The twenty-first century is a period of unprecedented change in organizations. The popular Business press constantly documents organizational restructuring, reengineering, downsizing, and other assorted changes. Even during the robust economy of the late 1990s, many large Companies were shedding jobs at an incredible pace. Terms such as downsizing and rightsizing may suggest a one-time fix, but many experts view this as an ongoing process for organizations of the future (Richman, LS, 1993). So what is organizational change? Organizational changes are departures from the status quo for smooth trends (Huber, GP, 1995). It is the process of altering or modifying the current state in terms of behaviors or functions (Harrington, N, 2008). The forces of change are everywhere, they can be found within the organization itself and they can be found in the external environment. The internal environment is affected by the organization’s management policies and styles, system and procedures as well as employee attitudes. The external environment is affected by political, social, technological and economic stimuli outside of the organization that causes changes (Benowitz, EA, 2011). Why do organizations change? Organizations change for many reasons but there are six broad forces that bring about change: workforce changes, such as diversity; technology changes, such as mobile computing; economic changes, such as stock market fluctuations; competitive factors, such as mergers and acquisition, social trends and world political factors, such as china opening up for trade (Robbins, SP, 2005). Here, we are going to focus on world political factors as they are major factors that cause organizational change. All organizations are affected to some degree by political and legal systems in their environments. The political system is an important variable in virtually all aspects of managerial decision making and activity. Like the other factors, the political factor provides both constraints and opportunities to organizations. It is important because it is the source of laws and regulations that govern the operation of business. This factor includes local, regional, national, and international legal and political systems. For example, both Canada and France have content laws for music, movies, print, and broadcast businesses that require companies to ensure sufficient levels of Canadian or French content (Hodge, BJ, 2003). Perhaps the most obvious impact of government is through its powers to tax and regulate. Governments often attempt to spur economic activity through tax cuts or suppress demand through the application of taxes. For example, local governments may offer tax abatements to businesses willing to locate within the government’s jurisdiction. In 1993 several states in the US engaged in heated competition for new Mercedes Benz and BMW manufacturing facilities. The competing states typically offered elaborate plans that involved relief from property taxes for as long as ten years (Taylor A, 1994). In order to understand the political factor and its effect on organizations, we have to discuss the world economy. In modern history, the dominant effective boundaries of the capitalist world-economy have expanded steadily from its own origins in the sixteenth century, such that today it encompasses the earth (Wallerstein, IM, 1976). Today’s organizations face several key challenges. Even rich and powerful companies with long traditions are not immune to obstacles in meeting these challenges. The recent problems faced by such industry giants such as General Motors, Kodak, IBM, Sears, and countless dot-com internet companies (Edin M, 2002). These companies have been facing challenges and one of the reasons is the global challenge, as in managing organizations in a global environment. Virtually all businesses are affected in one way or another by a host of global issues ranging from tariffs, to the relocation of firms offshore, to import/export restrictions. Currently, mere geographical borders are no protection from the effects of actions taken by businesses and governments all around the world. Almost every business is affected in some way by the seemingly constant crises in the Middle East, perhaps the most notable of which surrounds the importation of oil (Scott, RW, 1992). One need only look at news papers or newsmagazine over the past few years to see how dramatically the world political and business landscape has changed. Communism has fallen in most of Eastern Europe. The shift to market economies in these countries presents business with opportunities, but political instability also creates great risk. In Western Europe the formation of a unified economic market has caused great concern for many businesses, particularly firms outside the European community (Williamson, O, 1981). Several events in Asia may have important implications for business organizations. Recent turbulence in Japan’s economy has made the task of balancing trade more difficult. Because of their own recession, the Japanese are spending less on American products. The economic and political situation in china is equally uncertain. As china has become a more open and adopted a more market-based economy, it has become an increasingly important trade partner for western business. Yet, human rights organizations throughout the world have pressured the Chinese to grant greater political freedoms in exchange for favorable trade relations (Mehdi K, 2006). Additionally, in 1997 the former British colony of Hong Kong, a major Asian economic center, reverted to the people’s republic of china. No one knows what long-range impact this change will have on Hong Kong-based businesses. Also, adoption of the north American free trade agreement (NAFTA) and recent revisions in the general agreement on tariffs and trade (GATT) will reduce trade barriers between the united states and its trading partners throughout the world. This, too, will create new opportunities for American businesses, but it is also likely to increase competition. Many businesses may expand the scope of their operations. Some will relocate to take advantage of lower costs of doing business and some will be challenged by new competitors. The point is that no business, big or small, can ignore events throughout the world (Knopf AA, 1987). Government’s impact on business extends beyond domestic businesses. Another area of rapid change in recent years is international trade. The signing of NAFTA has removed or substantially reduced trade barriers among the United States, Canada, and Mexico (Harbrecht D, 1994). There was much debate over the anticipated impact of NAFTA on the three trade partners. Between December 1996 and December 1999, U.S trade with china and Mexico tripled from a total of 14.3 billion per month (import and exports) to 47.2 billion per month in 1996 dollars. In Europe, the EU plays an even more pervasive role in business and trade among the member nations. While the United states, Mexico, and Canada have not given up substantial autonomy with respect to trade and business issues, the 15 members of the EU have ceded considerable economic, labor, and trade authority in an effort to develop consistent rules among member nations. Thus, labor laws, environmental laws, agricultural regulations, and myriad other rules apply to all members of the EU. Trade barriers have been removed. People, assets, and capital can move freely among member countries. On January 1, 1999, 11 members adopted a common currency-the euro-that will replace their national currencies. On January 1, 2002 the euro began circulating. The adoption of this common currency will facilitate trade and reduce transaction costs. It is also a statement of the shared destiny of the member nations (Cook WJ, 1990). Organizations exist within some form of economic system that exerts tremendous influence on them. There are, of course, many forms of economic order, ranging from mixed-private enterprise (i.e. capitalist) systems of North America, Western Europe, and Japan to centrally planned economies like those of china, North Korea, and Cuba. Numerous economies are undergoing fundamental transformations from central planning to some form of market-based economy. The extent of government control has an important effect on the types of organizations that exist and how those organizations are managed. Central planning often dictates the specific form of organizations as well as how the organizations will be managed. One problem many former communist countries faced as they moved from centrally planned economies to market economies was that they lacked financial institutions such as banks, brokerage firms, and equity markets. In market economies owners and managers decide on specific characteristics of organizations (Mintzberg H, 1971). Even in the relatively free market environments of North America, Western Europe, and Japan, government still exerts significant control over the economy. Political debate in the United States typically focuses on how much control over business and the economy the federal government should exercise (Walczak M, Dunham RS, 1994). Like every other elements of an organizations environment, the economic sector is constantly changing. For example, the German economy, renowned for its robustness, has experienced some difficulty since the early 1990s as a result from reunification. Unemployment rates increased to the level of unknown since World War II. Tight monetary and fiscal policies helped to drive up the value of German currency, making German products expensive in the United States. Some companies such as BMW and Mercedes Benz, have relocated manufacturing outside Germany while others have attempted to purchase U.S companies (Dwyer P, Miller KL, Neff R, 1995). From the early 1990s through the turn of the century, the once mighty Japanese company has stalled badly. Banks and the government have even resorted to interest-free loans to stimulate the economy, but little progress has been made. By contrast, the economies of France, Spain, and Ireland, once saddled with double digit unemployment, have recently shown signs of significant growth and robustness (Schechter MG, 2002). Part of the change in the economic sector is that economics has become more of a global issue and less restricted to local and national economies. Products that were traditionally developed and manufactured in the United States such as steel, motor vehicles, electronics, and heavy equipment are now made in many other locales. Many companies operate in multiple locations throughout the world. Sometimes products are developed in one nation, manufactured in another, and sold in still a third location. General Motors, Ford, Volkswagen, Honda, and Toyota, for example, manufacture and sell cars throughout the world and are and are affected by economic conditions in each of the countries where they operate (Brittain J, 1980). Ratification of NAFTA and the WTO, along with the EU’s move to a single currency (among 11 members) and unrestricted trade among members, increase the importance of global economies. Although local economies are still important, businesses cannot ignore global economic conditions (Felice WF, 2010). International conflict can bring about major changes in an organization, as it is likely to affect the economy or even international businesses. During the first half of the 1970s, the world economy has been buffeted by collapse of the international monetary system, the rise in oil prices, the boom in commodity prices in 1973 and 1974 and by unprecedented inflation, followed by a recession, in almost all major industrialized nations. In this unstable world economic situation, instability has been most marked in trade in primary commodities (Rangajaran LN, 1978). Organizations are affected by the economy and the economy can be affected by world politics, which can facilitate change in organizations directly or indirectly (Geomans HE, 2011). The end of the Cold War and globalization processes have led to renewed interest in the study of transnational relations and the impact of non-state actors on world politics. Some authors praise the emergence of a global transnational civil society (Boli and Thomas, 1999 Florini, 2000, Held, 1999), while others denounce an increasing transnational capitalist hegemony (Gill, 1995). Both positions ascribe to non-state actors quite an extraordinary influence on outcomes in international politics. It is certainly true that transnational actors — from multinational corporations (MNCs) to International Non-Governmental Organizations (INGOs) — have left their mark on the international system and that we cannot even start theorizing about the contemporary world system without taking their influence into account. But there is little systematic evidence to sustain claims that the transnational ‘society world’ has somehow overtaken the ‘state world’ (Czempiel, 1991,). Rather than analyzing transnational and interstate relations in zero-sum terms, it is more useful to study their interactions and inter-penetration. As Reinicke put it, ‘governing the global economy without governments is not an option. Yet for global governance to succeed, governments will also have to enlist the active cooperation of nonstate actors’ (Reinicke, 1998). The role of organizations in monitoring the implementation of national treaties, their relevance in the organization of development projects, and their importance in the representation and education of civil society has been acknowledged and valued by both international organizations and national governments. Nongovernmental actors also play an important role in the negotiations of international agreements. Moreover, many UN agencies work closely with organizations. Organizations have played an important part in numerous environmental conventions, and their role is becoming more clearly defined. The presence of organizations has also been instrumental in the evolution and development of many international trade agreements.
References
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