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HR1004
Organisations, Management
and People
Week 2
Business in Context
Business in Context
An explanation of the key internal
and external factors which impact
on the operation and functioning of
organisations and businesses
LEARNING OUTCOMES
At the end of this lecture you should
• Understand the context within which
businesses operate including the main
environmental drivers – the economy, the
State, technology, labour and culture
• Understand the role and purpose of the main
stakeholders in organisations and businesses
The Economy
• The relationship between business and
the economy is two way
(Q. What might we consider as a
‘business’?)
• Economic changes affect businesses
e.g. changing global economy,
increased international competition,
globalisation, State intervention
Key Factors – “The Variables”
• Structural changes – shift from manufacturing
to service; role of unions; shift from public to
private ownership
• Finance – availability of investment capital;
level of interest rates
• International competition – globalisation
• Cost of commodities, materials and labour
The State
• ‘..that body which has a monopoly over
taxation, money supply, and the legitimate
use of violence.’ (Scott cited in Needle, 2004 p75)
• World Bank (1997) definition cited in Needle, 2004
p75: 5 core responsibilities of the state:
• Legal framework
• Economic policies
• Basic services and infrastructure
• Protecting the vulnerable
• Protecting the environment
Forms of state
control/intervention
• State control and central
planning
• Free market and nonintervention
• Social market
• Directive
Types of State Intervention
• Collective provision – goods too expensive/dangerous for
private provision
• State as employer
• State as consumer
• Legal Regulation
• Demand management – why and how?
• Training
• Protection against global competition – inward investment
• Marketing
• Advisory services eg overseas trade, environment, ACAS
Globalisation
• Focus on UK but principles can be
applied to any nation state
• Today’s world broader influences
operate – globalisation – meaning?
• European Union. How does it
impact on UK economy/society?
Definitions of Globalisation
‘The global circulation of goods,
services and capital, but also
information, ideas and people. It has
shaped all of the 20th century, albeit
with large cyclical variations and has
become an increasingly visible force
in recent decades’ World Bank cited in Needle 2004
p13
Definitions of Globalisation
(cont)
‘A social process in which the
constraints of geography on social
and cultural arrangements recede
and in which people become
increasingly aware that they are
receding.’ Waters cited in Needle 2004 p14
Causes and drivers of
Globalisation
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Rational knowledge
Growth of trade
FDI
MNCs/MNEs
Costs
Technological innovations
World politices
Markets
Regulations
Key questions asked by
academics /researchers
• Does technology act as an environmental constraint i.e.
determining the way businesses must operate – see the
work of Joan Woodward (1965), Galbraith (1972) OR
• Is technology only one factor amongst others influencing
the way in which businesses organise themselves e.g.
does the size of a business play an important role, what of
strategic decisions made by management/people in the
process? e.g. role of production line in manufacturing
industry/organisation of a call centre
Related issues
• Give consideration to the impact of:
• E-commerce, the internet to the
organisation of work
• The impact of new technology jobs –
does it create or destroy them? How?
Where? What type of jobs?
Labour
• Labour interacts with business through the
workings of the labour market and the
activities of organised employees (trade
unions) and unorganised (individual)
employees at the place of work.
• Employment law
• Consideration of numerous key issues e.g.
employee motivation, and commitment,
attitude, values and culture
Key Trends in Labour Market
• Loss of jobs from the primary (mining, agricultural) to secondary
and tertiary sectors – general feature of developed economies –
although output increase
• Job losses in traditional manufacturing industries – result of
global competition, state policy e.g. privatisation
• Job growth in tertiary sector of economy, particularly services –
financial sector, catering, tourism, professions and professional
services
• Many changes in nature of employment resulting from changes
in technology
• Some evidence of companies developing dual labour market –
core and peripheral employees; full time, “flexible” employees.
Use of part-time and temporary employees
Key trends continued
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Dramatic rise in the number of female employees - by late 1990s
women constitute over 50% of labour force
Women still over-represented in certain types of employment e.g.
health, education, and local government – under-represented in
management in all sectors
Some have argued (Dore 1997) that these trends will result in
polarisation of job market – raising of educational entry requirements
for jobs across the board resulting in those with good education and
scarce skills getting challenging jobs, but global
competition/technological change ending the concept of a job for life
At other end of the scale an increasing proportion of population will be
faced with either poor jobs, poor skills, few training opportunities and
unemployment
Key trends - continued
• Note the key importance of the role of
education, training and development in
addressing some of these issues
• Note also the declining role and
influence of organised labour – trade
unions – in the labour market. See later
lectures/sessions on these areas
Culture
• Again difficult to define but Needle offers his
own, and gives others to consider
• Culture represents all human activity that is
socially, as opposed to genetically, transmitted. It
includes norms, values, and beliefs that manifest
themselves in behaviour, practices and
institutions. Culture pervades all areas of
business life. A particular interest is the extent to
which we can learn from the business
experiences of other cultures and transplant
ideas developed by one culture and use them in a
different cultural setting
Culture a complex matter
• Culture interacts with business in three
different ways
• Our socialisation will determine our individual
approaches to work
• Organisations tend to be seen as societies in
microcosm with their own specific
cultures/transmitting this to members eg
identifiable “corporate culture”
• Culture is used as an analytical device to
distinguish one society from another
Culture – Key variable,
environmental factor
• Culture is seen as probably the most
pervasive of the the five environmental
factors discussed – impacting on, and
being influenced by all the other four
• The role of the state, the application of
technology, and the orientations of the
labour force to their work can all be
viewed as culturally determined
Culture free v. Culture specific
• This lies at the heart of the debate about transferring business
practices/ideas from one country to another
• Culture free – culture has less influence over business practices
than for example technology. Culture free view is that ideas and
practices across the world are converging and businesses can
easily borrow and implement ideas from their
counterparts/competitors in other countries
• Culture specific – suggests that business practices and ideas
are rooted in their specific cultures and that transfer is only
possible between nations displaying similar cultural
characterstics
• In practice debate is not either/or but question of emphasis and
balance
Hofstede’s work
• In terms of culture specific hypothesis it is
important that you are aware of/understand
the work of Hofstede (1980)
• His research carried out in the 70s/80s
amongst IBM’s 116,000 employees
worldwide
• Identified 4 (subsequently 5) variables
explaining differences in cultural approaches
across the same global company
Hofstede’s 5 factors
• Power distance – the extent to which members of a society
accept that power is distributed unequally in organisations
• Individualism versus collectivism – the balance in the
emphasis placed on the individual v the collective or group
• Uncertainty avoidance – the extent to which members of a
society feel uncomfortable with uncertainty
• Masculinity v femininity – assertiveness and emphasis on
achievement versus quality of life and care for others
• Long versus short term orientation – long term, future
planning in contrast to short term perspectives
Five key external variables
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The Economy
The State
Technology
Labour and
Culture
Note some factors influence all the
others eg culture, but also globalisation
PEST Analysis
• Sometimes this form of analysis is also eg
given the term PEST analysis where
• Political = State
• Economic = Economy/Labour Market
• Social = Culture
• Technology = Technology
• Note: sometimes referred to as Pestl where l
= labour
Dynamic relationships
• Remember these variables impact on
businesses and in turn are impacted on by
businesses at a number of levels eh
locally,(community, council), local labour
market, planning permission
• Nationally (within UK) Government laws,
interest rates, inflation And
• Increasingly internationally/globally, foreign
exchange rates, Euro, international
competition, EU/worldwide regulations
The Internal Factors
• Four internal factors
• Operations/production management – how
goods/services are made, provided, delivered
• Marketing – the promotion,advertising,
pricing, placement of products services
• The finance and accounting function
• Personnel/ Human Resource Management
issues – management, motivation,
development of staff
Stakeholders
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The employees
The shareholders
The managers
The directors
The customers
The local community
The State
International Bodies