AN ASSESSMENT OF THE EFFECT OF ENVIRONMENTAL FACTORS ON CORPORATE PERFORMANCEÂ (A STUDY OF DANGOTE GROUP PLC)
CHAPTER ONE
INTRODUCTION
1.1Â Â Â Â Â Â Background of the Study
Environment of any organization is dynamic in nature due to the forces that operates in it as a result; managerial activities could not be operated freely. The environment of any organization is the aggregate of all conditions, events and influences that surround and affect it, ( Davis, 1975).
The environment is a major source of uncertainty to a business manager and as such both influences the design of any organization and the configuration of any organizational structure, therefore, without a thorough analysis of the environment, a manager finds it almost impossible to make important operational decisions in his organization, which are essential in the attainment of various business objectives.
Organization of every dimension both formal and informal operates in an identifiable environment. Corporate environment can be described as the totality of situations and factors that can have direct or indirect effect on corporate performance in any given organization.
Organization operates in an environment. As a social institution, business organization has an intricate and important relationship with the environment which it interacts (Hellman 1999).In any business organization, the main purpose of such interaction is to maximize profit and well-being of a firm’s constituents. The mechanism of interaction is the interface between the corporate performance and its environment. The dynamic environment in which the organization operates provides opportunities for it to grow, develop and create value and wealth. It also poses threats to corporate performance. The primary concern is how the organization affects people and natural environment as it produces and sells products or services necessary to satisfy customers, stakeholders and other constituents. By building key stakeholders relationships among government agencies, consumer entities, environmental groups and other constituents, an organization can participate and manage issues and concerns that might otherwise have gone undetected until they had grown into major problems(Rainey 2008). This necessitates the analysis of both internal and external environment by the organization. For any business organization to be able to control its growth, change and development, the corporate manager must seek to control the forces which provide the opportunities for growth and change and those which pose threats and demand responses (Inyang, 2004).
The environment changes have been rapid and unpredictable economic variables have been complex as well as customers have been showing complex behaviours both in local and international market. The most dramatic change is exhibited by technology and competitive pressure. It is vivid that technological change is vital for any corporate firm, since it is a major driven force of competition in industries as well as sources of sustainable competitive advantage. Therefore, a manager will find it difficult to make important operational decisions which are vital to the attainment of various business objectives without a thorough assessment of the environmental factors in an organization.
Hence, business organization cannot successfully operate in isolation, it has to exist and operate within an environment where there is complex interplay between human resources, material resources and other system. We ought to realize that an organization is an integral part of it environment and that they mutually interdependent where the environment plays the role of providing the resources and opportunities to organization for its existence and the organization in turn, offers its goods and services to the people living in its environment(Imaga, 1996).
The environment which consist of the external or macro environment comprise of the economic, social, cultural, political, technological, competitive and natural forces which encroach on the business operations, while that of internal or micro environment concern mainly with the functional aspect of business organisation which include marketing, production, finance, human resources and administration.
The key to survival in the modern competitive environment depends on clearly defined objectives and efficient and effective practices to achieve corporate objectives. However, it is very important for a manager to specifically adopt strategic planning which is essential to company’s survival and growth. Failure for organization to adequately adapt to the environment is a major cause of organizational failure.
Adaptability requires flexibility to identify and assess emerging issues and trends, that might prove to be critical to the organization in future. By expecting future changes and their implications, organizations can avoid the worst problem and prepare for those that are unavoidable and take advantage of possible opportunities.
The most important sole influence on organizational policy and strategy is the environment both within and outside the organization, (Stanner,1998). The more complex, turbulent and dynamic an environment becomes, the greater the impact on human attitudes, organizational structure and process, and therefore since the environment is very complex, all the organizations should direct its attention to their environment when crafting strategies to facilitate their survival.
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1.2Â Â Â Â Â Â Statement of the Problem
The environment which business organizations operate in, is highly complex, turbulent and dynamic and forces in this environment pose both opportunities and threats.
The organization and environment share a closed loop interaction. Environment affects the followed by the generation of response from organization, thus completing the cycle. It implies that effect of environment on the organization cannot be fully understood without evaluating the organizational response.
Furthermore, the environment determines the limits of the organization activities. For any organization to be able to control its growth, change and development, the corporate must seek to control which provide the opportunities for growth and change, and those which pose threats and responses.
No corporate organization can be successful or remain relevant or even survive without adapting to changing environment. To adapt to the changing environment requires efforts to identify and assess emerging situations, events and trends that may be critical to the future of the organization. By anticipating uncertainty and their implication, problematic situations confronting the organization can be avoided and adequate preparation being made for those that are unavoidable, and greater attention being devoted to examining the type of strategies and mechanisms, which organizations use to cope with these difficulties, and take advantage of possible opportunities.
However, it is unfortunate, that so many corporate organizations have been grounded due to inability to scan, monitor, and assess the effect of economic, social, political, technological, as well as internal environmental factors in their organization to identify potential changes, and to determine the strength and weakness as well as opportunities and threats to cope with these environmental challenges. But analysing the situation will attest that there is a need for thorough assessment of environmental factors in order to improve corporate performance.
1.3Â Â Â Â Â Â Objectives of the Study
The main objective of the study is to examine how the environmental factors could affect the corporate performance.
But the study will specifically address the following:
- To identify major environmental factors that affects the corporate performance.
- To assess the relationship between the environmental factors and corporate performance.
- To identify the strategies that should be adopted in coping with environmental problems.
- To offer useful suggestions on measures to improve corporate performance.
1.4 Â Â Â Â Â Research Questions
The following questions are posed in order to enhance the attainment of the objectives of this study.
- What are the environmental factors that influence the corporate performance?
- Is there any relationship between the environmental factors (economic, technological, political, socio-cultural, etc) and corporate performance?
- What are the strategies to be adopted in coping with environmental problem?
- Are there any useful suggestions on measures that can be taken in order to enhance corporate performance?
1.6Â Â Â Â Â Â Significance of the Study
Although much have been written about the effect of environmental factors on corporate performance, a successful carry out of this research would be of immense important to various groups in the society as outlined below:
The study will give an insight into effects, problems and uncertainty associated with environmental factors on corporate performance. It will be of immense help to top managers to know the extent to which environmental factors can influence on organizational performance. The study will particularly uncover the strengths and weaknesses as well as opportunities and threats of corporate entities.
It will reveal the secret of optimum performance amidst hostile or negative environment. It will serve as a source of reference material for government, policy makers as well as students who want to carry out similar research. It will give an insight on various strategies to be adopted in order to cope with the ever changing corporate environment.
Finally, the research will contribute to the existing knowledge on how best to adapt to or handle corporate environmental changes to enhance performance.
1.7Â Â Â Â Â Â Scope and Limitation of the Study
