Effect of Environmental Factors That Affect Both Suppliers and Creditors

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By: Site Engineer, Staff

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Suppliers’ and Creditors’ Environment

The relationship existing among the suppliers, creditors, and companies is crucial for the company’s long-term survival and growth. The relationship must base on faith and commitment and should be long-lasting.

The suppliers and creditors should be dependable during times of difficulty because the company should have a continued supply of needed inputs. A company depends on its suppliers not only for the timely delivery of materials but also for financial support and services.

During emergency conditions, the company may have to demand quick delivery of soft credit terms. The deliveries of items and material deferred or a lot may be broken into sub-lots. Only if the company is competent enough and it’s able to address some of the following aspects will it be continued support from its suppliers.

  • Whether suppliers offer desired services.
  • Whether suppliers have the ability reputation, reciprocal dependency, etc, and share value engineering benefits and benefits accrue due to other cost-reduction programs.
  • Whether suppliers offer the right quality of materials and whether the cost is low.
  • Whether prices offered by suppliers are competitive concerning the quality of products offered.

Business Environment Faced by Suppliers

  • The continued supply (as per the schedule of deliveries) of raw materials, components, consumables, parts, tools, tackles, etc at competitive prices.
  • Availability of finance for the implementation of strategies, plans and projects as per schedule.
  • Availability of energy at costs compatible with the profitability of the company.
  • Perception of creditor company’s past payments working capital management, etc.

Specifically addressing the above issues a company can make forecasts about its position in the market and implement the needed strategies to sustain itself.

It is only rarely that a company can process all the ideal factors quality, quantity, price, and human and material resources. However, an accurate evaluation of suppliers and creditors is crucial for a company to gauge its business environment.

It has come into the understanding that youngsters are highly ambitious; therefore, it has become necessary for companies to pay marginally higher salaries to attract employees of other companies.

The ability of a company to sustain its efficient employees is necessary for its success. In the business environment, the reputation of a company and the total pay package that it offers are the main considerations of personnel.

From an employee, a good company is one which has long-term ability to meet the personal needs of employees is stable and permanent, pays reasonable salaries to its employees, looks into the welfare of employees, is valued for its product quality and service rendered and has a good reputation for the social behavior of its employees.

Offshore Workers

The wage pattern in all countries is different and this fact has been well utilized by many companies around the globe. The data processing and back-office work are shifting to countries where facilities in computerization and trained people are available to handle the information.

Technological Environment

Technology has been rapidly changing in recent years. Likewise, obsolescence is also fast-changing. The advent of computers has shortened distances and virtually there has been an explosion of information. This technology boom has even changed the nature of competition. By innovating technology and streamlining operations, companies have expanded their operations and have raised customer’s expectations. Thus, the customer’s satisfaction transforms into a customer’s delight and customer’ success.

The technological changes also result in shrinking the product life cycles from years to months. A product introduced today may become obsolete the next day. The time to develop new products and services and to introduce new concepts has greatly reduced.

Some of the key factors which influence operations in a technological environment are as follows:

  • The technological developments are vital for a company as they decide its competence. The rate of change in technology, cost of change, and time to assimilate and install a new technology are some of the important factors to be considered.
  • While going in for new technologies the companies are responsible for taking care of the social environment and man-machine systems. The effects of technology, the health of employees, and the social environment should also be taken into consideration.
  • The fields of information technology and management have taken quantum leaps in the recent past. Businesses have tramped new rules and companies have gone into the introspection of their operations. The business processes have been redesigned to avoid arbitrary fragmentation of natural business processes which causes extensive information exchange data redundancy and rekeying of desired information. The system slackness which was unable to cope with uncertainty causing the piling of inventories, buffers and other assets is being made more adaptable and responsive. The high ratio of checking and control to value additions are being reduced. The technology has involves the know-how and know-why which refer to ways of designing, manufacturing or using things and which transform into tine products, processes, and services rendered or delivered to customers. Furthermore, technology is strategic as it has far-reaching confluences on the future of a company. It has become a major stimulus for change resulting in economic progress. Countries that dominate are technologically advanced in the global scene today. Developments in agriculture, transportation, health, communication, etc are all dependent on technology. Every pillar of human civilization is affected by technology.
  • The source of technology is important for any company competing in a market. Several companies develop their technology through in-house research whereas others depend on collaborations. However, technology becomes old by the time it is imbibed. Small improvements are made on the existing technology using techniques like value engineering. These modify the material flow processes and other design features. The cost of technology is an important factor and must be considered during its sourcing.

Environment Scanning

Companies need to comprehend, identify and classify the environment and its factors to draw meaningful conclusions. Although these environmental factors discussed above encompass all the relevant dimensions, it should not be forgotten that the environment is highly dynamic and it is humanly impossible to be accurate about these factors and their interrelationships.

All the elements act together in a coordinated fashion and no single element can be exclusive of the others. A change in the environment triggers off a series of reactions. The effect of a rising in petroleum prices on the business environment of a company, the effect of education on product preference, the effect of adulteration of edible oil on its sales, etc can be cited as examples.

Since the changes in the environment affect various factors that are vital to a company, to varying degrees at various times, it is difficult to evaluate these influences. Probable cause and effect relationships can be drawn between various factors and their impact on the environment.

The environmental uncertainties cause strategy managers to go for short-term plans. They operate with flexibility, focusing on speeding up operations to be in tune with the fast changes in the environment. Therefore, companies tend to become reactive rather than being proactive and hence face the risk of losing leadership in business.

It may be true that some strategies are successful. But it may be very difficult to anticipate the impact of changes in the remote and operational environments of a company. The impact of changes on other alternative strategies also cannot be easily evaluated. Hence, a lot of data should be collected, classified and analyzed.

In spite of the inaccuracies in predictions, it is worthwhile to study the effect of various changes on the environment as it helps to narrow down the alternatives and avoid unwanted options.

Assessment of the environment does not lead to the best strategy but it leads to the elimination of all non-promising alternatives. The cost effort and time spent on environmental scanning helps in justifying the efforts that go into the entire exercise.

 

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