CHAPTER-2

HISTORICAL FORCES
1. Industrial Revolution:
The first force mentioned is the Industrial Revolution, which started in the late
1700s. This period transformed simple societies of farmers and craftsmen into
complex industrial ones. This change greatly increased wealth and national power.
Before this, for thousands of years, there was little economic growth, and most
people lived in poverty.

Conditions for Industrial Revolution:

For the Industrial Revolution to happen, certain conditions were needed. These
include having enough money (capital), labor, natural resources, transportation,
markets, and supportive ideas and institutions. Britain was the first to have these
conditions, and it became the source of scientific advancements and inventions,
like the steam engine.

Spread of Industrialization:
After Britain, Western Europe and the United States experienced industrial growth
in the late 1800s. Japan and Russia followed in the early 1900s, and later in the
20th century, other Asian countries like Taiwan, South Korea, and China also
industrialized. Even today, less developed nations are trying to create the
conditions for industrialization.

Impact of Industrialization:
Industrialization changed societies. It improved living standards, changed people's
daily lives, and shifted values. Material progress (economic growth) has
historically been associated with moral progress, fostering things like opportunity,
tolerance, social mobility, fairness, and dedication to democracy. However,
because institutions (like governments and laws) change more slowly than people's
lives, the rapid growth of industry created significant social tensions.
Enormous Economic Growth:
In the 20th century, economic growth was astonishing. The total production of
goods and services during this time surpassed everything produced in human
history before. This growth, which continues today, creates significant tensions in
both developing and developed societies.
In essence, the passage highlights how the Industrial Revolution and subsequent
industrialization have been powerful forces shaping the world, bringing both
progress and challenges.

2. Inequality throughout History:

Throughout history, societies have always had rich and poor people. Inequality, or
the gap between them, is common and leads to issues like envy and calls for fair
distribution of wealth.

Industrial Revolution and More Inequality:

A big economic change called the Industrial Revolution happened in England in
the late 1700s. It made a lot of money for some people but also made the gap
between the rich and the poor even bigger around the world.

Measuring Global Income Inequality:

People use something called the Gini index to measure how unequal money is
around the world. By 1820, when the Industrial Revolution was spreading, the
world was already very unequal. Over time, it got even more unequal.
Causes of Inequality:
Contrary to what some may think, making more money in a country doesn't always
mean that poor people get poorer. The main reason the world has more unequal
money is because rich countries and poor countries have a big gap between them,
not because rich and poor people in the same country are getting farther apart.

Current Poverty Situation:

Nowadays, about 2.6 billion people live in poverty, meaning they make less than
$2 a day. Around 1.4 billion live in really extreme poverty, making less than $1.25
a day. But things are better than before. Back in 1820, when the Industrial
Revolution started, almost everyone in the world was poor.

Inequality Sticking Around:

Inequality stays because of things like caste, marriage, land ownership, laws, and
how markets work. These things create unfair situations where some people have
more opportunities than others. Most of the world's poor live in places that haven't
changed much and still have these unfair situations.

Lesson from History:

Over almost 200 years, we've learned that if we use money-making systems (like
capitalism) in a good way, it can help poor people. But we also need to fix unfair
situations in societies to make sure everyone gets a fair share of the benefits

3. Population Growth Through Time:

Throughout history, the world's population has kept growing. It started getting
faster about 1,000 years ago with large-scale farming. Then, in the late 1800s, it
really took off because of the Industrial Revolution. It took until 1825 to reach 1
billion people, and after that, each additional billion came quicker and quicker.
Current Population and Predictions:
In 2011, the world had 6.9 billion people, and it's still going up. However, it's
expected to slow down and eventually stop growing. The United Nations predicts
that the population will peak at 9.2 billion in 2075, then gradually decline to 8.3
billion in 2175 before going back up to 9 billion in 2300.

Why Population is Slowing Down:

The world's population is expected to slow down because of a transition from
having many children to having fewer. During the Industrial Revolution, more
people were born because of better living conditions. Now, having fewer children
is encouraged because it allows women to go to school, work, and earn more
money. The total number of babies a woman is expected to have is dropping, and
by 2050, it might be below what's needed to keep the population stable.

Aging Population:
The world's population is also getting older. In 1950, the average age was 24, and
now it's 28. By 2050, it's expected to be 38. Developed countries, where people
live longer, are aging faster. For example, Japan has a median age of 45, while
Zambia in Africa has a median age of 17.

Migration's Role:
More people are moving from one place to another than before. In the 1950s, this
wasn't a big deal, but now about 3.1% of the world's population are migrants. The
United States is expected to take in the most migrants from 2010 to 2020, with
about 11.6 million people. Mexico and China are expected to lose the most, with
3.7 million and 3.3 million leaving, respectively.

Implications of Population Trends:

The way the population is changing has some important effects. First, even though
the world's population is growing slower, the increase is happening more in poorer
regions, making the gap between rich and poor countries wider. Second, this
growth is putting stress on the Earth's ecosystems. Lastly, the West (developed
countries) is seeing a decline in population compared to other places. This might
lead to slower economic growth, putting more pressure on things like welfare and
pension policies. In the future, non-Western countries might become more
influential economically, militarily, and politically.

In summary, population trends are important because they affect how our world is
changing, impacting businesses and shaping our expectations for how companies
should behave.

4. Technology Shaping History:

Throughout history, new technologies and devices have not only changed how
businesses operate but also transformed societies. For instance, in the 1450s, the
printing press became a hit, not just in publishing but in reshaping European
culture. Printed materials challenged the established ideas of the Catholic Church,
leading to events like the Protestant Reformation and the scientific revolution.

Industrial Revolution and Waves of Innovation:

In the late 1700s, the steam engine, waterwheel, and improved iron-making
methods sparked the Industrial Revolution, marking the beginning of significant
technological advancements. This was just the first of five waves of technological
revolutions. Each wave brought about new innovations, leading to economic
booms with increased investment, productivity, and output growth. The waves
became shorter, indicating faster innovation over time.

Benefits and Challenges of New Technologies:

New technologies are great because they make things more productive and
improve our lives. But, like the printing press, they can also stir things up in
society. For example, steamship technology in the 1860s made travel across the
Atlantic faster, cheaper, and safer. This led to a flood of European immigrants to
America's East, causing problems like job shortages, lower wages, and political
movements against big companies.

Impact on Society and Stability:

Over the past two centuries, as technology has played a big role in making
societies more industrial, it has brought both good and challenging changes. On the
positive side, it has improved our lives with better living standards and longer life
spans. However, because technology changes faster than people's beliefs and the
rules we follow, it also creates stress and challenges in society.

In simple terms, technology has been a game-changer throughout history. It brings

lots of benefits, but because it changes so fast, it can also create some problems in
the way we live and work.

5. Globalization - Connecting the World:

Globalization is like a big web that connects people and things all around the
world. This connection happens not only in business but also in politics, society,
military matters, science, and the environment. When we talk about economic
globalization, it means countries are opening up to each other, allowing them to
trade goods, services, and money on a global scale. This really took off after World
War II when many countries started working together more closely.

Globalization Through Time:

This idea of countries being closely connected is not new. Thousands of years ago,
people were already sharing things like genes, language, and inventions, but it
wasn't as organized. Then, about 500 years ago, countries like China, Portugal, and
Spain started exploring faraway places, connecting even the most distant parts of
the world. By the late 1700s, the world was already pretty connected with trade,
currencies, and ideas flowing between different nations.
Modern Globalization - The Role of Companies:
Today, big companies that operate globally are like the explorers of the past. These
companies, often from developed nations, invest a lot of money in countries
outside their own. They are a big force in today's economic globalization. But,
because they operate in many countries, they have to deal with various groups of
people who care about what they do. This creates challenges and sometimes leads
to criticism, especially from groups in rich countries. These groups worry that the
fast-paced global trade might harm the environment, human rights, and democracy.
They want to control and regulate the activities of these big global companies, and
sometimes they succeed in doing so.

In simple terms, globalization is like the world becoming a closely connected

neighborhood where countries and big companies interact, share, and sometimes
clash due to different values and concerns.

6. Nation-States - Countries in Action:

A nation-state is like a team made up of three parts - the people (citizens), the
leaders (ruling authority), and the land they live on (territory with fixed borders).
This idea came about after the Roman Empire fell apart, and it was a good fit for
Western Europe where the borders matched the languages. But later on, this idea
was copied in other parts of the world, sometimes causing problems because
borders were drawn without considering cultural or historical ties.

Why Nation-States Matter:

These countries are like big puzzle pieces on the global stage. They allow people
and groups within them to shape their own future. This is why they've stuck around
for so long. Nowadays, the world is like a patchwork quilt of independent
countries, and how they interact is a big deal for businesses worldwide.
Changing Ways of Gaining Power:
In the past, countries tried to get more powerful by grabbing more land. More land
meant more resources and people. But now, things have changed. Wealthy
countries build their power through global businesses that operate worldwide.
Trying to take over a company's headquarters wouldn't really help because these
companies spread their operations globally. So, instead of traditional warfare,
countries prefer to build power through trade, where they can grow their wealth
more efficiently.

Challenges for Countries:

While international markets can make countries more powerful, they also bring
challenges. Countries can't just close their borders to the rest of the world; that
would hurt their growth. So, they have to find a balance between keeping control
and letting the global market forces do their thing.

Forces Beyond Borders:

Apart from market forces, there are other things like diseases, climate change,
terrorism, nuclear weapons, and strong ideas (like human rights) that don't care
about borders. These global forces make it harder for countries to do everything on
their own. This means that sometimes, big companies might have to step up and
take on more responsibilities to help out.

7. Dominant Ideologies - Shaping the Way We Think:

Ideologies are like big sets of beliefs and values that shape how we see the world.
Think of them as the glasses through which we view everything. Back when the
Western world was going through the Industrial Revolution, there were a bunch of
these influencing how people thought.
Ideas that Boosted the Industrial Revolution:
During that time, there were several key ideologies at play. First off, there was
capitalism, which is all about businesses and private ownership. Then, there was
constitutional democracy, ensuring people had rights. The idea of progress, the
belief that things were getting better, was there too. Even Darwin's theory of
evolution played a role, suggesting constant improvement in the world. Social
Darwinism, a bit related, thought that competition improved society. And lastly,
the Protestant ethic said hard work and honesty were important for salvation.

Why Ideologies Matter:

Ideologies aren't just random thoughts; they help us make sense of life. They
spread widely when they match what people are experiencing. Believing in the
same set of ideas brings people together and helps society run smoothly.
Institutions like churches and governments get their power from these shared
beliefs.

Ideological Competition - Survival of the Fittest Ideas:

Ideas are in a constant battle for survival, kind of like evolution. In history, there
were lots of different beliefs, but globalization has made some disappear. As ideas
spread through trade, travel, and conquest, they clash. Some beliefs vanish, and a
few become really powerful. This has happened with religions, cultural styles, and
even in politics.

The Twentieth Century Speed-Up:

In the 1900s, things sped up. More people could read, and new ways of sharing
information, like radios and computers, made ideas spread faster. This quickened
the process of some ideas becoming really popular and others fading away. For
example, capitalism became a big deal, while socialism took a back seat.
So, in a nutshell, ideologies are like the glasses we wear to see the world, and over
time, the most popular ones survive and shape how we live.

8. Leadership and Its Impact:

Leaders play a big role in shaping societies and businesses. Some leaders, like
Alexander, opened up trade routes and brought prosperity. Others, like Hitler and
Stalin, caused harm and slowed down progress.

Two Views on Leaders and History:

People have different opinions about the power of leaders in history. One view is
that leaders just go along with the flow of history. They're like points where big
social forces intersect. For example, when oil was found in Pennsylvania, John D.
Rockefeller jumped into the new industry, becoming a big shot. But some think
that even if he had stuck to selling lettuce, the changes in the industry would still
have happened.

The other view is that leaders themselves shape history. They don't just follow the
tide; they change it. Thomas Carlyle believed that history is basically about the
great men who do important work. For instance, John Jacob Astor explored and
connected wild lands, impacting how the United States looks on the map. James B.
Duke, with his marketing skills, turned cigarette smoking from a local habit into a
global health problem.

Leaders and Their Influence:

The text gives examples and stories to spark debates about how business leaders
have changed the world. It makes you think about whether leaders are just going
with the flow of history or if they're the ones steering the ship.

9. The Role of Chance:

Sometimes, in the world of business and history, things happen unexpectedly, and
scholars don't always like to talk about it as just luck or chance. However, Niccolò
Machiavelli, a smart observer of history, once said that around half of what
happens is due to luck (fortune), and the other half is because of human actions.

Being Prepared for Anything:

Machiavelli's point is that we can't always predict what's going to happen. So,
managers and leaders should be ready for unexpected events. He suggests that
those who are prepared will come out on top when something unexpected occurs.
It's like being ready for whatever life throws at you, and if you're ready, you have a
better chance of succeeding.

Shell's Scenarios:
The reference to Shell's scenarios means that the author is giving a nod to the Shell
oil company's approach. Shell is known for creating scenarios or plans for different
possible futures. Machiavelli would probably appreciate this, as it aligns with the
idea of being prepared for unexpected events, just as he suggested.
SIX EXTERNAL ENVIRONMENT:

1. Economic Environment:
This is about the forces that affect how businesses operate. It includes things like
overall economic activity, prices of goods, interest rates, currency values, wages,
what competitors are doing, and government policies.

Recent Turbulence:
The global economy has been a bit shaky recently. After the 9/11 attacks, there
was a slowdown, then it picked up, and in 2008, there was a big problem. The
housing market in the U.S. got out of control, banks had issues, and it caused a
global economic downturn.

Recovery Efforts:
Governments took action to fix things. They lowered interest rates and spent
money to boost confidence. It worked, but the recovery has been slow and uneven.
The world economy is getting back on track, but there's still some risk.

Trade Growth:
Over the years, trade between countries has exploded. In 1948, global exports were
$58 billion, and in 2008, they were $16.1 trillion. This happened because countries
agreed to lower trade barriers, promoting free exchange.
Foreign Investment:
Companies from one country investing in another (foreign direct investment) has
also skyrocketed. Inflows of these investments went from $59 billion in 1982 to
$1.8 trillion in 2007.

Global Business Expansion:

Companies have become global, creating networks around the world for efficiency.
About two-thirds of the world's exports happen within these global networks.

Favorable Environment for Companies:

Since World War II, and especially since the 1980s, the world has been good for
companies to expand. Even though there have been recent recessions, things are
expected to keep growing in the long run.

In simpler terms, it's like the world's economic stage where countries and
companies perform. Sometimes there are bumps, but the show goes on, and
companies adapt to keep growing.

2. The Technological Environment:

This is about the incredible advancements in science and how they affect
businesses. Let's break it down:

Nanotechnology: This is technology developed on a super tiny scale, like atoms.

Scientists can manipulate objects at this level, creating materials and machines so
small you can't even see them.
Microchips and Storage: Companies can now make microchips with components
incredibly small. Imagine storing all the information in the Library of Congress in
a sugar cube-sized space!

Human Genome Mapping: Scientists are mapping our genes, promising new
products to treat tough diseases.

Renewable Energy: There are methods in the works to use renewable energy more,
reducing the need for things like fossil fuels.

Digital Telecommunications: This is the global network of computers and

electronic devices we use today. It has led to cool things like open sourcing, where
lots of people work together to create complex knowledge products.

Wikis: These are websites where lots of people can edit and collaborate. They've
been used to create things like browsers, encyclopedias, and news sites.

Opportunities and Threats:

Opportunity: New technologies, like wikis, can bring knowledge from all over the
world.

Threat: They can also be a challenge for established companies. For instance,
Western Union didn't see the potential of the telephone and missed out on a big
opportunity.

3. The Cultural Environment:

This is about the way people in different places think and act. Let's break it down:

What's Culture? It's like a set of rules and habits that people in a group learn from
each other. This can include things like what's considered important, how people
act, and the customs they follow.

Diversity in Culture: No culture is the same everywhere. Different countries have

different languages, religions, and values. This can create challenges for businesses
working across different cultures.

Cultural Conflicts in Business: Managers in foreign countries have to deal with

differences in how people work together, how loyal employees are, the role of
women in organizations, ethical values, gift-giving customs, attitudes toward
authority, how time is perceived, and even what's considered appropriate clothing
for work.

Western Culture vs. Others: Western countries, like those in Europe and North
America, have a particular set of values that promote things like markets,
individual freedom, and democracy. Some other countries resist these values,
seeing them as a threat to their own culture.

Shift in Cultural Values: In developed countries, especially after the 1960s, there
was a shift in values. Before, when people were struggling for basic needs, they
focused on making money. But as societies became more prosperous, new
generations started valuing things like personal freedom, quality of life, self-
expression, and tolerance.

Postmaterialist Values: These are values based on assumptions of security and

affluence rather than just survival. This shift has influenced social, political,
economic, and sexual norms in rich countries. For example, there's more emphasis
on individual rights, quality of life, and tolerance.
Global Movements: This shift in values has led to global movements promoting
human rights, fighting racism and sexism, and advocating for sustainable
development. Multinational corporations now have to follow rules that focus on
both making money and being socially responsible. They're expected to care about
things like human welfare and not just profit.
4. The Government Environment:

This is all about how governments impact businesses. Let's break it down:

Government's Role: Governments can both help and limit businesses. Over time,
governments have become more involved in people's lives. They spend more
money on things like welfare and regulate various aspects of business activities.
For example, in the U.S., government spending was only 3% of the economy in
1930 but rose to 28% in 2009.

Government Growth: Governments worldwide have taken on new tasks, especially

in promoting social welfare. They provide financial help to citizens and create
rules for businesses to follow. In the U.S., there's almost no business aspect that the
government can't regulate if needed and supported by the people.

Democratization: Back in 1900, there were hardly any full democracies with fair
elections and equal voting rights. But by 2009, there were 89 democracies around
the world. This trend accelerated in the late 20th century, especially after the
breakup of the Soviet Union. As countries became more democratic, they
responded more to what their citizens wanted.

Postmaterialist Values: A big reason for more democracy is the rise of

postmaterialist values. This means that as societies became wealthier and more
secure, people started caring about things like human rights, the environment,
aesthetics, and ethics. These values push governments to listen to public demands
about how businesses should behave. So, governments are more likely to enforce
rules that align with these values.
In simple terms, governments play a big role in business. They spend money, make
rules, and their actions are influenced by what their citizens care about, especially
when it comes to how businesses should act responsibly.

5. The Legal Environment:

This is about the rules and laws that businesses have to follow. Let's simplify it:

More Laws and Rules: Governments keep making more and more rules for
businesses. As people get more involved in what companies are doing, the
government responds by making new laws and regulations to keep businesses in
check.

Protecting Everyone's Rights: Businesses now have more responsibilities to make

sure they're not doing anything unfair. Laws cover things like treating employees
and customers fairly, advertising honestly, and being careful with the environment.

Global Complications: With businesses operating globally, they have to deal with
laws from different countries. Also, groups that care about human rights and the
environment push companies to follow global guidelines, which sometimes are
even stricter than local laws.

Ethics Becoming Law: Some things that were once considered a choice for
businesses, like being ethical and socially responsible, are now turning into legal
requirements. For instance, what used to be just a moral duty for companies to
avoid polluting has now become strict laws enforced by government agencies.
Ever-Changing Laws: The law is always changing, especially with new
technologies. Businesses need to stay ahead and anticipate what new laws might be
coming. An old case about a ship not having a radio in a storm shows that
sometimes, even if there's no specific law, businesses can be held responsible for
not using the latest and safest technologies.

In simple terms, the legal environment for businesses keeps getting more
complicated. Governments are making more rules to make sure companies are fair,
ethical, and responsible, especially as businesses go global and new technologies
emerge.

6. The Natural Environment:

This is about how our economic activities affect the planet, like messing with
ecosystems and using up resources. Let's break it down:

Earth's Toll: Our economic growth is taking a toll on the planet. As we build more,
use up resources, and grow our industries, it's hurting nature. We're using up
minerals, cutting down too many trees, killing off species, and messing up the
balance in the air with too much nitrogen and carbon.

Measuring the Impact: There are ways to measure how much we're hurting nature.
One measure, called the Living Planet Index, looks at the population trends of
different animals. Between 1970 and 2005, it dropped by 28%, showing that
conditions for many species are getting worse.

Ecological Footprint: Another measure is the Ecological Footprint. It calculates

how much land we need to keep up with our consumption of food, energy, and
more. The trend shows that since the late 1980s, we're using more than the Earth
can handle. Our "footprint" is 17.5 billion hectares, but the Earth's capacity is only
13.4 billion hectares.

Unsustainable Path: In simple terms, the way we're using nature's resources is not
sustainable. We're using more than the Earth can replenish. The implication is that
our current way of doing things is not okay for the long term.

Changing Attitudes: People are changing their minds about how we treat nature. In
the past, it was all about using nature for profit. Now, more and more people
believe in preserving nature. This change in thinking is affecting how business
decisions are made, with more consideration for the environment.

In a nutshell, our economic growth is hurting the planet. We're using up resources
faster than the Earth can handle. People are realizing this and thinking more about
how our actions affect nature. Businesses need to adapt to this change and make
decisions that are better for the environment.

The Internal Environment:

Alright, now let's talk about what's going on inside a company. Think of it like a
team working together. Here's the breakdown:

Who's Inside: Inside a company, you've got four main groups—managers (the
folks making decisions), owners or shareholders (those who own a piece of the
company), employees (the people doing the work), and boards of directors (a
group overseeing things).
Rules and Objectives: In developed countries like the United States, there are rules
and laws defining what each group should do. Each group has its own goals, but
they need to work together to make the whole company successful.

Corporate Culture: Imagine a company's culture like its personality. It's a mix of
beliefs, values, and assumptions unique to that company. This culture is pretty
important because it influences how everyone works together, maybe even more
than official rules.
Power Play: The external world also plays a role here. Laws and regulations might
limit how much power managers have over employees by giving workers more
rights. But, on the flip side, new technologies can let managers expand their
operations globally, which means employees might face competition from workers
in other countries.

Board Power: Boards of directors, the group representing the owners

(shareholders), have more say thanks to new financial rules. However, there's a
twist. Shareholders' power is also a bit shaky because external groups are pushing
for companies to do socially responsible stuff, even if it doesn't always bring in
maximum profits.

In a nutshell, inside a company, you've got different groups with their own goals.
They need to work together, following rules and influenced by the company's
culture. What happens outside the company, like laws and global changes, also
affects how things work inside. It's like a big puzzle where all the pieces need to fit
just right.