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The purpose of this paper is to discuss the external and internal factors affecting Orica’s management functions. This will be accomplished by explaining how Orica Company has been able to deal with each internal and external environmental factor that affects the company. The external environment assessment of Orica has been conducted after the internal environment analysis. The internal environment analysis of Orica seeks to identify the strengths and weaknesses in its management system. It focuses on factors that can be easily improved or changed by the management of Orica Company. In the identification of internal factors affecting Orica, a model has been used. The model includes the following: strategy, structure, style, staff, skills, systems, and shared values.
In doing the external assessment exercise of Orica, five key external environmental factors have been considered; these are economic, political, social, technological and competitive factors. The scope of the external environmental factors assessment embraces the analysis of threats and opportunities impacting Orica Company.
2.0 Background Information
Orica was founded130 years ago as Jones, Scott and Co. It supplied explosives during the Victorian gold rush. The company was later bought by Nobel, which later merged with several British chemical manufactures forming Imperial Chemical Industries (ICI). In July 1997, ICI Australia became an independent Australasian company. It changed its name and on February 1998, the company became to be known as Orica (Orica Annual Report, 2010).
Orica is a publicly owned Australian company and employs about 14,237 people in around fifty countries all over the world. It is estimated that its annual sales is about Aus$ 6.5bn. Orica Mining Services is the leading producer of commercial blasting solutions. As a company Orica has a long history of technical excellence. Its innovative products have given the company a commercial advantage which has contributed to the company’s success. The company engages in research and development which is view to be very important and determines the future of the organization. Orica operates three main primary businesses:
- The Orica Mining Services- this is one of the global market leader in the supply of commercial blasting and explosive systems to the quarrying, mining and infrastructure sectors in Australia.
- Orica Chemicals- this is one of the leading global suppliers of sodium cyanide used in the extraction of gold. It also suppliers chemical products to the mining industries, water treatment industries and other industries.
- Minova- this is one of the leading manufacturers of strata support systems, water control, and ventilation and geotechnical solutions globally.
For a business to succeed it requires two elements-the environment and the individual. Business environment consists of all the factors that have an implication on the operation of the business (Stanat 1990, p. 102) . The term business environment implies all the external factors, forces and institutions that beyond the control of the business management and they directly or indirectly affect the business enterprise (Vitt 2002, p. 34). Business environment influences the operations of the whole business system. On the basis of the degree of intimacy with the firm, the environmental factors of a business may be classified into two- internal and external.
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4.0 Internal and external environment Analysis
4.1 Internal environment
The internal environment has a direct impact on the business. Some of the internal factors are controllable because the management has a direct control over these factors. The management can alter and modify such internal factor as its personnel, organization, physical facilities, and functional means (Davenport & Pursak 1998). The internal environment that has a considerable effect on the strategies and other decisions of internal organization of Orica Mining Services are as discussed below.
- Management structure and nature
The structure of Orica as an organization influences the business decisions. For instance, the composition of the board of directors has been having a great influence on the decisions that management makes. The style and structure that Orica organization puts in place may lead to delayed decision making or a quick decision making and thus influencing the operation of the company.
- Internal power relation
Another internal factor that affects the operation of Orica is the relationship among its employees. The relationship among the three levels of the organization i.e. administrative, executor and operative, has a considerable influence on the success of Orica Company. The mutual co-ordination among the three levels is very important in the operation of Orica industries. In order to achieve its strategies and vision the relationship among the employees working in these three levels should be cordial.
- Human Resource
The human resource of Orica organization is an important internal factor since it contributes to the strength and weakness of the organization. In order for Orica to continue leading in the manufacture of mining services it should employ human resources having characteristics like quality skills, high morale, good attitude and those who are committed towards success.
- Company image and brand equity
The image of the Orica Company in the outside world has a significant impact on its internal environment. Though Orica Company has build a good reputation to the outside world, it is important for it to reconsider its branding and company image for they significantly help in raising the finance, expansion, making joint ventures and alliances, entering purchase and sale contracts, and launching new products.
- Company Mission and Vision and its objectives
For Orica company to continue existing in this competitive market it should have the ability to think about the future by being innovative and creative. The company management and employees should have the realization that the mission is a medium through which the objectives of the company can be achieved. The value system of those at the helm of business affairs has an important bearing on the choice of mission and the objectives of any organization.
- Resources (physical assets and facilities)
Orica mining services is a large company and therefore, for it to remain competitive in the market it should be able to meet the customers demand. Facilities like a firm production capacity and its level of technology influences the competitiveness of the company.
4.2 External Environment
The external environment of a business has an indirect influence on the business operation. These factors cannot be controlled by the business. Some of the external environment factors affecting Orica Company are as explained below.
- Social environment
The social environment of a given nation determines the value system of a society which consequently affects the operations and functioning of the business (Davenport & Pursak 1998. Orica as an organization has been affected by sociological factors including costs structure, mobility of labour and customs and conventions. The demand of Orica’s products has been affected the changes in customs and habits of people in the society. These social environment factors have been having a far-reaching impact on the operation and performance of Orica industries because they determine the mobility of labour, the work culture and work groups. Orica Company has been facing problems due to the changing attitude of people towards their way of life. It has been forced to adjust its products in order to meet these changes. Also, the company has social responsibilities to its customers and employees. The company imposes social costs to its adjacent environment, for instance pollution which is highly discouraged by the government through taxes, fines and legislation (Pirttimaki &Hannula 2004, p.257).
- Political Environment
The political environment of a given nation influences business operation of a business to a greater extent (McGee & Prusak 1993). Orica Company has not been an exception. The political environment is influenced by the political organizations such as ideology of the government or parties, the philosophy of political parties and the nature and extent of bureaucracy of primary groups. The absence of political stability in some countries affects the exportation of the company’s products.
- Economic environment
The aggregate nature of economic system of Australia, the social economic infrastructure and business cycles has a significant influence on Orica performance. The company has been affected by the changes in income level of the people, tax rates and the changes in government economic policies. As the economic level of people goes down there is reduced demand for goods and services.
The major task of every business is to sustain customers because it exist and depends on its customers. In choosing customer segments a number of factors needs to be considered including dependability, profitability, stability of demand and the extent of competition (Batemann & Snell 2004). Orica Company has been facing competition from other companies which produces similar products. The company has been reacting to the increase in competition in various ways such as cutting prices, improving quality of its products, spending more in its promotion strategy and cutting the operation costs. All these strategies have brought with them associated consequences such as reduction in profits due to the increased costs.
- Technical Environment
The Orica Company has adopted modern technology and this has influenced the type the quality of its products and the level of production. The Orica Company has been forced to adopt upto-date technology in order to remain competitive in the market. Although this has led to better services and products, it is associated with increased expenses.
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As the management team of Orica Company evaluates the company strategies, they must consider the internal and external environments to see if there is balance between opportunities and threats, and if strengths and weaknesses are in equilibrium, before deciding which strategy to implement. By analyzing the internal and external environmental factors, the company would be able to achieve its strategies and mission.