Management and Affecting External Factors

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Table of Contents

Abstract
Introduction
Unemployment and inflation
Methods that managers employ to learn more about their industry
The relevance of trade-in strategic planning
Conclusion
References

Abstract

This paper looks at the various external dynamics that affect the management of an organization. These factors include; unemployment, inflation, industry, and trade. Unemployment affects the provision of labor in an organization while inflation serves to raise the costs of doing business. Industry practices and trade are also external influences that bring about both positive and negative effects on the organization. This paper answers several questions on these four factors linking them to the management of a business firm. It shall also look at ways in which managers learn about their industries and also the relevance of trade in strategic planning.

Introduction

The International Labour Organization (ILO) defines unemployment as a situation where people stay without work even after active searching for a specific period (usually four weeks). Inflation is defined as the general rise in the prices of commodities in an economy. Both of these factors are the consequences of a weak economic system. Trade-in this context refers to the buying and selling of goods and services in an economy. It is controlled by the twin forces of demand and supply. The industry is also an important factor since it brings about certain practices that become customs and also it involves competition among business firms dealing in similar goods and services.

Unemployment and inflation

A business firm does not operate in a vacuum. It is susceptible to internal as well as external pressures that influence the way they are managed. While management may seem to be dealing with purely internal issues, external factors such as unemployment and inflation may bear on the minds of managers in their decision making. While managers can do little to address these two issues since they fall outside their scope, they are still affected by them especially in their decision making. A high rate of unemployment ensures that managers are keen on their jobs since being fired or replaced is not a difficult thing for the organization. Raskino (2009) states that when people are being laid off, managers tend to become very cautious in their decision making and they tend to avoid risk (p.1).

When it comes to inflation, the effects come in absorbing the rising cost of goods. The effects of inflation thus serve to discourage lavish spending, reduce investment and savings, lower the firm’s output due to less raw materials and decrease economies of scale. During inflation, managers adopt cost-cutting measures which may include laying off workers or doing away with unnecessary expenses.

Methods that managers employ to learn more about their industry

As a manager, having information about one’s industry is key for strategic planning and decision making. Usually, managers use several methods to learn about other players in their industry. The most common method used is a SWOT analysis. This method involves isolating a particular competitor and analyzing their strengths, weaknesses, opportunities, and threats. Another method employed is doing a market survey where one issues questionnaires or conducts interviews with consumers to learn about which firm they prefer and why. This method is highly successful since the consumers are the most important informants when it comes to research in trade (Abram, 2010, p.24).

Finally, managers can learn about their industry by researching any publications available. These publications usually come in the form of reports from chambers of commerce or government ministries and articles in financial magazines. Abram (2010) states that managers must learn to get out of their offices and learn how other industry players are running their firms to get an insight on new techniques being employed (p. 25). This way, dynamism is introduced and the business firm can change with the times.

The relevance of trade-in strategic planning

Strategic planning involves the formulation of a long-term business plan that outlines the company’s key strategies, targets, and objectives. Companies that lack strategic plans are more likely to fail since they lack purpose and direction. Various factors must be considered in the making of a strategic plan such as the cost, method, duration, and effects. The key among factors that influence the formulation of strategic plans is the prevailing economic ‘climate’ as well as anticipated changes in the market.

Trade is an important factor since the forces of demand and supply are the key influences on the financial performance of a company. Usually, business firms want to have a competitive edge over their rivals and they come up with strategies to outdo the competition so that their goods or services can sell more. These strategies have to be well planned and organized in advance and they must also take into account the various factors in the market that might act as a benefit or barrier. We can, therefore, conclude that the reason why business firms come up with strategic plans is to be able to trade better or to gain more from trade.

Conclusion

As we have seen, business firms have to make provisions for certain external factors when they are formulating their business firms. Chief among these external factors are the effects of the industry and from customers. Effective managers have to learn about their industry as well as the preferences of customers to be successful in marketing their products. Additionally, business firms must learn to cushion themselves from the harmful effects that come from unemployment and inflation.

References

Abram, R. (2010). Research your industry, target business market and competition. Web.

Raskino, M. (2009). Don’t underestimate the management effects of unemployment. Web.

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