Societal Forces on Management

Topics: Fast food, Inflation, Food Pages: 6 (1821 words) Published: May 14, 2010
Discuss how societal forces influence the practice and theory of management. Do you think management techniques are a response to these forces? (Samson and Daft, 2009:78).

Management, as defined by Davidson et al. (2006), is “a set of activities including planning, decision making, organizing, leading and controlling directed at an organization’s resources (human, financial, physical and information) to achieve organizational goals in an efficient and effective manner” (p. 5).

According to Bartol et al. (2007), societal forces in general environment are factors that impacts on the organizations out of its control. Societal forces are often listed as economical, technological, socio-cultural, political-legal and international forces (Bartol et al., 2007). Evaluating each of these forces in a business management is crucial for a manager to carry out management theory and practices.


Bartol et al. (2007) define economic element as activities involves profit gaining, buying abilities, spending patterns and distribution of wealth in a system. Many organizations faces economic influences that beyond their control and predictions. Inflation, recession, interest rates, currency exchange rates and unemployment are few of the important economic forces in business management (Bartol et al., 2007).

Wessels (2006) explain that during inflation, general prices of goods and services will increase. As a result, a company must adjust the prices of its products or services in order to compensate the difference in cost due to higher prices of raw materials (Wessels, 2006). Company may also need to adjust wages or salaries of its workers to reflect the real cost of living on that period of time unless there is a long term contract that fixed an agreed amount (Wessels, 2006).

Davidson et al. (2006) state that when unemployment rate increases, buying power of consumer decreases because less people are working. During economic downturns, it will be a lot harder to find a job and companies tend to redundant some of its workers in order to save cost (Wessels, 2006). Wessels (2006) also mentioned that recession could occur when unemployment rate continues to rise.

Davidson et al. (2006) point out that a company may force to pay the bank a larger sum of money than it expected due to increase in interest rates. This often causes delay in expansion of business (Davidson et al., 2006). However, some companies may take advantage of the high interest rates in foreign market and shift investment offshore that offers better return (Davidson et al., 2006). In converse, lower interest rates encourage smaller business to borrow loans from bank for business upgrade and investments (Davidson et al., 2006).

When economy reaches its full potential, Ford Motor benefits from moderate unemployment in Australia and consumer demands for automobile is strong (Davidson et al., 2006). There will be no issues in cutting labor cost and production can be maximized. Low inflation rates allow company to maximize its sales due to lower cost in resources and raw materials (Davidson et al., 2006). The company takes advantages to improve production process with equipments and plant upgrade when the interest rates are low.

During the global economic crisis that happened in late 2008, many organizations were being affected. General Motors Corp. which also known as Chrysler LLC, faced crisis when there was insufficient fund to operate the business (McKee, 2008). The government refused to offer financial assistance and forced the company to face bankruptcy in early 2009 (McKee, 2008). The company managed to survive by filing bankruptcy protection after it made a deal with Fiat and its former owner Cerberus lost its 80.1% share (BBC News, 2009).


The advance of science and technology nowadays creates much more opportunities to most organizations. Many organizations with higher vision are willing to invest a large sum of money...
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