The External Assessment
Strategic Organization
Management
Federal, state, local, and foreign governments are major
regulators, deregulators, subsidizers, employers, and
customers of organizations.
Political, governmental, and legal factors, therefore, can
represent key opportunities or threats for both small and large
organizations.
In the face of a deepening global recession, countries
worldwide are resorting to protectionism to safeguard
their own industries.
European Union (EU) nations, have tightened their own
trade rules and resumed subsidies for various of their
own industries while barring imports from certain other
countries.
The EU recently restricted imports of U.S. chicken and
beef. India is increasing tariffs on foreign steel. Russia
perhaps has instituted the most protectionist measures
by raising tariffs on most imports and subsidizing its
own exports.
Russia even imposed a new toll on trucks from the EU,
Switzerland, and Turkmenistan. Despite these measures taken
by other countries, the United States has largely refrained from
“Buy American” policies and protectionist measures, although
there are increased tariffs on French cheese and Italian water.
Many economists say the current rash of trade constraints will
make it harder for global economic growth to recover from the
global recession.
Russia has said that “protective tariffs are necessary to allow
Russian companies to survive the recession.” This view
unfortunately is also the view at an increasing number of
countries.
Governments are taking control of more and more companies
as the global economic recession cripples firms considered
vital to the nation’s financial stability. For example, France in
2009 took a 2.35 percent equity stake in troubled car-parts
maker Valeo SA.
President Nicolas Sarkozy of France has created a $20 billion
strategic fund to lend cash to banks and carmakers as many
governments become more protectionist.
The United States of course also is taking equity stakes in
financial institutions and carmakers and is “bailing out”
companies too.
The UK government in 2009 took a 95 percent stake in the
banking giant Royal Bank of Scotland Group PLC in a
dramatic move toward nationalization. The government gave
the bank $37 billion and insured another $300 billion of the
bank’s assets.
Similarly, the U.S. government has taken over Fannie Mae
and Freddie Mac and has raised its stake even in Citigroup
to 40 percent.
As more and more companies around the world accept
government bailouts, those companies are being forced to
march to priorities set by political leaders. Even in the
United States, the federal government is battling the recession
with its deepest intervention in the economy since the Great
Depression.
The U.S. government now is a strategic manager in industries
from banking to insurance to autos. Governments worldwide are
under pressure to protect jobs at home and maintain the
nation’s industrial base.
For example, in France, Renault SA’s factory in Sandouville is
one of the most unproductive auto factories in the world.
However, Renault has taken $3.9 billion in low-interest loans
from the French government, so the company cannot close any
French factories for the duration of the loan or resort to mass
layoffs in France for a year.
Technological forces represent major opportunities and threats
that must be considered in formulating strategies. Technological
advancements can dramatically affect organizations’ products,
services, markets, suppliers, distributors, competitors, customers,
manufacturing processes, marketing practices, and competitive
position.
Technological advancements can create new markets, result in a
proliferation of new and improved products, change the relative
competitive cost positions in an industry, and render existing
products and services obsolete.
Technological changes can reduce or eliminate cost barriers
between businesses, create shorter production runs, create
shortages in technical skills, and result in changing values and
expectations of employees, managers, and customers.
