Economic Environment and Business Management

If you have undertaken the Activity 5 seriously, you would have realized that there is lot of overlapping or one item may fall under different heads. This suggests a difficulty in  the classification of environmental variables. At the same time, it points towards introduction among environmental  factors. 

Let us now examine the interaction between Economic Environment and Business Management. 

Business environment influences business management. Tile critical elements of business environment often interact with the critical elements of business management. The critical enteritis of business management 'are  : planning, direction, organisation, control or co-ordination, staffing and supervision and  evaluation. Magnificent at all the levels, top, middle as well as supervisory, is concerned with these critical elements to a certain degree. Similarly, these very critical elements are the concerns of the genitalia that specializes in different functions such as production, finance, marketing, purchase. inventory control, personnel, public relations, regardless and development, etc. 

The existing business environment may act either as a stimulant or as a constraint for business engagement. If the prevailing environment is favorable to business growth and prosperity, the the management feels happy and responds positively. Small business owners, for example, are often encouraged to produce more when the government pays them subsidy. On the other hand, when the prevailing environment  is unfavorable, it acts as a disincentive.  For example, when the government tries to impose a high tax rate on corporate profits, many business concerns try to evade tax by under-reporting their profits. It is interesting to note that the same environment may act both as stimulant and as a constraint - stipulating for some and constraining for others. Reconsider the last example. A high tax rate increases the propensity to evade taxes; it induces tile corporate tax-payer to restrict his output, sales or profits. At the same time, this very situation provides an opportunity to the tax consultant for a thriving business. 

For the management, the environment is not limited to the institution of the government. There are other institutions  and forces as well. The manageability has to take care of the interests of other groups also, such as the workers, suppliers and contractors, consumers, shareholders and many others. The workers organised in trade unions, often ask higher wages. The salaried middle-level managers, Through their associations, may also ask for a particular package of pay and perks. The  suppliers, organised in guilds, may not always supply laterals as per the specifications of the management, and they may seek revised  rates or change  the quality and schedules of delivery. The shareholders may ask for higher^dividends  or they may like to have a greater say in the management. The consumer co-operatives may seek lower prices arid better quality tor the product they buy. All m all, the top management  11?s to balance interests of all the parties government, trade unions, manufacturers' association, financial  institutions, consumer co-operatives and so on. Very often, the management's own reconcile  aspirations may come in conflict with those of other groups. It the management  can readily resolve these conflicts. it gets the better of environment. And if the management accentuates these conflicts. it becomes the victim of environment. The management may dictate or be dictated by the negativeness forces of the environment.

A good amount of managerial skill and dexterity is required in adjusting to the environment. The managers Sirius have a thorough knowledge, understanding and comprehension of their immediate business environment. With experience and  maturity, the alert managers acquire the skill to deal with the environment. When all environment repeats itself, the experienced managers effectively display their 'capability'  to take care of  When the changing dimensions of the environment establish a sudden departure groin the past trends and tendencies, the managers are called up to demonstrate their 'capability' to deal with the situation  of risk and uncertainty. The environment, thus, poses a challenge for the Argentinian. The managerial efficiency and/or effectiveness is a measure of adaptability to the existing business environment. 

Environmental scanning, thus, becomes an important  step towards corporate planning and business policy decisions. Corporate managers analyse the Strengths (S), Weaknesses (W), Opportunism (0)  and Threats (T) that exist for their organisation ill the context of its environment. The SWOT analysis precedes the painstaking of strategic and tactical decisions by the management. 

Environment and management thus influence each other. The existing environment influences corporate level planning, business strategy and business tactics; it also affects the size, structure, location,  integration and growth of business. The management's success failure is determined by its adjustment of favorable/adverse environment factors. The nature of such realization, its frequency and duration, induces corporate managers to cultivate some standards of business philosophy, business ethics and business practice. Simultaneously, the government managers, the labor managers and the like also start adjusting to the changing organisation-culture. This yields a new business environment. And so the process continues. It is thus, a never-ending process of interactions : Environment + Management + Environment + It is like a biological organism which keeps both the environment and the management continuously responsive to each other.