How the organisational environment influences rational strategy processes

1. Introduction

The global business scene and its increased uncertainty during the last years have made organisations and their managers more aware of the environmental forces that influence the life and therefore the corporate strategy of every organisation.

Our new century has a climate of tremendous improbability and fast changes and for this reason strategy has never been more complicated and more important than it is now.

This varies of course for every industrial sector but it can be determined by using two dimensions:

- the speed of change which determines how dynamic or how static the conditions are.

- the degree of the environmental comprehension which determines how simple or how complex a certain situation for an organisation is.

The macro environmental factors are the ones a single person or company cannot influence, although there are companies in the global economy that have a tremendous power. But there are still always limited t o the economic surface they are operating on.

Therefore every organisation needs to adapt to the changing environment.

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2. Environmental factors

It is necessary to define the different environmental factors in order to understand the link between the rational strategy developments. The most significant of them are the economic environment, the legal and political environment, the social environment, and the technological environment. In addition there are cultural and infrastructural obstacles which can be important as well.

2.1. Economic environment and rational strategic planning

The main factor when analysing the environment and making a compilation of different factors should always be the economic consideration. The economic state of a nation or a region can be measured by the gross domestic product, household and per capita disposable income, investments, unemployment rate, the exchange rate of their currency or the local competition in a specific sector or branch. The changes in international trade and flow of capital, i.e. the foreign direct investments, follow a cyclical pattern.

As a result of prosperity and recession economies throughout the world are always hit by shortages in a wide variety of commodities, like steel, lumber, paper and nowadays oil and different provisions of services.

Although forecasting the rise and fall of demand in cyclical markets, the best example is the oil and electronic semiconductor industries, is difficult, because many unpredictable variables can occur, the strategy architect has to have a definite understanding of the effects of the economy on the industry and on his particular firm.

The company that develops a strategy or even a concrete plan, based upon the effects of economic reflections, has an individual advantage over competitors who have not done so. The most effective advantage is when the economic turn-around is at the peak.

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2.2. The influence of political environment on rational strategy

The political environment of each state refers to the decision which is taken by the local, national and supranational governments in form of legislation that of course influence the organisations situated within that borders. Supranational bodies as the European Union, which is the most powerful, have laws that affect the competitive framework within the companies operate. As a consequence, different aspects must be analysed:

- involvement of governments in private enterprises

- governmental policies on subsidies

- tariffs

- export financing

- research and development funding

- the national planning on corporate level All these factors do have an enormous impact on the strategy of every company and pose enormous threats to the validity of the current strategy. In addition there are political disturbances such as strikes, riots and civil commotions which make it even more unpredictable and complicate to carry on an existing strategy.

2.3. The impact on corporate strategy through technological progress

Technological advances are continuously achieved in the business world. There are advances in old- economy industries though the linkage of the new technology, i.e. the automotive with the IT or any other old technology as well, and there is the tremendous advancement in absolutely new technologies like the bio- and nanotechnology to name only these two. Therefore, what was important yesterday is of minor interest today. Technological factors are inevitable element in the analysis of the macro environment. To create a new business, the possibility to produce new products and services or to improve the existing ones or to find new ways of distribution

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