Global Environments and the Interconnections

¶ … global environments and the interconnections between business, the society and the public economy that a global economy comprises have definitely changed the way business is done in the last 10-20 years. Businesses have become more keen in dealing with and managing their social responsibilities, both because of the pressure from civic groups, but also because many of tem have a global image they need to keep and improve. In the same category are environmental issues and environmental disasters that companies operating in chemical or extracting industries, for example, need to keep in mind. In many ways, the primary responsibility for a company, to produce profits, has diversified, reaching social or environmental areas, with a direct impact on the business itself.

One of the other characteristics of a global business environment is the increased level of competitiveness in industries. Capitals or people can move much easier and faster around which creates a certain flexibility at these levels. This means that many companies can drive costs down and benefit from an increased cost competitive advantage.

As such, mergers and reorganizations have become the tool many companies use to become more competitive. The explanation for this is quite simple: the synergy effect. The synergy effect refers to the fact that the new company that is form is likely to be more efficient than the sum of the two companies' values. In this sense, we may sense that the synergy effect is best explained by the equation 2+2=5. Examples of mergers have been numerous, especially in the automotive or media industries. In the former, mergers like the ones between Nissan and Renault or Daimler and Chrysler were meant not only to promote a synergy effect, but also to ensure the presence in distant markets through the partner. In my opinion, given the challenges of the business environment in the 21st century, this trend is most likely to continue.

So, in this sense, a company can prepare for environmental instability by increasing its own potential. Increasing employee efficiency and effectiveness, decreasing the costs of production and striving to achieve customer satisfaction will make a company less exposed to negative reactions from the market.

I can't imagine Jack Welch referring to anything else but General Electrics with this statement, so the explanation should take this path and that of strategic management. In my opinion, his statement is more actual than ever and refers to the forces of the market that can steer your business into bankruptcy or acquisition unless you take control and lead it. This includes having strategic objectives to build on, creating the proper means of reaction to the opportunities and threats that come from the market and the strategic planning that can make sure that the strategic objectives of the company are realized. As a person who was always one step before the market, Jack Welch's advice addresses businessmen to take action rather than sit and wait, to mould the market and their companies' reactions themselves.

The organizational size does not necessarily affect the company's change in one direction, however, in my opinion and taking as example again General Electrics and the changes that have occurred there during the Jack Welch era, the size determines the rapidity with which these changes are actually implemented. With the will of the board of directors, anything can actually be achieved within the company. Having referred to General Electrics, there were two issues that Jack Welch wanted accomplished, as mentioned in his own autobiography: removal of bureaucracy and a certain restructuring of the business. Even if believed impossible to realize, through methods and concepts such as "boundaryless" or the Six Sigma formula, Jack Welch implemented change despite the organizational size.

In this sense, Jack Welch provided the formal vision statement, but he also created the right means and the proper mechanism for this vision to be achieved. These were the strategic and tactical plans, the efficiency quotas each employee needed to reach, the evaluating mechanisms, etc.

Telecommuting is becoming a genuinely popular practice nowadays, but it brings about two important problems. First of all, not all industries can use telecommuters, mainly because some have special equipment that cannot be transported or installed in the employee's home. Generally, things that use only the computer are excellent sources for telecommuting, but this brings us to the second problem: keeping an eye on the employee. In my opinion, this problem could be overcome simply by measuring the effectiveness of the employee at home. In this sense, he will have every interest to properly follow a strict timeline and organize his schedule, even if he is not supervised.

Quick decisions generally do equate to more flexible organizations because they are applied much easier and much faster and, even more important, the company can react upon the first market response. In a larger company, less flexible, quick decisions may have larger implications.

Mission statements rarely change, from what I know, during the lifetime of a company. Certainly, some of the strategic goals may change, perhaps some of the means to achieve these, but the mission should stay the same, because it has little to do with the business itself, but with the creed with which the customers have already learnt to associate the company.