The business processes are trying to implement smooth management system no matter how big their organizational size is or how many employees work for them (Harper, 2015). The overall organizational environment is in the process of constant change and this affects the performance of the modern-day organizations. The businesses are becoming more susceptible to the forces of the external environment and hence they need to adopt suitable organizational policies (Harper, 2015). This essay would outline the various critical issues that are relevant to the business as well as management context. The aim of the report is to improve the understanding of the various contextual factors that are needed for the decision-making purposes in the internal organizational environment. This report is expected to provide in-depth ideas regarding the smooth functioning of the business and the type of factors that affect the company operations on a day to day basis.
The business entities do not take place individually and they are interconnected into the core organizational policies (Harper, 2015). There are several factors that are evident in an organizational context which include political, social, economic, technological and environmental. These factors are being analyzed with the help of PESTEL analysis (Yüksel, 2012). The Porter’s five forces is being used by the companies to analyze the external environment factors of the company. The five factors such as bargaining power of suppliers, threat of new entrants, competitive rivalry, threat of substitutes, and the bargaining power of the buyers are helpful in industry analysis (Harper, 2015). The advantages of this model are that it segregates the theory into small chunks so that it can be understood easily (Yüksel, 2012). There are also different tools for analyzing the internal organizational dynamics such as TOWS strategic alternatives matrix, SWOT analysis and others (Kajanus et al., 2012).
The companies face an increasing number of critical issues that the organization faces in their day to day functioning. There are high chances of poor market research, which would lead to faulty decision making (Kajanus et al., 2012). There are increased lawsuits to the company, which can land the company in legal troubles. The global recession is gripping the whole world and the companies are increasingly worried about this alarming trend. This also leads to high level of risks, especially for the multinational companies (Butler, 2012). There is an increased competition in the market, which often leads to loss of revenues for the companies. The loyal customers of one company may get attracted to the rivals and hence the original company loses a considerable chunk of their revenues (Kajanus et al., 2012). The international business usually involves a high amount of expenditure, which may cause financial trouble for the company (Killing, 2012). The political instability of a foreign country poses several risks for the companies. There are also legal risks that are associated with the legislative characteristics of particular place (Samuels, 2014). It is important to identify the risk categories such as minor, moderate, significant, negligible and severe. This compels the companies to formulate risk management guidelines, which would be highly effective (Butler, 2012).
There are several international contextual factors that are highly relevant in modern business environment (Killing, 2012). The globalization is a major phenomenon which is affecting the entire world. It is true that it has several good qualities, however, it has certain negative attributes too (Samuels, 2014). The high degree of globalization has led to increased competition among the companies. A relatively high level of competition exists concerning the target market, technological adaptation, high cost of services and goods (Kim & e Mauborgne, 2014). There is also an increase in technological processes, which is being used by the managers. The managers are increasingly facing the issue of technology push, which is concerned with the technology change process specified by the use of suitable technology within industrial usage (Rollett, 2012). The maturity of the industry and the life cycle of the products affects the business prospects in a foreign location. The technology is important in the fulfillment of the business goals (Rollett, 2012). There are considerable changes in the customer preferences and needs (Kim & e Mauborgne, 2014). An Asian guy would expect different food services than an American guy, which implies that the organization needs to customize their products based on the local preferences of the foreign land (Rollett, 2012). The companies are increasingly focusing on the different emerging markets, which present lucrative sales opportunity. They are increasingly inclined towards sustainability by focusing on global warming and increased adoption of the environment friendly practices (Rollett, 2012).
The different domestic contextual factors should be considered by the firm while making business strategies. There are several contextual factors like ownership, age of firm and the size of the firm, which are intrinsic factors for business success (Wang & Altinay, 2012). The organization should consider several factors such as supply chain management, new product development, customer management and others (Rollett, 2012). The business managers should decide on their strategic priorities and devise the business policies accordingly. They should engage in fair allocation of the organizational resources (Wang & Altinay, 2012). The business leaders should engage in the process of developing new tools, concepts, mindsets and resources so that the organizational objectives are fulfilled. The managers should consider the life cycle of the organization and hence design policies accordingly (Wang & Altinay, 2012). It is important to focus on the market entry modes when the firms are trying to venture into foreign markets (Shaver, 2013). This would improve the profit margin in the long run. It has been proven that the profitability of a firm increases when the company is in the growth phase. The managers should engage in transparent decision making, which would help the to achieve high degree of operational excellence (Wang & Altinay, 2012). The domestic environment also comprises of effective human resource management, because the employee is the backbone of the business processes (Berman et al., 2012).
The domestic and international contextual factors have major influence on the business processes (Wang & Altinay, 2012). It affects the internal communication and the way the organization corresponds to the external forces. The mutual coordination influences the organizational culture of the firm (Handley & Benton, 2013). If the employees are engaged in the organization, then there would be increase in the organizational productivity too, which would be beneficial for the organization in meeting the objectives.
Conclusions
The implementation of the contextual factors is important for achieving the organizational success. The organizations should be active in deciding the external and internal contextual factors. This essay strived to discuss the external business environment with the help of tools such as Porter’s five forces and PESTEL analysis. The critical issues to the business are discussed. The internal business environment is also analyzed with the help of tools such as SWOT analysis. There are several risk factors that are associated with the business processes. The organizations should perform market survey and identify the different international as well as domestic business factors relevant to their industry. It is also required to make contingency plans based on these contextual factors. This essay would broaden the understanding of the different contextual factors in a modern-day business environment.
References
Berman, E. M., Bowman, J. S., West, J. P., & Van Wart, M. R. (2012). Human resource management in public service: Paradoxes, processes, and problems. Sage.
Butler, K. C. (2012). Multinational finance: evaluating opportunities, costs, and risks of operations (Vol. 729). John Wiley & Sons.
Handley, S. M., & Benton, W. C. (2013). The influence of task-and location-specific complexity on the control and coordination costs in global outsourcing relationships. Journal of Operations Management, 31(3), 109-128.
Harper, C. (2015). Organizations: Structures, processes and outcomes. Routledge.
Kajanus, M., Leskinen, P., Kurttila, M., & Kangas, J. (2012). Making use of MCDS methods in SWOT analysis—Lessons learnt in strategic natural resources management. Forest Policy and Economics, 20, 1-9.
Killing, P. (2012). Strategies for joint venture success (RLE international business) (Vol. 22). Routledge.
Kim, W. C., & e Mauborgne, R. (2014). Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.
Rollett, H. (2012). Knowledge management: Processes and technologies. Springer Science & Business Media.
Samuels, B. C. (2014). Managing Risk in Developing Countries: National Demands and Multinational Response. Princeton University Press.
Shaver, J. M. (2013). Do we really need more entry mode studies?. Journal of International Business Studies, 44(1), 23-27.
Wang, C. L., & Altinay, L. (2012). Social embeddedness, entrepreneurial orientation and firm growth in ethnic minority small businesses in the UK. International Small Business Journal, 30(1), 3-23.
Yüksel, I. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), 52-66.
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