Discuss the external environment or external factors of the management? which affect the activities of management
EXTERNAL ENVIRONMENT :-
Those factors which affect the management from external side these are called external environment. No doubt a manager has very little control on them, but even then he pays special attention to them. A manager tries his best to reduce their affects. Following are the important external environments.
ECONOMIC ENVIRONMENT :-
When any business management is affected economical;ly by the environment, it is called economic environments.
1. Customer :- In a business activity customer has a very important role. Customer provides demand in the market without demand business cannot exist. If customer demands cars,then producer will produce the cars. If the customer is not ready to purchase the cycles, then no body will produce the cycle. So customer is a guiding star for the manager or producer.
2. Capital :- Every kind of management needs capital. It is not possible for the management that without capital it may purchase land, machinery, office and building. So capital affects the various decisions of the management. It is very important decision that business should be started on small scale or large scale. Now this decision is also made keeping in view the availability of capital.
3. Labour :- It is a productive factor and its importance can not be ignored in the business activity. If in any country skilled and cheap labour reduces the cost of production and encourages the business activity. Many items can be produced at a lower cost in Korea, China, Pakistan and Taiwan because wages are relatively low as compared to the advanced countries.
4. Competition :- When there are large number of producers of the same product, they will compete in the market. They will compete in price, quality and design. Such type of competition will affect the management decisions. So competition is also the external environment for the management decisions.
5. Govt. tax policy :- It is also the business environment if taxes rate is low, it reduces the cost and increases the purchasing power of the people. On the other side if tax rate is high, it increases the cost and price. So demand falls.
6. Credit policy :- Credit policy has also considerable impact on the business. If banks are ready to provide the credit on low rate of interest, it will improve the business activity. It also affects the management decisions.
7. Change in price :- A rapid change in price level affects the business seriously. It affects the out put, cost, demand and management decisions.
8. Availability of managers :- If qualified and capable managers are available in the business they will improve the quality of the product. It can reduce the cost and increase the rate of profit. A manager plays an important role in the business.
TECHNOLOGICAL ENVIRONMENT :-
It has also greater impact on the management decisions. It has different kinds. The use of techniques, inventions, tools and skill involves in the technology. Use of technology influences the quality, distribution, cost and sale of production.
POLITICAL ENVIRONMENT :-
It has also greater impact on the management. The political leaders change the law of business and regulations which affect the policies of the management. The changes in the attitudes of the political Govt. brings change in management decisions and it is known as political environment.
SOCIAL ENVIRONMENT :-
All the goods and services are produced for the society. As the demand, habits, likes and dislikes of the society change, it also bring change in the management decisions. So social environment is made up by the beliefs, attitudes, traditions and values of the people. It has great importance on the management.
LEGAL ENVIRONMENT :-
Every manager has also to obey the laws ans regulations at the national and local level. He respects and follows the decisions of the court . Managers are expected to know the legal restriction applicable to the business. So the legal environment also affect the management.
ETHICAL ENVIRONMENT :-
In every society some principles are formulated keeping in view the customs, beliefs and tradition of the people. These are not imposed by force on the people but they obey and respect these principles. The conduct and behavior of the people is checked keeping in view these principles. These principles of personal conduct are called ethical environment.