This document discusses the dynamic role of management in the global economy. It outlines how management has transformed the world through innovations that allow knowledge workers to be productively employed at large scales. While older occupations like farming and manufacturing have declined, management is now the largest occupation. Effective management requires adapting to changes in the environment and pursuing continuous innovation. The role of management is crucial for business growth, expansion into new markets, and entrepreneurship. Industries must be managed differently depending on their growth stage. Overall, management has been the key driver of economic growth worldwide.
Uday salunkhe evolution of corporate governance india
Uday salunkhe dynamic role of management in global economy
1. 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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2. 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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3. 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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4. 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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5. 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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6. 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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7. 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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8. 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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9. 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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10. 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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11. 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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12. (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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13. 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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14. 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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15. 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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17. 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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