Openness is one of the most important qualities of a managerial philosophy that fosters internationalization of a business’s activities. Systems approach provides an analytical framework for viewing an organization as an open, organic system that is in continuous communication with its external environment. It is the exchange of information with the external environment that guarantees the survival and prosperity of the organization.
As Exhibit 1 illustrates, there are three main inputs to any organization: people, money and physical resources. These three inputs are processed in accordance with certain economic principles (such as the least-cost combination). The results of this processing are three outputs: products, waste and pollution. Input, processing, and output are coordinated by management through such functions as goal setting, decision making, and controlling. Management, in carrying out this combination of input, processing, and output functions, receives input from the external environment regarding scientific and technological development, governmental policies and public attitudes.
In order to survive, the open system depicted in the exhibit must maintain an internal order that is in tune with the order exhibited by the external environment. Not only must the management of the system have a very good knowledge of the internal workings of the organization; more importantly, it must learn as much as possible about the characteristics of the external environment. It thus appears that the ultimate task of management is to secure a harmony between the organizational objectives and the external environment’s capacities.
The implications for management of these demands for environmental and internal congruence are twofold. First, since the environment is multifaceted and changes continuously, the firm’s management must remain intimately acquainted with it, consider as large a portion of it as possible, and make neither a conceptual nor an operational distinction between the domestic base and the international environment. Second, since the parts of the environment will at any given moment be at different levels of economic development, the company’s management must always keep all alternative modes of entry alive. A company must be ready to switch, for example, from exports to direct foreign investment if the host country moves up the industrial development process.
The environment represents the totality of factors that affect the firm and are beyond the immediate control of the firm’s management. The study of the macro environment places emphasis on the relationship between humans and their natural habitats (exhibit 2). The natural habitat is the set of interrelated and interdependent life support systems that provide the means of human survival. This information becomes input in the organizational decision-making process as the set of uncontrollable variables in the strategic management.
Understanding the macro environment of a country or the world requires understanding the relationship between humans and their natural habitat (exhibit 3). The resources and the carrying capacities of the natural habitat affect both the quantitative aspects and the cultural aspects (such as social, political and economic behaviors) of human life.
