Managing Global Environment Management Study
The analysis of the company on the basis of global environment is called global environmental analysis. This analysis also includes various other analysis such as, industry analysis, market analysis, analysis of companies, customers and competitors. There are two types of analysis in a company, macro level and micro level analysis. Except for global environmental analysis, all other analysis are the microscopic level analysis. However, global environmental analysis is company's macro environment analysis. Many environmental factors, affect the companies decisions, opportunities and risks for the company's business. The company follow different tools for analyzing the global environment.
These tools are called PESTLE analysis. Managing in Global Environment, meaning is managing a business or firm globally. Managers deal both global and home country issues in foreign work facilities globally. global environment economy creates both opportunities and threats for managers. Every organization is affected and becoming more diverse and complex for managing in a global environment.
PESTLE analysis is a tool for analyzing the company's external environment PEST refers to political, economic, social and technological factors. Two further factors, legal and environmental, are defined within the PESTLE analysis. these environmental factors are interdependent and they change over the years consequently, when one factor changes it affects the others as well. These environmental factors should remain in equality for every company. There are Various environmental factors, which are covered below.
Political And Legal Factors
Political and legal factors are considered here as a single entity. They refer to Existing regulatory or legal frameworks, which regulated on regions, nations or international grounds. For example let's deal with issues related to the labor market. Which falls under the category of economic issues. According to the degree of assistance, a country may be more or less attractive to a company, In relation to the labor law of a country. The company location can greatly influence decisions. If Dismissal protection is very good in a country, a company choose a country with a more flexible hire-and-fire-system and the stability of a political system in that country. Political stability is a most important aspect for most of the companies. a social market economy with rights for co-determination, regulations for patents, the company's investment and environment protection are main characteristics for a company, for which the political stability is very important in which country the company has established.
Affordable economical factors have a direct impact on supplier and consumer markets for national or international economic development. economic factors that play a big role in GDP, inflation rate, interest change rate, employment or money market situation. These economical factors affect demand, intensity of competition, cost pressures and willingness to invest. For example, if a country's gross domestic product is lower, then that country demand will be lower, compair to that countries which GDP is higher.
Social factors is very important for dealing with social issues such as social values, ideas, opinions, and the culture of market participants. Market partners can be employees, customers or suppliers. Through their contact with the company, they influence company by their opinions. The company needs to follow the changes in the value, according to the market partner and adapt their strategies. Nowadays, a change of values related to environmental protection is going on.
Technological environmental factors
Technological environmental factors are a very important factors for industrial companies, which are undergoing day to day very fast technological change. The increasing and very fast technological changes in industrial work, such as microelectronics or robotics, shows the very high potential risk for the company. Particularly for manufacturing production companies, that are affected by rapid growth in Technological environmental factors.
Finally now days environmental factors are becoming more and more important. These factors form the basis of natural resources and human life. Among them, availability of raw materials and energy is the main concern. As the availability of fossil fuels such as oil or coal are decreasing over the decades, availability of those fuels becomes quite risky. Furthermore, to show an ecological responsibility, companies must use less raw materials and should develop new technology to prevent increasing pollution, environmentally friendly management gets more and more, environmentally friendly products or technologies to take the competitive advantage.
Methods For Global Environmental Analysis
According to six presented factors of PESTLE analysis, Segmentation is the starting point of global environmental analysis. The analysis can be done with the help of a checklist that evaluates each criteria of a section. In general, each section needs to work systematically to identify changes, so that the factors and its effects can be properly interpreted. After segmentation, the analysis consists of four steps these are,
The first phase is called environmental scanning. Through environmental scanning, every section is analyzed to find trend indicators. after examining the section, indicators of its development are defined. According to Fahey and Narayanan, scanning reveals real or imminent change because it clearly focuses on that areas, which may have previously neglected by the organization. Scanning is also used to detect weak signals in the environment before they become entangled in a recognizable pattern that can affect the organization's competitive environment. Content such as television, newspapers and magazines may be included, This method of scanning is called media-scanning. Product-scanning involves the scanning of products that announce consumer behavior to re-emerge. The search for global trends on the Internet can be defined as online-scanning. Francis Joseph Aguilar in 1967s distinguishes between indirect viewing, conditioned viewing, informal search, and formal search. 'Indirect viewing' means reading a variety of publications for a specific purpose without the possible exception of exploration. This mode is the most cost effective, but also provides the most benefits. There are lots of diverse sources and information, which means that the potential data are unlimited. The data are imprecise and unclear, and there are no guidelines that determine where the search should be focused. By applying 'conditioned view', the viewer pays attention to particular types of data and assesses their importance to the organization. The field of information is more or less clearly identified. informal search can be actively defined to obtain specific information in a relatively unstructured way. The opposite of informal search is called 'formal search'. This active mode of scanning includes methods of obtaining information for specific purposes.
Environmental monitoring is a 'process of repeating for one or more elements or indicators of the environment, according to a pre-determined schedule in space and time, for defined purposes using comparable methodologies for environmental monitoring and data collection. data about environmental development are recorded, followed, evoluted and interpreted, For historical development changes that are important to the company.
Forecasting of environmental trends is necessary to get a picture of the future. This is done by adequate methods, such as strategic foresight or scenario analysis. The following are several other methods of forecasting, such as guessing, rule of thumb, expert judgment, extrapolation, leading indicators, surveys, time-series models and econometric systems. The 'guessing' and related methods depend entirely on luck. generally this is not a useful method. Furthermore, it is almost impossible to evaluate the uncertainty of an estimate in advance. Valid expert judgment lacks validation as being the only component of the forecast. It is difficult to guess which 'oracle' is successful. 'Extrapolation' is effective when it occurs. Forecasts are most effective when changes are predicted in trend. 'Forecasting based on leading indicators' requires a stable relationship between the variables that lead. Indicators can give misleading information if the reasons for leads are not clear. 'Surveys' of businesses can give information about the future. They rely on planning that should be realized. Changes in business lead to changes in planning. 'Time-series models' are popular forecasting methods. They describe historical patterns of data and they focus on measurable uncertainty. The econometric system of analyzes is the main tool of economic forecasting. They consist of equations that attempt to "model" the behavior of economic groups such as consumers, producers, workers, investors, driven by historical experience.
The results of the last three stages scanning, monitoring, forecasting discovered environmental trends, that are reviewed to estimate their probability to evaluate whether they represent a chance or a risk to the company. opportunities or risks is also important for the company. a response strategy needs to be defined for the risks or opportunities that occur. This is done with the help of the points-effect-matrix, which is an adequate tool for evaluating and prioritizing trends. According to their classification, they display Factors with a high incidence probability and a high, significant impact on the company. High priority, rapid response is needed to avoid risks and to benefit from opportunities. Environmental assessment represents the final stage of global environmental analysis.