College of Business Administration Management & Marketing Department University of Bahrain College of Business Administration Management & Marketing Department Chapter Four: Managing in the Global Environment Dr. Mahmood Asad MGT230: Chapter4

What is the Global Environment? Global environment is the set of global forces and conditions that operate beyond an organization’s boundaries but affect a manager’s ability to acquire and utilize resources. Dr. Mahmood Asad MGT230: Chapter4

Figure 4.1: Forces in the Global Environment Dr. Mahmood Asad MGT230: Chapter4

(1) Suppliers Suppliers are individuals and organizations that provide an organization with the input resources that it needs to produce goods and services. Dr. Mahmood Asad MGT230: Chapter4

(1) Suppliers Global outsourcing is the purchase of inputs from foreign suppliers or the production of inputs abroad to lower production costs and improve product quality and design. Dr. Mahmood Asad MGT230: Chapter4

(2) Distributors Distributors are organizations that help other organizations sell their goods or services to customers. Dr. Mahmood Asad MGT230: Chapter4

(3) Customers Customers are individuals and groups that buy the goods and services that an organization produces. Dr. Mahmood Asad MGT230: Chapter4

(4) Competitors Competitors are organizations that produce goods and services that are similar to a particular organization’s goods and services. Dr. Mahmood Asad MGT230: Chapter4

(4) Competitors Potential competitors are organizations that are not presently in a task environment but could enter if they so choose. Barriers to entry are factors that make it difficult and costly for an organization to enter a particular task environment or industry. Dr. Mahmood Asad MGT230: Chapter4

Figure 4.2: Barriers to Entry and Competition Government regulations Dr. Mahmood Asad MGT230: Chapter4

Three main sources of barriers to entry: 1. Economies of scale Definition: cost advantages associated with large operations. Factors: a) manufacturing products in very large quantities, b) buying inputs in bulk, c) effective use of resources Newcomers will find it very expensive to enter the industry. 2. Brand loyalty Definition: customers’ preference for the products of organizations currently existing in the task environment. Newcomers bear huge advertising costs to build customer awareness. 3. Government regulations Deregulation of many industries (e.g., telecommunications) increase level of new entry and force existing companies to operate more efficiently. Dr. Mahmood Asad MGT230: Chapter4

The General Environment Forces in the general environment that affect the task environment forces are: Economic Technological Sociocultural Demographic Political Dr. Mahmood Asad MGT230: Chapter4

(1) Economic Forces Economic forces are Interest rates, inflation, unemployment, economic growth, and other factors that affect the general health and well-being of a nation or the regional economy of an organization. Dr. Mahmood Asad MGT230: Chapter4

(2) Technological Forces Technology is the combination of skills and equipment that managers use in the design, production, and distribution of goods and services. Technological Forces are outcomes of changes in the technology that managers use to design, produce, or distribute goods and services. Dr. Mahmood Asad MGT230: Chapter4

(3) Sociocultural Forces Sociocultural forces are pressures emanating from the social structure of a country or society or from the national culture. Both sources can constrain or facilitate the way organizations operate and managers behave. Social structure is the arrangement of relationships between individuals and groups in a society. Dr. Mahmood Asad MGT230: Chapter4

(3) Sociocultural Forces National culture is the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society. Societies differ in values and norms. It affects the way managers motivate and coordinate employees. Dr. Mahmood Asad MGT230: Chapter4

(4) Demographic Forces Demographic forces are outcomes of changes in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, and social class. Dr. Mahmood Asad MGT230: Chapter4

(5) Political and Legal Forces Political and legal forces are outcomes of changes in laws and regulations, such as the deregulation of industries, the privatization of organizations, and the increased emphasis on environmental protection. Dr. Mahmood Asad MGT230: Chapter4

(5) Political and Legal Forces Political and legal forces that challenge organizations include: Deregulation Privatization Removal of legal barriers to trade Environmental protection and preservation of endangered species Emphasis on safety in the workplace Legal constraints against discrimination on the basis of race, gender, or age Dr. Mahmood Asad MGT230: Chapter4