After reading this article you will learn about the environmental and functional challenges faced by managers in an organisation.

Environmental Challenges:

In a liberalised and globalized economy, managers face the following environmental challenges:

1. Economic environment:

In the market economy of today, consumers are free to buy what they want and producers are free to produce what they want. Keeping in view the economic system of a country, demands and preferences of consumers and system of ownership (private or public), managers decide whether or not they should carry business operations in the host country.


Natural resources (oil, iron, coal, natural gas, uranium etc.) of a country also attract foreign enterprises to manufacture goods for domestic and international markets. Infrastructural facilities like roads, schools, hospitals, transport, communication system etc. affect economic development of a country. An economically developed country attracts and supports foreign enterprises.

2. Political/Legal environment:

Political environment of a country also offers challenges to international managers. A politically stable economy where rules and regulations affecting the business operations do not change frequently; where incentives (reduced interest rates on loans, tax subsidies, market protection etc.) attract foreign business; where international economic communities agree to reduce trade barriers on international trade (in the form of tariffs, quotas, export restraint agreements and “buy national” laws) to protect domestic business (more the trade barriers, less the international business), offer great advantage to foreign enterprises.

3. Cultural environment:


International business is also affected by cultural environment of a country. The value systems, social and ethical beliefs, understanding and interpretation of symbols and language of different cultures have direct impact on business practices. The international manager must, therefore, get accustomed to cultural environment of the economy to establish his business there.

Functional Challenges:

The following challenges are faced by managers in carrying out these functions:

1. Planning:

Planning becomes complex in the changing business environment. At the domestic level, local market conditions, technological factors, growth of products and markets, strengths and weaknesses of domestic and foreign competitors and a host of other factors become challenging to effectively plan the business operations.


At the international level, economic, political and legal stability of economy, availability of technology and finance, ease of formation or strategic alliances, understanding of the environmental circumstances and many other issues affect planning. Managers who are able and competent to forecast environmental opportunities will be successful in making optimum plans.

2. Organising:

Managers have to reorient their organising abilities to face the competitive challenges in domestic and international markets. Line organisations cannot be suitable forms of organisations and managers have to adopt project, matrix or network organisation structures.

They should be competent to manage organisation structures and designs, manage people and change, both at the national and international levels. Firms operating at the international level should give authority to managers in each country to manage their businesses rather than exercising authority from the head office.


3. Staffing:

With increase in knowledge and competence of workers, managers have to be skilled in making appointments so that right persons are selected for the right jobs and expenditure on training and development is worthwhile.

4. Directing:

As management is moving towards excellence and managers deal with people from different social and cultural backgrounds, they must understand how cultural factors affect individuals, how motivational forces and communication vary across cultures and, thus, interact with work groups of different cultures.


Even while interacting with people of the same culture, managers adopt democratic styles of leadership, non-financial motivators and two-way communication to get better responses from the employees.

5. Controlling:

The basic issues with respect to control are operations management, productivity, quality, technology and information systems. Managers have to take care of distance, time zones and cultural differences (in international management) while controlling the business operations. Control through computers and management information systems is replacing direct controls through close contacts and supervision.