Management Structure
Management Structure: “The sum of all external forces, circumstances, and institutions that are outside the control of an individual commercial company yet have a substantial impact on the operation and development of individual businesses.”
In other terms, the term “business environment” refers to the sum of all external factors affecting a firm’s or industry’s structure and activities.
The membership of the board of directors, the number of independent directors, the level of professional management, and the share-holding pattern are all examples of organisational structure. The type of an organization’s organisational structure has a considerable impact on the decision-making process. A corporate organization’s effective operation necessitates that its organisational structure be favourable to swift decision-making. Delays in decision-making may cost a company a lot of money.
In a commercial organisation, the board of directors is the highest decision-making body. It makes broad policy choices on the firm’s growth strategy and oversees its entire operation. As a result, the board of directors’ management skills is critical to the smooth operation of a corporation and the attainment of its overall goal and objectives.
It has been advised that the number of independent directors be raised in India in order for the board of directors to function efficiently and transparently. Many private corporate enterprises in India are run by family members of the entrepreneurs, which is not conducive to effective operation.
Internal Situation
As a result, increasing the level of professional management in private corporations is extremely desired. The arrangement of stock ownership has substantial implications for corporate management. In several Indian enterprises, the promoters own the bulk of the stock.
In various other countries, the public’s shareholding structure is fairly diverse. Financial institutions in India, such as UTI, LIC, GIC, IDBI, IFC, and others, have considerable shareholdings in prominent Indian corporate enterprises, and their nominees play a crucial part in these companies’ main business strategy choices.
The board of directors is made up of directors who are elected by the shareholders. The company’s senior managers are then appointed by the board of directors, who make numerous business choices. The majority of shareholders, on the other hand, assign their voting rights to the management or do not attend the annual general meeting.
As a result, the majority of shareholders see firm ownership as merely a financial investment. However, in industrialised nations such as the United States, stockholders have gained a significant amount of power in recent years.
The failure of corporate titans like as Enron and WorldCom in the United States has raised investor knowledge as well as suspicion. Shareholders have launched several lawsuits against directors and management in recent years, accusing them of disregarding their interests or even defrauding them by failing to declare dividends. As a result, there is a global discussion over how to run a company properly.
Management Structure: The Business Environment’s Nature
The entirety of all external elements that impact the operating and decision-making of an organisation is referred to as the business environment.
Different parts of the business environment are interconnected and interdependent. A change in one element has an impact on the others. For example, the Economic Environment has an impact on the Non-Economic Environment, which in turn has an impact on the Economic Situation.
Relative: The concept of the business environment is relative. It vary from one nation to the next, and even from one area to the next. As a result, the Business Environment is determined by the location or nation in which the business is done.
Inter-Temporal: Because the business environment varies throughout time, it is also an inter-temporal idea. The Business Environment may stay static in the near term, but it does change over time. As a result, the business environment is more or less dynamic.
Uncertainty: The business environment is generally unpredictable since forecasting the future environment is very challenging. In addition, as the environment changes rapidly, uncertainty rises.