness within the control of organization (SWOT)
General versus relevant Environment attitude external environment The technology,encompasses a variety of factors like international, national and local economy, social changes, demographic variables, political system,, towards. Business, energy source, raw material & other resources, and many other macro level factors known as general environment. Immediate concerns of the organization is confined to just part of general environment (relevant environment)
Components of EnvironmentSupplier Customers Interest/ Pressure Groups Competition Economy Govt. Regulations Technology Religion Organization Society Community
Components of Environmentof environment Seven important component are: 1. Social; 2. Political; 3. Economic; 4. Regulatory; 5. Market; 6. Supplier; 7. Technology;
Social EnvironmentSome of important factors & influences operating in the social environment are: 1. Demographic:- Population, Density, Sex, Rural Urban, Income Distribution. Age,
2. Social attitudes & values: Social custom beliefs, Rituals, Changing life style, & materialism. 3. Social Concerns: Such as Role of Business to Society Pollution Corruption Consumerism.
Social Environment4. Family Structure:- Small family norms Breakage of Joint family system. 5. Role of women in society: Increase in working women 33% reservation levels (Parliament). Education
awareness. Rights and Work Ethics.
Social Environment Social Environment is related to human Relationship, and the development, of such a relationship. Social environment effects the strategic management process within the organization, in the area of mission , objective setting and decisions related to products and markets.
Social EnvironmentNote: The Social changes take place slowly and do not seem to have an immediate effect/ impact on short term strategic decisions. Some social change are too prominent to be ignored. Example: Emergence of middle class. MTV Effect on Youth
Exhibit: The rise of the Indian middle-class According to the World Development Report for 1987 of the World Bank, the top 20 percent of Indias population have an income share of 50 pr cent of the GDP or a per capita income of the Rs. 10,000 and a family income of Rs. 50,000. This part of the population, consisting of 15 crore people, constitutes what is known as the rising middle-class of India. Owing to the black economy which largely benefits this class and the repatriation of money from abroad by non-resident Indians who mainly belong to this class, the rising Indian middle-class possesses the real purchasing power. By 2006 A.D., this class is expected to expand to the size of 40 crore and would, most probably, be the single largest middle class group in the world. There are important implications of the changing socioeconomic structure, taking shape in India currently for the economy in general and industry and business in particular. Much of the macro-level sectoral shift away from agriculture to manufacturing and services could be attributed, directly or indirectly, to the middle-class affulence. To the corporate sector, the middle-class provides more than a crore investors and a continuing demand potential for a variety of consumer items, ranging from detergents to refrigerators, and a number of
Environmental influences on the instant Foods Industry
Instant foods industry one of the sunrise industries that has come up well in India in the recent past. Essentially meant for middle and upper-middle class urban consumers, instant foods are a product line that offers considerable potential for growth. The business environment in which the instant foods industry exits at present could be explained in terms of the opportunities and threats operating currently.
Environmental influences on the instant Foods Industry
Opportunities are supported by factor like: High demand potential, estimated at around Rs. 20,000 crore. At present, the total industry output is just Rs. 300 crore. Rising personal incomes, emergence of nuclear families and rise in the number of working women. Availability of packaging material to keep instant foods fresh and unadulterated. Spread of television as a media for advertising. Threats arise due to factors like: Problem of acceptability, as Indians are typically used to eating fresh vegetables and foods. High taxes, as instant foods are considered a luxury item; direct and indirect taxes constitute 70 to 80 percent of the price of processed foods. High raw material costs. High overhead expenses.
Political EnvironmentThe political environment consist of factors related to management of public affairs & their impact on the business. Important Factors The political system, ideological forces, political parties & centers of power. The political structure, its goals & stability. Political processes like operation of the party system, elections, funding of the elections, and to economic & Industrial legislation with respect promotion & regulations.,
Political Environment Political philosophy, Government Role Business, its policies & interventions economic & business development. Example: in in
Janta Government Forcing Coca-Cola IBM to leave 1977. Pepsi Cola factory in Punjab to deal with Punjab problem. Appollo Tyres Kerala Government Take over.
Economic EnvironmentThe Economic environment consists of Macro level factors related to the means of production & distribution of wealth that have an impact on the business of an organization. Some Important Factors are 1. The Economic stages existing at a given time in a country. 2. The economic structure adopted, such as capitalistic, socialistic or mixed economy. 3. Economic planning : budgets etc. five year plan annual
Economic Environment4. Economic Policies: Industrial, monetary and fiscal policies. 5. Economic indices like distribution of income. national income,
6. Rate of saving & investment, value of exports & imports, the balance of payment. 7. Infrastructure factors: Such as financial institutions, banks, transport, communication.
Economic EnvironmentExamples: 1. Liberalization 2. Public saving in India from Fixed assets & Precious mental to stock markets & company deposits, leasing & financing companies, mutual funds, venture capital, entry of bank & financial institutions in stock market. and Now with scams after scams and Mismanagement of funds. Back to square one.
Regulatory EnvironmentConsists of factors related to planning, proposition, and regulation of economic activities by the Govt. that have impact on the business of an organization. Some Factors are 1. Industrial policy and licensing. 2. MRTP. 3. Legislation related to company operation. 4. Capital issues control & control over stock exchange.
Regulatory Environment5. Import and export control. 6. Foreign exchange control. 7. Control over foreign investment. 8. Control over distribution & pricing. 9. Control over dev. & Reg. of industries. 10.Control through consumer protection. Control of Environment pollution Excessive control & no control both are dangerous. Love & hate relation between Govt. & Industry is the prevailing situation.
Market EnvironmentThe market environment consists of factors related to the groups & other organizations that compete with & have impact on markets & organizational Business. Some Important Factors are 1. Customer Needs, preferences, perceptions, attitudes, values, bargaining power, buying behavior & customer satisfaction.
Market Environment2. Product Factors Demand, image, features, utility, function, design, life cycle, price, promotion, distribution, differentiation & availability of substitutes of products & services. 3. Market Intermediaries. Level of customer service, middleman, distribution channels, logistics, costs, delivery system and