Businesses take on different forms, yet most of these include characteristics of objectives, structures, and, most importantly, people. People are social elements and, over time, tend to form several interdependent structures and relationships, from families to tribal systems. Businesses are no different, with these interdependent relationships creating a foundation to achieve common goals.
As the world evolves into a complex system dominated by significant and formal global structures, businesses have followed suit as social entities necessitating several perspectives regarding their management. But how and why does business management vary across the world?
There have been significant differences in productivity between businesses in different parts of the world, most of which reflect variations in business management practices. In this article, we dig deep into business management and explore factors that alter its approach globally.
Understanding business management
For any business in any location to become successful, it is vital to streamline all of its operations effectively to achieve every organizational goal. This is where management comes in. Business management incorporates several activities that aid in a business’s effective planning, organization and smooth running.
The importance of management in a business’s profitability is inevitable, yet there is no ‘one size fits all’ strategy in regard to business management. This is because several factors affect businesses’ operations, planning and success strategies. Therefore, tactical and tailored techniques and approaches are required in implementing business plans.
Factors that influence business management
Businesses across the globe are subject to internal and external factors that may affect them in different ways. Internal factors are aspects of an operation that the company can control, including capital generation, the atmosphere within the workplace, and the technology it operates with.
On the other hand, businesses do not have much control over external factors, yet they significantly affect how entrepreneurs run their businesses. These factors incorporate structures required to sustain a business operation, and every management practice must be developed to suit the specific system in a location. Here are some factors that foster varying business management practices across the world.
Cultural factor
One critical impact of increased globalization in the world’s economy is the regular engagement of different cultures in the business scene. Wherever a business establishes itself, its growth and expansion will result in interaction with customers, colleagues and competitors from varying cultural backgrounds. As such, cultural diversification in a location or within an organization is a critical determinant of how business management should be practiced.
For instance, a well-established business in the US would have to employ a different management technique when dealing with customers or operating from a location with a different culture. In most cases, business managers look to gain a competitive edge managing in specific areas and the global job market by earning an online MBA from a top university such as Aston, based in the UK.
Business management practices in culturally diverse environments center on cultural sensitivity and accepting the differences and similarities in each culture. A business’s attitude in a cultural context depends on the perspective, and business management in such diverse locations aims to expand this perspective through sensitivity training and consequences for not being culturally aware.
That said, an organization’s culture also plays a critical role in business management. This culture incorporates a collection of values, expectations and practices that controls and informs the actions of all employees. Culture propels business management, which, by definition, controls the attitude of entrepreneurs, managers and employees toward a common objective.
Social factor
Aside from cultural diversification, another significant aspect of a business’s external environment is the societal factor. Social factors are aspects that affect the lifestyle, thoughts, feelings and beliefs of customers. Every society has to contend with different factors that have the potential to change what people want and need to buy, how businesses market their goods, and how the customer views a product or service.
Strategic analysis is a vital aspect of business management, and the proper identification of specific societal factors through frameworks such as SWOT, TOWS and PEST analysis could result in the better tactical alignment of a business to society. Some possible social factors that affect businesses and management include the following:
- Social classes and influences on the society.
- Average disposable income.
- Economic inequalities.
- Level of education.
- Preferences and customer buying habits.
- Average retirement age.
- Health consciousness in the society.
- Conflict within the society.
- Wealth of people.
Underdeveloped countries can be used as a case study. These areas need help to make technology and other infrastructural elements ubiquitous. As a result of the current societal factor, most businesses in these areas engage in localized marketing strategies as part of their management.
However, due to the prevalence of technology and better infrastructure, businesses in thriving locations typically find it harder to keep up with customers locally. In this case, business management adapts its practice to suit the current social factor by employing strategies such as e-commerce.
Economic factor
The economy covers all activities concerned with the manufacturing, distribution, and use of goods and services. As with the two other factors, the economy forms an environment with several aspects that significantly impact businesses. Several economic factors exist, but economists have listed the level of customer spending, product prices, future investment decisions, and the potential number of workers as crucial influences of the economy on a business.
Each economy features different tax rates, policies, interest rates, wages, and several governmental activities that inevitably impact every operational entity. While some of these factors do not directly relate to a business, they could affect its future investment value depending on how well it’s managed to suit the economy.
Economic factors are attached to services, products and finances and primarily refer to a location’s financial state. However, the economic state can determine several vital details involved in a business, including taxes, asset value and customer demand. Managing a company by analyzing the different economic factors that affect its operation can be extremely helpful in increasing the revenue stream, growing the business, and surpassing the competition.
Conclusion
The ultimate aim of all businesses remains the same: to maintain profitability. However, how this is achieved would depend on streamlined business management practices developed based on the prevalent external factors in a location. As we have seen, the cultural, economic and societal backgrounds vary in different places, and each business must recognize each element and include them in its management.
