Environment Uncertainty

...

2.2 Economic Uncertainty

Economic perspective and constant augmenting scope of dangers proceeding to test even the most big and strong organizations, where organizations face many difficulties as they endeavor to discover development and remain competitive (Kleiner, 2017). The core problems that an organization faces due to economic uncertainty are inflation, interest rates, recession, unemployment and many more.

The year 1929 known as “Great Depression” because of the economic disaster that world faced. Similarly, in 2008 the world experienced the very economic disaster, which lead to great recession and that affected every government and private sector (Amadeo,2017). From this crisis, Greece suffered the most, where they faced unemployment by a great margin, very low income, poverty and many more; on top of that many organization lost their business, as a result the debt of the country increased gradually, and even now (Kindreich, 2017). Hence, the above assertion state that economic uncertainty impact on organization change to adapt the situation.

As mentioned above economic uncertainty affect inflation, high inflation affects greatly to an organization because the currency exchange rate increases, export collapse, the price of the goods and services increased and many more (Burn-Callander, 2015); all these factors change business plan for every organization. For example, every business organization have a common goal to make profit, but due to inflation the organization have uncertainty for return of their investment because the purchasing power for the consumer is reduced by great number and thus create a huge gap in cash flow in the market ( Wijesekera, 2017). Therefore, in order to cope with the inflation, the retail business came up certain changes in their business that would help them, such as, change in their inventory management, pricing and promotions (Forbes, 2008).

Another factor is interest rates, this factor plays major impact on economy, for example, when the interest rate in increased, the cash flow in the circulation is reduced, thus help the to keep the low inflation. Moreover, it also effects the consumer and organizations to borrow money from the bank or financial institutes, as it becomes more expensive, hence, causing changing their behavior in spending their money. Furthermore, increase in organizational expenses, resulting lower profit as they pay their debt with high interest; finally lowering them to investment in different sector or in the stock market (Saunders and Cornett, 2008).

High interest rates restrict the business organizations for their investment and research and development. In increasing in interest rates might build credit defaults in banking sectors, thus it may drive cost push inflation because of increment in cost related with higher expenses of business financing (Central Bank of Kenya, 2012). As a result, when organization does not borrow money from the bank and be tight on their finances, the organizations undergo in their changes, to avoid slowing down the growth of the organization and maintain their profit margin (Kisaka, 1999). The changes usually the organization makes are cutting cost that is office expenses, not hiring part-time employees, reduce over time payment, dismissal of part-timer, decreasing in outsourcing and many more (Evans, 2014).

The next factor is unemployment, due to economic uncertainty, the organization are forced to lay off their employees (Ibrahim et al., 2015). to reduce cost, therefore meaning in labor market the number of candidates getting jobs and on top that people getting lay off adding to that number, thus unemployment come into the scene.

At the same time many organization using this increasing in unemployment rate during economic crisis as advantage, because unemployed workers willing to get a job at low wage (Bartlett, 2014). So, many organizations lay off some of its employees, whose performance in the organization low or have bad reputation or demand high wages, to get suitable candidate at low wages; in this way the organization can reduce their overhead cost and increase profit (Masaoka, 2009).

2.3 Technology Uncertainty

Technological uncertainty includes extra level of external uncertainty to an organization, industry, or government. Over time in advancement of technology, will have a tendency to have higher technology uncertainty (Audretsch, 2001). However, technology uncertainty creates a scope for the organizations, whether or not the organization will adapt the new technology before their respective competitors (McMullen and Shepherd, 2006).

It is seen the case of Nokia, Nokia was of leading phone company back in 1998 to 2007, so why Nokia was declined in the market? There are several reasons behind their failure but one of their core reason was advancement in the technology. In late 2008 when google released android operating system the mobile phone market dramatically changed, at that time Nokia’s main competitors was iPhone’s iOS (Singh, 2010). Therefore, Nokia had three major competitors. Moreover, Nokia foresaw the advancement of technology in this sector, but their major failure was unwillingness to grip the rapid change in technology (Savov,2014) and hence, they always lagged from other major player in the market, like Samsung, Sony, HTC, and iPhone both in hardware and software (Jia and Yin, 2015). Since then Nokia started to lose market share, but at 2011 there was dramatic drop in their market share of smart phones. Since then they fail to recover their market share. According to survey in 2012 by “mobile Internet user behavior research” revealed by CNNIC that 53 percentage of Nokia’s user will shift different smart phones (CNNIC, 2012). Due to gradually in decline in the market, causing the company to suffer significant loss, forced the company to layoffs 10,000 employees globally, in 2012. Even then the company could survive in the market, so at the end of 2013 Nokia sold the company to Microsoft (Rosoff, 2015).

The Case is seen in Kodak, when the company Kodak established in 1892, they was the first one come up with photographic film in form of roll and then onwards they was the leader player in the market along with their innovation in their sector. According to a study by Harvard cited by Pangarkar, in 1976 they hold 90% in the film sales and 85% sales in camera alone in U.S. therefore, from this figure it can be concluded that the organizational plan for Kodak was running smoothly (Pangarkar, 2012). Over the period when there was advancement in the technology sector, caused the analog film to transform in digital imaging, the company Kodak made a good effort transforming into digital imaging,