All business entities are under the pressure of different factors inside and outside the organization. In order to survive in the global environment, companies in building their strategies have to aware of the outside forces such as political and economic situation inside the country and in the global community, new technologies in the market, socio and cultural influences. POLITICAL FACTORS
Political factors that affect the activity of an organization are: tax policy, employment laws, environmental regulations, trade restrictions and political stability inside the country. As company maintains sales and service organizations as well as manufacturing operations in many different countries it must deal with a great variety of laws and policies, which additionally change all the time. For example in many countries of European union now taking place dynamic changes in employment law.(Federation of European employees, 2007) Also many countries are now environment concerned and try to reduce pollution. Philips as a large manufacturer can face some problems because of that.
At the present time a lot of countries where Philips Company has its business are experiencing high levels of economic growth at the moment. For example according to bbc.co.uk, the economy of the country grew at the fastest rate for two years in the second quarter of 2006 and as it was reported by Office for National Statistics (ONS) reached 2.6% in August 2006. Inflation rate has increased to 2.5% in June 2006; however, the average inflation in 2006 is likely to around 3% that is normal for UK. Because of the high economic growth inflation and interest rates are likely to rise. In 2006 the Bank of England kept the interest rate at 4.5%. For Philips high economic growth means the increasing purchasing power of the population that is desirable for the company.
The social and cultural influences on business vary from country to country, region to region. It is very important that such factors are considered.
Philips operates in many countries therefore they are in vast and diverse socio-cultural arena. It is important for Philips to adapt to these changes in customers expectations from region to region and being able to cater according to them. People in developed countries now also start to pay more attention to the culture of a company, and that fact that Philips is a highly ethical company, which cares about its customers and suppliers will win them more respect from people. Another point about social factor is that people in many countries become wealthier so more now will be able to afford prices of new technology.
Technology is vital for competitive advantage, and is a major driver of globalization. The main benefits of a better technology are that it allows cheaper and better standard of quality for products and services. It also offers to consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc.
Philips Company is very dependant on technology. New innovations can significantly improve operations of the company. On the other side if competitors of the company will become more technologically advanced Philips can loose its market share.
Research and development is very expensive and now companies have less time to invent and develop new technologies.