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DYNAMIC ROLE OF MANAGEMENT IN GLOBAL ECONOMY

* Prof. Dr. Uday Salunkhe and Prof. Dr. P.S. Rao

We are living in a world of sweeping changes and swift movements. In every

developing civilization a period comes when old instincts and habits prove inadequate

to altered stimuli, and ancient institutions and moralities crack like hampering shells

under the obstinate growth of life. The type of change which has been witnessed in

the realm of business during the past two centuries since the dawn of the Industrial

Revolution era in the West, is of such a fundamental character that it has materially

altered the entire fabric of man’s way of life. While the Industrial Revolution, thus,

has had its decisive impact on the environment, the latter too has reacted in turn by

having its own influence felt on business. Recent times have witnessed a significant

intensification of this two-way process. From the point of view of business, it can be

safely stated that the most serious problem that business everywhere faces today

concerns the challenge of this rapidly changing environment. An attempt is made in

this paper to critically examine the dynamic role of management in global

economy.

Introduction:

While business is the engine of growth for any country, Management is the key driver

for economic growth .The concept of global economy has now become a reality. The

Indian economy is passing through the critical phases of globalization and

liberalization. We are facing tremendous competition from MNCs.

* Prof. Dr. Uday Salunkhe, DIRECTOR and Prof. Dr. P.S. Rao, DEAN
Prin. L.N. Welingkar Institute of Management Development and Research
Lakhasmi Napoo Road, Matunga (East) Mumbai – 400 019

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Many of the Indian companies have accepted the challenges and started adapting

themselves to the change. Hence, it becomes necessary for them to bring the required

changes in the functioning of their organizations. At the same time, the role of the

management has been changing with the time and level of organizational growth and

expansions.

Business growth and business expansion in different parts of the world will

increasingly not be based on mergers and acquisitions or even on starting new, wholly

owned businesses there. They will increasingly have to be based on alliances,

partnerships, joint ventures and all kinds of relations with organizations located in

other political jurisdictions.

Emergence of Management:

Human wants are unlimited. The more you get, the more you want. We have

expanded our business from local level to state level, from state level to national level

and now we have extended our wings in International market. International business

has become the key driver for economic growth of any country. The concept of global

economy or global village has now become a reality as we have stepped in global

market. Entering in global market is not so easy, but it can be easy if we apply the

concept of “Working Smarter than Working Harder”. This implies the Dynamism

in Management.

Management includes the actions of planning, organizing, directing, coordinating,

controlling and evaluating the use of people, money, materials and facilities to

accomplish missions and tasks. It can also be defined as the activity consisting of

those tasks that are performed to ensure that the mission of a project is fulfilled by,

planning and controlling its scope, schedule, costs, resources and communication.

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Hundred Years ago, on the threshold of World War I, when a few people were just

becoming aware of management’s existence, most people in developed countries

(perhaps four out of every five) earned their living in three occupations. There were

domestic servants – in Great Britain, the largest single occupation, (a full third of all

workers), but a very large group everywhere, even in the United States. There were

farmers – usually family farmers, who accounted for more than half the working

population in every country except England and Belgium. And finally, there were

blue-collar workers in manufacturing industries – the fastest growing occupation and

the one that by 1925 would embrace almost 40% of the U.S labour force.

Today domestic servants have all but disappeared. Full- time farmers account for only

3% to 5% of the working population in the non-communist, developed countries, even

though farm production is four to five times what it was 80 years ago. Blue- collar

manufacturing employment is rapidly moving down the same path as farming.

Manual workers employed in manufacturing in the United States now make up only

10% of the total work force in the United States and elsewhere – with manufacturing

production steadily rising and expected to be at least 50% higher. The largest single

group, more than one-third of the total, consists of workers whom the U.S Bureau of

the Census Calls “Managerial and Professional”. And a larger proportion of the total

adult population than ever before – almost two- third in the United States, for instance

– is now gainfully employed everywhere.

Management has been the main agent of this unprecedented transformation. For it is

management that explains why, for the first time in human history, we can employ

large numbers of knowledgeable, skilled people in productive work. No earlier

society could do this. Indeed, no earlier society could support more than a handful of

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such people because, until quite recently, no one knew how to put people with

different skills and knowledge together to achieve common goals.

A sustainable business is that business which encompasses itself in the dynamism of

the environment. Forces and counter-forces, which influence our environment, are

always concurrent. Any healthy business will overcome the illness of the environment

and the situation. The function of an effective management education is to instill in

the managers, solidarity and dynamism. It is rightly said that the only thing constant

in the world is CHANGE. A durable business has to absorb new changes without

losing its originality and ethos. In the state of constant flux the management and the

industry has to respond to such a stimulus by a paradigm shift - to a new viewpoint or

modification of its ideals. No doubt, there will be resistance but every debate will be

welcomed, for the real challenge will lie in overcoming the obstacles. Applying the

concepts of classical thermodynamics and transfer of mass and energy, we will come

to certain conclusions relevant to modern time management. We talk about

Dynamism – Change in Management… But how it is possible?

Management Dynamics:

Dynamism in Management is possible by inventing Creative Thinking and New

Innovations in Management. "Creative Thinking" means original thinking (i.e. a

novel way of perceiving, or rearranging data). "Innovation" by contrast is the

successful application or commercialization of creative thinking and applies to the

various business processes (e.g. financing, production, marketing, distribution), as

well as to the improvement of existing (and/or development of new) services and

products.Creative thinking is not an ability restricted to an artistically gifted minority,

but rather a learnable competency for all. Since creative thinking is a learnable

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competency, it can be increased by training programs. However, in order for the

creative thinking skillset to really add value, the organizational culture must also be

redesigned to support its rollout as successful innovations. This requires a lot of hard

work and appropriate resources. (As noted by one of the world's most prolific

inventors, Thomas Edison, "Creativity is 1% inspiration and 99% perspiration").

Innovation Management:
Innovation management, which refers to the requisite organizational values, resources

and processes that enable a high level of consistent innovation, is now an imperative

for organizations to survive and thrive in this era of non-linear change. It is also the

only sustainable way of working "smarter", rather than harder. Innovation

management requires employee training in creative thinking, plus modification of the

corporate culture to encourage risk-taking and the provision of logistical resources to

enable the progression from developing creative ideas to successfully rolling them out

as innovations.

Great Britain, Germany and USA had emerged as economic powers during late

eighteenth century, nineteenth century and early twentieth century respectively

enjoyed starring roles in the World economy based on Leadership in Technological

innovation. But the one great economic power to emerge in the second half of the

twentieth century – Japan has not been a technological pioneer in any area. Its

ascendancy rests squarely on leadership in management. The Japanese understood the

lessons of America’s managerial achievement during World War II more clearly than

we did ourselves – especially with respect to managing people as a resource rather

than as a cost. As a result, they adapted the West’s new “social technology” –

MANAGEMENT – to make it fit their own values and traditions.

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Management’s Contribution to World Economies:

As we all know that USA produced approximately 50% of the worlds wealth with 5%

of the world’s population in the early 1960s. Research Analysis revealed that if we

subtract all the non-business people from this 5% of the world’s population of

America, we would be left with only 1% of business people who are responsible for

generating this 50% of the world’s wealth. If we subtract further all the non-

management people from this 1% of the business people would be left with 0.0018%

which represent the cream of the management personnel who were responsible for

generating this 50% of the world’s wealth. During the same period, Japan which was

not able to produce 3% of the world’s wealth was able to produce 24% of the world’s

wealth with only 6% of the world’s population in 1990s whereas India produced only

0.3% of the world’s wealth with more than 11% of the world’s population during

1960s. However India could produce 3% of the world’s wealth with more than 17%

of the world’s population in 1990s. With the introduction of new economic reforms

within the period of one decade, India could raise its world’s wealth generating

capacity to nearly 10%. Unfortunately, this was not due to manufacturing but because

of software engineering and development. India has been leading in the world in

software development and exports. It shows that on an average India has been able to

produce 1% of the world’s wealth every year. If it continues thus, by 2020, India

would be in an in enviable position and could be able to produce more than 25% of

the world’s wealth within a span of 15 years.

Managerial innovations during the last 60 years represented the application of

knowledge to work, the substitution of system and information for guesswork, brawn

and toil. Everyone, to use Fredrick Taylor’s terms replaced “working harder” with

“working smarter”

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What we knew about management 60 years ago – and have codified in our systems of

organized management education – does not necessarily help managers meet the

challenges they face today. Nevertheless that knowledge was the foundation for the

spectacular expansion the world economy has undergone since 1950, in developed

and developing countries alike. And what has made that knowledge obsolete is, in

large measure, its own success in hastening the shift from manual work to knowledge

work in business organizations. Management thus, has made knowledge the true

capital of every economy. For the first time in human history, we can employ large

numbers of educated people productively throughout the world

Role of Management in Business Growth and Expansion:

Business growth and business expansion in different parts of the world will

increasingly not be based on mergers and acquisitions or even on starting new, wholly

owned businesses there. They will increasingly have to be based on alliances,

partnerships, joint ventures and all kinds of relations with organizations located in

other political jurisdictions. They will, in other words, increasingly have to be based

on structures that are economic units and not legal – and therefore not political –

units.

There are many other reasons that growth henceforth will be based on partnerships of

all sorts rather than outright ownership and command and control. But in all

likelihood one of the most compelling ones will be the need to operate in both a

global world economy and a splintered world polity. A partnership is by no means a

perfect solution to this problem. In fact, partnerships have enormous problems of their

own. But at least the conflict between economic reality and legal reality is greatly

lessened if the economic unit is not also a legal unit, but is a partnership, an alliance, a

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joint venture that is a relationship in which political and legal appearance can be

separated from economic reality.

The final implication: All businesses will have to learn to manage their currency

exposure. Every business, even a purely local one, is in the world economy today. As

such, it is subject to currency fluctuations even if it does not sell outside its own

country, or does not buy outside it.

Even the most provincial and most local Mexican company was severely hit by the

sudden collapse of the Mexican peso a few years ago. Even the most purely local

Indonesian company was severely hit by the sudden collapse of the Indonesian

currency in 1998.

There is no country today that is immune to sudden currency fluctuations – for the

simple reason that the world is awash in “virtual money”, that is, in liquidity for

which there is no profitable investment. Every country, therefore, is awash in money

that is not invested in property, in businesses, in manufacturing or in service

enterprises, but kept in liquid and volatile “portfolio” investment. And very few

countries have enough of a surplus in their balance of payments to service the interest

on this “portfolio investment,” let alone to pay it should it take flight. Every country’s

currency, in other words, is at the mercy of short-term movements of money for

which there may not be any economic rationale whatever.

Recent times have witnessed a significant intensification of this two-way process.

“The proportion of contemporary change that is either planned or issues from the

secondary consequences of deliberate innovations is much higher than in former

time”. From the point of view of business, it can be safely stated that the most serious

problem that business everywhere faces today concerns the challenge of this rapidly

changing environment.

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Role of Management in Entrepreneurship:

It should have been obvious from the beginning that management and

entrepreneurship are only two different dimensions of the same task. An entrepreneur

who does not learn how to manage will not last long. Business – and every other

organization today – has to be designed for change as the norm and to create change

rather than react to it.

Management must focus on the results and performance of the organization. This is

particularly more so with regard to small enterprise management. Indeed, the first task

of management is to define what results and performance are in a given organization –

and this, as anyone who has worked on it can testify, is in itself one of the most

difficult, one of the most controversial, but also one of the most important tasks. It is

therefore the specific function of management to organize the resources of the

organization for results outside the organization.

The new assumption – and the basis for the new paradigm on which management,

both as a discipline and as a practice has to be based – is therefore: Management

exists for the sake of the institution’s results. It has to start with the intended results

and has to organize the resources of the institution to attain these results. It is the

organ to make the institution, whether business, church, university, hospital or a

battered women’s shelter, capable of producing results outside of itself.

Industries, whether businesses or non-businesses, have to be managed differently

depending on whether they are growth industries, mature industries or declining

industries. A growth industry that can count on demand for its products or services

growing faster than economy or population manages to create the future. It needs to

take the lead in innovation and needs to be willing to take risks. A mature industry

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needs to be managed to have a leadership position in a few, a very few, but crucial

areas, and especially in areas where the demand can be satisfied at substantially lower

cost by advanced technology or advanced quality. And it needs to be managed for

flexibility and rapid change. A mature industry shifts from one way of satisfying

wants to another. A mature industry therefore needs to be managed for alliances,

partnerships and joint ventures to adapt rapidly to such shifts.

One example is Pharmaceutical Industry. Until very recently – since the invention of

the sulfa drugs and the antibiotics just before World War II – it was a leading growth

industry. In the 1990s it became a mature industry. This means with high probability

that there will be fast and sudden shifts to new ways of satisfying the old demands, for

example, from chemical drugs to genetics, molecular biology, medical electronics, or

even to “alternative medicine”.

In a declining industry one has to manage. Above all, for steady, systematic,

purposeful cost reduction and for steady improvement in quality and service, that is,

for strengthening the company’s position within the industry, rather than for growth in

volume – which one can only take away from somebody else. For in a declining

industry it is more and more difficult to establish meaningful product differentiation.

Products in a declining industry tend to become “commodities” – as is rapidly

happening with passenger automobiles (except so far for a few luxury cars).

In conclusion, institutions – businesses as well as nonbusinesses – will have to learn

to base their strategy on their knowledge of, and adaptation to, the trends in the

distribution of disposable income and, above all, to any shifts in this distribution. And

they need both quantitative information and qualitative analysis which was made

possible through management.

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Role of Management in Changing Business Environment:

Management should therefore be able to feel the several forces which shape the

environment and judge the effects of their impact on business activities. Broadly,

these forces may be classifies such as: (a) technological, (b) economic, (c) socio –

political and psychological.

(a) Technological:

Scientific and technological developments which transcend even the moon and the

planets, will not be confined to a few developed nations in the days to come. The

impact of such developments will be felt by every nation and every section of the

society. Industries will be first to receive the impact of such developments.

Innovations on equipments, processes and products, which enable mass production at

low cost, will be the order of the day. To live in obsolescence will be suicidal. It is a

race against obsolescence. To keep ahead or even to stay where one is, one has to

keep , on moving fast. Innovative disposition reflected through research and

development activities of business is the only defence against the onslaught of

obsolescence. Readiness to accept technological changes for hire productivity may

sometimes conflict with the socio-political realities. A certain amount of compromise

has to be worked out in such areas where business is prepared to introduce

technological changes. But every given society has its own limitation and

peculiarities. For example, Large computerization in a developing country with

unemployment as a major problem may invite resistance from other segments of the

society. In such conflicting areas business and government will have to strike a

balance and arrive at a satisfactory compromise.

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(b) Economic:

A developing economy such as ours is undergoing fast changes leading the nation to

the take-off stage, inspite of several uncertainties lurking in the path of progress. It is

responsibility of business to accelerate this movement by added production and an

increasing tempo of productivity.

(c) Socio-Political and Psychological:

The socio-political field which is charged with conflicting interests, each pulling in its

own direction, is a vital part of the environment in which the business functions. The

discontented labour, the dissatisfied consumer, the disgruntled shareholder, the

disappointed community and the disillusion masses – these are the forces to be

reckoned with. They cause major changes in the legal framework that direct, dictate

and delimit business activities. New theories of distribution of surplus and new sense

of values and norms tend to develop. The management has to adjust and adapt to these

changes in order to keep the business alive.

The psychology of the labour today is not same as it used to be. Higher educational

levels, better economic conditions, support trade unions, support of government and

political parties, have all been instrumental in changing the attitude of the labour

towards work and management. Management of workers today is not it was in the

past. These socio-political changes the resultant psychological climate of security, and

the demands for certain rights and privileges can be effectively met only by a

managerial revolution – a revolution which will change the outlook and attitudes of

management towards problems and persons. A new managerial perspective should

emerge to cope with such socio-political forces.

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Management can meet the challenges of change by adapting themselves to the

changed situation or by adopting changes in advance. Those who ignore the

environment or refuse to recognize the forces of change will be relegated to the

background. Adapting to the changed situation is only a common response practiced

by everyone. The fact that organizations and living beings continue to exist is in itself

an evidence of adaptation to the changing environment. Adopting changes in advance

is the result of foresight; innovating changes require formidable courage. Foresight

and courage are the essential requirements for planning for change and planning

change respectively. These qualities are to be developed in managers

Role of Management in Sustainable Society:

The goals of the individual and the society have to be harmonised. This task lies with

the future managers and with their effective management education. Stability is the

main plank on which every society is built upon. However, the objective is to build a

protean society. Hence survival with elements of ‘stability’ and ‘flexibility’ is a must.

Managers in this world are in a quagmire of indecision and hyper decision. To have a

really sustainable society, the process of growth will mean media education, rational

ordering of social, economic, political life and management education. All attempts

devoid of the above measures will be an exercise in futility. There should be a guiding

vision of every organization and every institution for only then it can envision the

future. Last but not least, every industry striving towards the goal of capturing the

global markets buoyed by the screams of perestroika and glasnost should discard

malevolence of indifference towards a particular society. This means what the Indian

society has been always advising the world about and yet not following it with respect

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the Indian industry, "Vasudev Kutumbkum" which means in simple language, "the

whole world is yours." By channeling the emotions and aspirations of the future

managers we will gain the loyalties of the customer and accept the existing

differences in societies with the hope of unifying the diverging goals; for only then

the ultimate goal will be complete – a truly sustainable society.

Role of Management in Future:

The famous “BRICS report” published by Goldman Sachs contends that in the next

40 years the BRIC nations (Brazil, Russia, India and China) could become larger

(GDP comparison) than the g6 nations (U.S, Japan, U.K, Germany, France and Italy)

in US $ terms. The emergence of the BRIC nations as the new engines of demand,

growth, and consumer spending has interesting consequences for the world economy

and the balance of the power in international trade.

Even amongst the BRIC nations, experts believe that the rise of China and India will

be the most significant event of the 21st century. With different national conditions,

advantages and disadvantages, the two countries will take varying ways and adopt

differing models. The question that dominates is : as they take giant steps towards

becoming economic superpowers will the coming years see an era of competition or

cooperation between china and India.

The future will be defined by co-operation as china and India will be the major

players and important trading partners. Each has much to learn from the other and

from what has and what has not worked in the past. Both countries also have much to

learn about setting appropriate economic incentives, investing in infrastructure, role of

property rights and institutions, and indeed the role of democratic institutions in

fostering growth and welfare.

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Conclusion:

The coming forty years will see this technologically advanced, scientifically

resurgent, highly cultured and economically and politically mature nation i.e. India

emerge into its second century of existence in 2047 AD as the GURU OF THE

WORLD. There is no need for India to change or question its own thinking. The

whole of the world is moving in our direction. Concepts, such as non-alignment, or

the mixed economy or the democratic socialism and equitable ordering of society will

become the accepted thinking the world over in few years to come.

What is important for this great country is to realize its strengths, its roots and its

mission. This will come from a great restructuring of the educational process, a great

reordering of priorities: from a re-orientation of the pursuit of knowledge for its own

sake to the application of knowledge for useful purposes.

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Author’s Profile

Prof. Dr. Uday Salunke Director - Welingkar Institute of Management is a

mechanical engineer with a management degree in 'Operations', and a Doctorate in

'Turnaround Strategies'. He has 12 years of experience in the corporate world

including Mahindra & Mahindra, ISPL and other companies before joining Welingkar

in 1995 as faculty for Production Management. Subsequently his inherent passion,

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commitment and dedication toward the institute led to his appointment as Director in

2000. Dr. Salunkhe has been invited as visiting fellow at the Harvard Business

School, USA and European University, Germany. He has also delivered seminars at

the Asian Institute of Management, Manila and has been awarded "The Young

Achievers Award-2003" in the field of Academics by the Indo American Society

recently.

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