The dimension of the general environment representing the overall economic health of the country or region in which the organization operates.
The economic dimension represents the general economic health of the country or region in which the organization operates. Consumer purchasing power, the unemployment rate, and interest rates are part of an organization’s economic environment. Because organizations today are operating in a global environment the economic dimension has become exceedingly complex and creates enormous uncertainty for managers. The economies of countries are more closely tied together now. For example, an early 2000 economic recession and the decline of consumer confidence in the United States has affected economies and organizations around the world. Similarly economic problems in Asia and Europe have had a tremendous impact on companies and the stock market in the United States.
One significant recent trend in the economic environment is the frequency of mergers and acquisitions. Citibank and Travelers merged to form Citigroup. IBM purchased Price Water House Coopers Consulting and Cingular is acquiring AT&T Wireless . In the toy industry the three largest toy makers – Hasbro, Mattel and Tyco – gobbled up at least a dozen smaller competitors within a few years . At the same time however, there is a tremendous vitality in the small business sector of the economy.
The dimension of the general environment that includes federal state and local government’s regulations and political activities designed to influence company behavior.
The legal political dimension includes government regulations at the local, state and federal levels, as well as political activities designed to influence company behavior. The US political system encourages capitalism and the government tries not to over regulate business. However, government laws do specify rules of the game. The federal government influences organizations through the Occupational safety and Health administration (OSHA) , Environmental Protection Agency (EPA) fair trade practices libel statutes allowing lawsuits against business, consumer protection legislation , product safety requirements , import and export restrictions and information and labeling requirements. The Federal Communications Commission, which regulates broadcast television to limit potentially offensive material, has been striving to extend its regulatory authority to the cable networks. Incidents such as Bono’s use of a four letter word at the 2003 Golden Globe Awards and the outrage over Janet Jackson’s wardrobe malfunction at the 2004 Super Bowl have triggered increased attention to what is shown on television. Many organizations also have to contend with government and legal issues in other countries. For example, the European (EU) has recently adopted new environmental and consumer protection rules that are costing American companies hundreds of million of dollars a year. Companies like Hewlett Packard, Ford Motor Company, and General Electric have to pick up the bill for recycling the products they sell in the EU.
An interest group that works within the legal political framework to influence companies to behave in socially responsible ways.
Managers must recognize a variety of pressure groups that work within the legal political framework to influence companies to behave in socially responsible ways. Automobile manufacturers toy markets, and airlines have been targeted by Ralph Nader’s Center for Responsive Law. Tobacco companies today are certainly feeling the far reaching power of antismoking groups. Middle aged activists who once protested the Vietnam War have gone to battle to keep Wal-Mart from destroying the quality of small town life. Some groups have also attacked the giant retailer on environmental issues which likely will one of the strongest pressure points in coming years. Two of the hottest current issues for pressure groups that are also related to environmental concerns are biotechnology and world trade. Environmental and human rights protesters have disrupted World Trade Organization meetings and meetings of the World bank and the International Monetary Fund to protest a system of worldwide integration that has food, goods, people and capital freely moving across borders.