The forces in external environment have their impact on the goals, values, human relations technologies and decision making in a business organisation. At the same time perceptions and beliefs of the managers are also important. It is because of the fact that information from the external environment is passed through the perceptive and cognitive process of individual managers. They analyse the information and take the appropriate decision. The decision will be based on how managers have perceived and interpreted the information by the management. It may, therefore, be concluded that managers of the two firms of the same industry may perceive the same information from the environment differently and take different decisions.
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The forces in the external environment may act a positive stimulant or a negative constraint for the business. When they act as positive stimulant, the efficiency of the business improves and when they act as negative constraint or when prevailing environment is not favorable the business efficiency and managerial performance decline. This situation lowers the image of the management in the eyes of the public. It should also be noted a change in the environment may influence on business unit positively while other business negatively.
For examples, if government allows the import of foreign capital and technology in a particular industry it will mean growth and expansion for the company which law collaborate with the foreign company and at the same time, it may prove disastrous to a small firm and may create fear of survival, if it cannot afford the import of technology. Thus, it is a great challenge before the management to transform the constraints into stimulant or challenge into opportunities for the business.
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Thus, the changes in the business environment had different impact on different enterprises. Some of them lost their top positions and others from the lower rank rose to higher rank. The ways in which companies responded to the changes of environment may be enumerated as following:
Capital Structure
The capital structure has been equity oriented. In the recent past debt has become dominant because the investor were cheated by many new issues. Indian companies have also started moving towards global market for equity and the debt capital example, Reliance was the first to move the global market other companies are following the leaders.
Acquisition and mergers
Now-a-days mergers, acquisitions, amalgations, absorption and takeovers have been the common features of post liberalized economy. The purpose of these acquisition and mergers were to achieve market dominance, market entry, product range and attaining core competence among the companies.
Brand building
Management of the enterprise have started paying more attention and making more expenditure in brand building. Heavy expenditure are incurred in touching the product. Examples; Hyndai, LG, Samsung and new lot.
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Production capacity
Management had also make their responsible in changing of environment in production capacities. As such Indian companies has considerably increased. Modification of MRTP act has also helped in this direction. Reliance petroleum has the largest refinery capacity in the world.
Labour
Management is also responsible towards the attitude of labour unions due to changing their changing. The unions have now been cooperating in the introduction of new technologies. They also provide higher wages and facilities to their workers. In modern business world up gradation of skill has been the order of the day to satisfy the labourers.
Customer focus
The strategy aims at maintaining or leveling the sales throughout the year in order to meet the threats in the environment. During the period of low demands, the enterprise may offer fabulous gifts to the customers or may offer other inducement like price reduction so that customers may buy its products. During peace period, it may charge premium rates on its products, thereby discouraging demand for its products. This strategy explains why fans are cheaper in winder and geysers in summer. Thus, manufacturers, these days, take pains in satisfying consumers expectations. The quality of product has considerably improved. Prices are seasonable maintained. Packaging of the product is beautiful, convenient to handle and durable. The performance of the products has also improved. The main objective of the business now-a-days is to satisfy the consumers.
Distribution and selling
In the modern business world selling goods through direct marketing is the recent development. So, the company management should take responsibility in cost of selling through advertisement as it involves more expenditure. Rural marketing is another area where companies are paying more attention.
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Compensation level
Company management should responsible in the salary and wage sector of his different levels of the management and laborers. There has been considerable increase in the salaries of the managers and engineers. Performance related inceptive schemes for remuneration have been the common feature. Compensation level for general employees has also increased. Some enterprises which are weak and are inefficient in perceiving the nature and dimensions of their environment which are not ambitious and just manage to survive in the dynamic environment follow the path of least resistance or a passive behavior in responding to environmental changes.