Global Challenges for Business Management and Leadership - Essay Example

Global challenges for business management and leadership Report on Global Challenges for Business Management and Leadership (January 16, 2009) Prepared by: Table of Contents Section Page No. Introduction 1 United Nations Organisation 1 General Motors 3 Norwich Union (Aviva) 4 Imperial Tobacco 6 Conclusion 7 Recommendations 8 References 9 Global challenges for business management 1 Global Challenges for Business Management and Leadership Introduction Political, economic, social and technological factors constitute the macro environment, which keeps challenging managements with the continuous changes that occur in it. The challenges are more daunting in a globalised world. For businesses, global interdependency is a fact of life and it impacts the way they are managed. For leadership, the task of integrating diverse resources for achieving organisational aims and objectives in the backdrop of changing environment is a process of continuously coping with crisis situations and learning. This report attempts to analyse the challenges facing an organisation like the United Nations (UN) and the manufacturing / service businesses represented by the General Motors (GM), Norwich Union (Aviva) and Imperial Tobacco. For the UN, the political conflict challenges, for GM, the energy and economic challenges, for Aviva, the climate change challenges and for Imperial Tobacco, the socio-political challenges will be analysed and appropriate recommendations will be presented in this report. United Nations Organisation (UN) The UN took its birth in the aftermath of the 2nd World War and is entrusted with the responsibility of maintaining peace and order among nations. However, it is faced with diminishing status even as political conflicts and wars rage around the globe. This is a leadership issue in conflict resolution for the UN. For example, while there was global consensus for war on Afghanistan in the light of the overwhelming evidence, the same was missing in respect of the US war against Iraq. Iraq ignored UN resolutions and Global challenges for business management 2 US ignored mainstream European opinion against the Iraq war. The situation is not different even in the case of the on-going conflict between Israel and Hamas in the Gaza region, who ignore UN pleas for ceasefire – even the UN relief camp in Gaza is on fire! These are only two examples of the many such events. The issues involved in these conflicts generally revolve round geo-political interests, cultural and religious differences, dominance of few over many, etc. Conflicts and wars impact businesses adversely and to that extent will make the task of achieving Millennium Development Goals set by the UN, more difficult. Important elements of this plan that are to be achieved by 2015 are poverty elimination, universal education, women empowerment, healthcare, disease control, environment sustainability and global partnership for development (UN, Millennium development goals report, 2007). Political conflicts can be also be faced and resolved by the UN by exercising leadership skills as applicable in business world. In this process, UN will have to find ways to increase the participation and effectiveness of the large number of its members who are not presently part of its Security Council. This would mean giving weightage to wider public opinion in matters that concern global piece and security. The Thomas-Kilmann Conflict Mode Instrument (TKI) identifies different leadership styles as i) competitive ii) collaborative iii) compromising, iv) accommodating and v) avoiding styles (Thomas and Kilmann, as quoted in Mind Tools, 2009). Knowing ones style and using that strength to reconcile and accommodate differing points of view helps to resolve conflicts. In this process the Interest-based Relational approach theory (IBR) comes in handy. The process involves systematic management attributes like identifying the problem, putting together all relevant facts, brainstorming for possible solutions, and negotiating a solution (Mind Tools, 2009). Ability to carefully listening to different view Global challenges for business management 3 points, communication skills and patience in negotiation process while keeping the aggrieved parties under control are all essential to this process and is commonly practiced in the business and industrial world. Industrial strikes, wage negotiations, mergers and acquisitions are some of the major conflict areas in business world and resolution is achieved by successful negotiations and skillful management. This should show the direction for UN as well. General Motors GM is a global company with its foot-print across many developing and developed countries. It is in direct conflict with other major non-US auto makers like Toyota, Nissan, Honda, and Volkswagen etc. in sustaining and improving its market share, even as it faces other US companies like Chrysler or Ford, along with whom it is currently negotiating for a bail-out package to avoid bankruptcy (Moore, WSJ). Two major challenges for GM are the economic crisis in the US and around the world, and the pressure it is facing in improving product designs for improved environmental compliance (UN Conference on Climate Change). The economic crisis resulting from the subprime crisis led to collapse of major financial institutions and banks in the US. These events led to drying up of consumer and business credit, falling sales and production, job losses, and default in loan repayments in a major way. The drastic volatility of oil prices which went up to US $147 per barrel in July 2008 and then falling to $ 40 per barrel now, added fuel to the fire. In this age of globalised business, the situation is not much different for competitors either. Toyota reported a loss following a 21.8 percent fall in sales in November 2008 Global challenges for business management 4 while Nissan reported a 19.8% drop in sales in November 2008, with its global production contracting by 33.7% (Washington Post). Dramatically reduced consumer confidence, lack of credit and falling consumption is now resulting worldwide recession – especially in the US and in European Union area. The congressional negotiators examining the bail out package are insisting on a time bound programme for product improvements, which will reduce fuel consumption and enhance environmental compliance. This would mean making high capital investments in research and development, new fuel efficient models, expensive retooling, re-negotiations with the United Autoworkers Union, all to be achieved within strict time limits. Thus, the challenges for GM are many fold and will test its leadership mettle to the fullest extent. It will have to face difficult times both within the organization from unions, at the global level from competitors and environmentalists. In a way these challenges are all linked and a solution can be found only if GM takes the courage to invest in future in a socially responsible manner. It will have to redo its product designs with economy and efficiency of production as core objectives, build smaller and more fuel efficient cars that produce less pollution and finally renegotiate with unions - from the platform of ‘sink or survive’ together. Norwich Union (Aviva) Aviva, the UK based insurance company of over 200 years standing, has business interests in 27 countries around the world, serving 45 million customers (Norwich Union, 2009). It covers both life and general insurance business. Its subsidiaries in the UK are Norwich Union General Insurance (NUGI) and Norwich Union Life (NUL). Aviva brand name is more prominent in the international market. Global challenges for business management 5 Aviva has assumed social responsibility for ensuring that its operations are environmental-friendly in the backdrop of worldwide concern for climate change. In accepting this challenging goal, it has identified five areas where energy consumption takes place and put in place policies that help to reduce or completely neutralise carbon emissions (Norwich Union, Corporate social responsibility, 2009). These are energy use, property management, paper use, waste management, travel and transport. Setting targets for reduction of energy usage, using energy produced by renewable sources only, redesigning offices for maximum energy efficiency, recycling copier paper to the extent of 80%, reducing and recycling waste paper and plastic products used in offices and finally, rationalising travel and transport policies that encouraged staff to reduce use of motor cars, increase use of bikes and reduced travel between offices – are all part of the company-wide programme for achieving the goal of the first carbon neutral insurance company (Norwich Union, 2009). This philosophy has leadership quality that not only economises Aviva operations but it is also a potent weapon for ‘green-marketing’ its products. With the increased concerns about climate change it is becoming all the more important for corporations to project a socially responsible image – both for products and for own operations. The challenge for Aviva is to extend these ideas to its overseas operations. Developing countries like China, Russia, Brazil and India, with low per capita consumption figures, are reluctant partners in the international efforts to control climate change, especially if these efforts involve more capital expenditure or dependence on expensive technologies, generally developed by rich nations. Aviva is an insurance service provider and may not face much resistance if it decides to implement similar policies on climate change as it does at home. By doing so, it can position itself more competitively vis-à-vis its rivals in insurance business as goodwill is one important factor in successful marketing. Imperial Tobacco (ITC) Global challenges for business management 6 This international company is in the business of cigarettes, paper and related products and has operations in 160 countries of the world. It has brands of significant value and promotes its products aggressively. Its motto is to enhance shareholder value which is in direct conflict with the increased awareness of the health risks associated with tobacco products. The challenge to ITC is to sustain and grow its profitable business and project its image in a way that the social benefits of ITC operations balance or out-weigh the negative impact of its products. ITC has chosen the path of skillful and extensive corporate communications to achieve this. ITC’s Annual Report and Accounts, 2008 can be taken as a specimen of excellent corporate communication policy. In response to the UK Government’s ‘Consultation on the future of tobacco control’ ITC submitted its view point on September 8, 2008. This response has two sides to its character – one that strongly refutes many of the reasons cited by the government for controlling tobacco products’ business, and the other which portrays ITC as being fully conscious of its responsibility towards reducing smoking (ITC, Press release, 200, p.78). Similarly, its website carries extensive information on tobacco and health related issues, the WHO framework convention on tobacco control and similar issues. It publicises its own research work on smoking and health, and questions adverse findings of the health industry on tobacco related risks both for active and passive smokers (ITC, Smoking & Health, 2009, p.80). In a similar fashion, it communicates extensively on the social economic benefits that accrue to its 40 thousand plus employees as well as to the farming communities around the world. Its case studies publicise its image as a responsible corporate citizen. Global challenges for business management 7 Thus ITC faces its global business challenges by defending its core business, responding scientifically to health concerns of using tobacco products, and aggressively projecting its corporate governance merits. It has gathered the shareholders and stakeholders on its side in its opposition to stringent legislation and communications is its effective tool. Conclusion The globalised world of business is always challenging. While technological innovations keep bringing in new challenges, political conflicts and socio-economic changes are equally important in understanding the business climate and formulating strategies. Managing conflicts, keeping pace with the challenging demands of energy, health and environmental concerns, and demonstrating leadership and communication skills are all critical for successfully managing global businesses. These are the issues and challenges faced by the UN, GM, Aviva & ITC. Recommendations UN should adopt the principles of conflict resolution that is widely practiced in the business world. It should balance its dependence on the economic and political power of rich nations with the more popular and majority will of the rest of the nations and modify its institutions to achieve this. GM has no alternative but to reinvent itself as a car maker that is fit to do business in a world of increasing efficiencies in respect of mileage and pollution control. It must assume leadership in research and development of engines that depend less on fossil fuels and more on non-conventional energy sources like electric cars, Global challenges for business management 8 Global challenges for business management 8 fuel cell cars or hybrids. Aviva should replicate its ‘carbon neutral’ policy in all the countries where it operates and make this as its unique selling proposition, especially to gain business from public sector units for non-life insurance products. ITC’s success so far in defending its business through aggressive but convincing communications policy may not be good enough in the long run. It should start diversifying such that a significant part of the revenue is generated by non-tobacco business. At the same time, it should pursue its efforts to reduce or eliminate the presence of carcinogenic chemicals in the smoke inhaled, without losing the charm of smoking. This is indeed a great challenge. Global challenges for business management 9 References ITC Press Release, September 8, 2008. Available at: http://www.imperial-tobacco.com/index.asp?page=78&newsid=633 [Accessed on January 16, 2009]. Mind Tools, Conflict Resolution, http://www.mindtools.com/pages/article/newLDR_81.htm. Moore H.N., (2008), “Will Obama bail out GM, Chrysler and Ford?”, Wall Street Journal, November 7, 2008. Available at: http://blogs.wsj.com/deals/2008/11/07/will-obama-bail-out-gm-chrysler-and-ford/ [accessed on December 27, 2008]. Norwich Union, 2009. Corporate social responsibility. Available at: http://www.norwichunion.com/ [Accessed January 16, 2009]. UN Conference on Climate Change, Retried November 7, 2007 from http://unfccc.int/meetings/cop_11/items/3394.php UN, Millennium development goals report, 2007. Washington Post, (2008), “Toyota reports steep drop in sales”. Available at: http://www.washingtonpost.com/wp-dyn/content/article/2008/12/24/AR2008122402422.html [accessed on December 28, 2008]. Read More