The organization is accessible in order to achieve a goal. To reach this purpose, it must evolve in an environment with which it interacts. This environment indicates all exterior elements which may have the to affect the organization. Some elements have direct impact on the corporation while some do not. Today the surroundings is changing so fast that this becomes ever more volatile. Actually, it creates uncertainty. Thus, some views declare that this changing environment symbolizes great risks for the organization. However, other thoughts see the volatile environment as a chance for the organization to innovate. Based on these concerns, this newspaper analyzes the different industries of the exterior environment, highlights the way they affect the functions of the business and demonstrates how they make up hazards or opportunities for the organization.
Part 1. - The environment
The external environment of the business is made up of several areas. Scholars declare that: "for every organization, ten industries can be analyzed". These industries can be all the exterior institutions or causes that have impact to organization's capacity to reach its goal. Firm has to interact with the marketplace sector, the industry, the government and the financial institutions. It also has to cope with the monetary conditions. Organizations need to get recruiting, and enough technology. All of these components imply the external environment.
This external environment is not static. The elements with which company works are very dynamic. They change on a regular basis. More often than not, it is very hard for company to even forecast the change rates. Now, what exactly are the characteristics of these elements? How volatile are they today?
The Market
Nowadays, customers have become increasingly encouraged. From day to day, they are simply arming with considerable information and they're being more resistant to stimuli. The customers want goods and services custom-made to their needs and their interest for a specific product can be abruptly shifted. Moreover in the context of the globalization, marketplaces and solutions are increasingly more interconnected. Then, it is not easy to take care of all the variables that motivate the choice of the clients.
The industry
It describes a specific business activity (for example, the program industry). This sector has a life pattern. This circuit shows an image of the changes seen in the industry as time passes. The life routine is not static. It includes several stages: birth stage, growth level, shakeout stage, maturity stage and decline level.
Birth Development Shakeout Maturity Decline
(Exhibit 1)
During the first stage, organizations seek to develop new services or goods. Then the services or the nice gain customer acceptance and begin to grow speedily. It is the second stage. The third stage is the most fragile. When the expansion becomes noticeable, many organizations will enter the industry. Thus, the surroundings can become more agitated. Through the fourth periods, the sector becomes more stable. Finally, over the last stage, the actions are quite sluggish.
Most of the time, the life routine changes very fast. When competitors, through advertising and new products, react with aggressiveness; instability occurs.
The government
In the government sector, several aspects can be analyzed. The politics aspect makes up an important power. In lots of countries, changes in politics arena could cause high doubt in the surroundings. The truth is, these changes are not the primary problems; in themselves. The issue is the way in which they occur and the outcomes they produce. In most countries, there are changes in political arena but the environment still stays on more or less stable. The other aspects in the federal government sector are fees, laws and regulations. In many government designs, all of them are intertwined.
Change is inherent to the federal government sector. The problem is when it occurs abruptly. For example, when a rupture all of a sudden happens in the political arena, it could create chaining results overall environment and make it very unpredictable.
The Financial and Monetary conditions
Every single manager knows that the earth market is intertwined. An monetary crisis of the country may have an impact on the market of other countries. A recent example would be the recession in the United States. Many countries in the world have been hit by the effects of this problems. Another example is the European crisis. A financial disequilibrium in few Europe cause great turbulences in the zone. Then it is clear that the impact of the intertwined current economic climate cannot be neglected.
During this 10 years, the globe has known several financial and monetary crises. The stakeholders have made a whole lot of efforts to boost the global market. But, much remain to be achieved. According to the "Global Financial Stability Record (IMF - October 2010), despite the ongoing economic restoration, the global financial system remains in an interval of significant uncertainty". The bank operating system still faces up complex situations. In mature credit market segments worldwide, the full total losses are very important. To keep themselves alive, the bankers have to get additional capital. Thus, the surroundings is still risky.
Many other factors such: Stock market, unemployment rate and inflation have to be taken in concerns. These variables broadly depend on the financial and financial conditions.
The real human resources
In the global current economic climate, highly qualified human resources constitute a potential way to obtain comparative benefit. They play a great role in the economy. The recruiting represent valuable investments available environment. Today, scholars even talk about "man capital". The idea is not to consider the human being as a machine which only provides services to business. The methodology is to own a better understanding about how the human skills can be an important booster for the overall economy of the 21st century.
This sector broadly is determined by universities outcomes. Nowadays, the entire world is changing so quickly that the colleges must do more efforts to create high developed human resources. That is to say, these competencies have to fit to the truth of the changing world. Most of the times, the shifts are very fast. In cases like this, the colleges usually take more times to respond. It does not mean that they are really ineffective. 60 that the universities, themselves, have to cope with many complex factors.
There are a whole lot of problems in the recruiting sector. While these resources become scare, the law of demand, in the labor market, will be suitable.
The technology
The technology is becoming essential for the well-being of the global economy. The technology impacts just how information is treated, the way corporations produce and the way people communicate. Because the world is becoming a small town, the information technology accocunts for a mainstay running a business sector. The progression of the internet makes the exchanges easier among people. Nowadays, it is possible to buy anything from anywhere. People do not need to travel for a few meetings ever again. Web-conference we can communicate with hi-def training video and high quality audio. Finally, each and every person knows that the technology performs a great role in the world.
However, the development of the technology is so fast that it's becoming difficult to handle it. The changes tend to be done abruptly. Generally, we do not have a chance to behave. The technology we use today will be swiftly obsolete tomorrow. Furthermore, the technology creates a exclusive world that sometimes contains a great deal of security issues. We are able to conclude that technology pays to but this sector accocunts for a high speed rail which frequently stuns professionals.
Nowadays, you can find proof that the external environment is not steady whatsoever. The markets become more agitated; the industry's levels run faster; taxes, laws and regulations cannot be treated by the business, the financial and economical conditions constitute uncertainty, the human resources are scarce; and the technology is improving at an unbelievable pace.
These concerns are far from being alarmist analyses. They only summarize the atmosphere together with today's organizations evolve. Now, how can such volatile environment effect the procedure of the business?
Part 2. - The effect of volatile environment on the business (risks)
Considering that the business is not an isolated entity, it's important to understand how it interacts with the surroundings into which it evolves. To obtain a better knowledge of this connections or what sort of external elements affect the procedure of the organization, it is vital to know about the field of activity and the style of management implemented by the business.
Generally, business may choose traditional management or modern management. Nowadays, people even discuss post-modern management.
In the traditional management theory, the organization elaborates proprietary knowledge. It uses this knowledge to remove advantages. Since this information is essential because of its growth, the organization shields this knowledge and tries to ensure that it's not accessible by another entities. To talk to the exterior environment organization must use official channels. In a few words, we can say that the business puts more emphasis on its internal activities.
Despite this strategy, it is clear that the affect of the volatile environment still impacts the operations of the business. Let us analyze more deeply a few of the exterior elements (threats); considering the traditional model of management.
As we've talked about it above, the clients gain more electric power than ever on the market. This compels the business to share information and also to response very quickly. However the way which the traditional management patterns the organization will not allow this last mentioned to be as adaptable as you can. Then, it becomes harder for the organization to get the anticipations of the customers. When we pay more attention to inner activities than to the customers, they go somewhere else.
In an industry where the competition is competitive, it's very painful for a traditional management to hold on. This model designs the organization as an autonomous entity. The original management will not allow information and resources writing. Thus, it becomes very hard for an organization which adopts this model to be competitive in a context of globalization. Today, a new procedure of competition is born. To compete within an environment where in fact the resources are scarce, the organization has to develop relationships with other organizations. That is to say, the organization has to have a vibrant and an exposed structure to survive. No corporation can develop in quarantine. Thus, we can conclude that an agitated industry may lethal affect the business.
The improvement of the technology makes up one of the threatening elements that influence the process of a normal management. Nowadays, to endure in a worldwide environment, organizations have to start themselves to the technology. Because, "Markets, solutions, and organizations have become ever more interconnected", (Richard L. Daft, Understanding the idea and Design of Organizations). In addition the digital workplace created by the advanced technology is a large challenge for the original model.
Now we understand how the volatile environment can test the traditional management, it's important to start to see the degree of effect of the perturbations on an organization which adopts the present day strategy of management.
Today, many organizations choose a new model of management. Organizations have a fresh approach for identifying, collecting and keeping intellectual capital; in some words, a new way of employed in order to accomplish its goal.
