Natural and International Environment

The natural environment comprises of ecological, geographical and topographical factors (such as a natural resources, weather, mate, location etc) that are relevant to business. Industries were set up historically in places where natural resources were available in abundance. This has created pockets of affluence congestion, and pollution all at the same time. The natural endowments began to be used recklessly leading to air, water and land pollution and ozone depletion gradually . Air pollution is created by dust particles and gaseous discharges that contaminate the air and cause global warming. Over the years the growing number of coal burning factories, thermal plants, automobile etc. have precipitated the problems further. Water pollution occurs mainly when industrial toxic wastes are thrown into the nature’s waterways . Land pollution is caused by the disposal of hazardous industrial toxic wastes underground.

The situation has become quite alarming in recent years when pollution levels have risen to unmanageable proportions causing serious damage to the ozone layer – heating up the soil, water and air.

Thanks to environmental activists, many companies are now seriously trying to come out with (1) eco friendly products (2) modify processes (3) redesign production equipment and (4) recycle byproducts. Steel companies have been forced to spend heavily in cleaner burning fuels and pollution control equipment. The automobile industry has been asked to redesign engines that conform to strict emission control norms. The gasoline industry has been compelled to formulate new low lead or no lead products. And thousands of companies have found it necessary to direct their R&D efforts towards finding ecologically superior products such as Sear’s phosphate free laundry detergent , Pepsi , Cola’s biodegradable plastic soft drink bottle ( Pearce and Robinson).

International Environment:

International development can greatly impact the ability of an organization to do business abroad. For example, fluctuations of the rupee against foreign currencies influences the ability of an Indian company to compete in global markets when the price of the rupee is high against foreign currencies. Indian companies find it difficult to compete in the international market. Conversely when the rupee falls against foreign currencies, new business opportunities open up. International factors influence domestic companies in other ways i.e. by producing new global competitors. For example a number of technological advances pioneered in the United States have led to successful products. Yet in regard to such items as phonographs color televisions, audio and video tape recorders, telephones, semi conductors and computers US producers have gradually lost a major share of the domestic market to foreign competitors who took the basic technology and successfully built upon it. International factors assume greater importance when domestic companies directly depend on imports or exports to certain countries. For example the slowdown in US economy is impacting the fortunes of software exporters in India, who derive more than 60 per cent of their revenues from the Silicon valley . The dismantling of quantitative restrictions, to take another example from 1. 2001, is going to affect the fortunes of domestic companies manufacturing goods, such as dry cell batteries, toys, stereos, telephone equipment, shoes, wrist watches , drinks , and juices, chandeliers , color televisions etc (especially cheap imports from China). Thanks to the advances in transportation and communication technology in the past century almost no part of the world is cut off from the rest . The world is a big global village now and virtually every organization , no matter what it offers and from which place it operates is affected by international developments in one form or the other.

Source: Strategic Management