Human Side of Organization
Project Report
Industrial Engineering
Team Number: 13
Team Members:
Firhan Hidayat (2018370061)
I Putu Mega Utama Putra (2018370072)
M. Rezky Wardana (2018370076)
1. Introduction
In an organization, there are numerous aspects that affects the way the organization
operates and performs, including the human side of it. This is simply because organizations
are run by a group of people who become its members. Whether the organizations are
performing well or not depends quite highly on how good the human resources of the
organization’s have.
In this study, the authors discuss how several aspects from the human side of
organization is contributing to the organization’s performances, especially from the
perspective of the organization’s manager. The aspects that would be discussed are: (1)
globalization and its effect on business management and environment, (2) SWOT utilization
and how does it improve an organization, and (3) how environmental uncertainties influence
companies, managers and employees. The study would also be brought into a study case
analysis using two multinational companies, which the authors use: (1) McDonalds and (2)
Lippo Group.
2.Review and Discussion of Topics as Textbook/Lecture
2.1. The Effect of Globalization on Today’s Management and Business
Environment
2.1.1 Definition of Globalization
The first thing that is to be discussed in order to understand the relation of how
globalization could affect today’s management and business environment is to understand the
meaning that lies on this globalization definition. As stated through the given lecture, it is
defined as the trend of the world economy toward becoming a more interdependent
system. In a broader term, it could be likely interpreted as the interconnected global economy
in which the economic situation in one country is giving significant effect to another country,
such as if they face any problem like crisis, recession, and etc, then the other countries will
also get the impact.
2.1.2 Effect of Globalization
The world today has evolved extraordinarily which neglect of how long the distance
travel also the time required to communicate between each other. The rise of sophisticated
technology such as email, voice call, etc. are playing a very important role to accommodate
alike this activity. This make things done become easier and result to a very positive effect. It
does really help as part of globalization to connect between all countries around the world
which later called as global village.
As a result, this brings up into what is called as the global economy, as also
mentioned earlier, in which it creates the existence of only one international market or global
market instead of many national markets. With this situation, it opens a big chance to have an
exchange goods, information, manpower, service, etc.among the global village. Globalization
now here are starting to affect today's management to help manage this cross-border
interaction as management practices.
2.1.3 Managing Globalization for the Company
To do management practices, it requires a good understanding especially about the
type of managers which are ethnocentric, polycentric, and geocentric manager, to those who
are acting as manager or an international manager. This due to a different situation that
might to manage and control to accomplish the goal. Like for example, dealing with
customers or partners from different cultures, buying components from foreign suppliers,
working for a superior from a foreign country, etc., which is basically laid off the differences
to be handled
In business environment side, due to globalization, it makes the firm can broaden their
market with making an international expansion. Firm can then get the advantages such as
new foreign supplier to fulfill their demand, open a new potential market when they have low
demand for the local, lower labor costs, access to finance capital, and avoidance of tariffs and
import quotas.
To do the expansion, the firm can do several things. Global Outsourcing is by using
foreign suppliers to complete the demand. Importing which buys goods outside the country
and resells them domestically. Exporting which produces goods domestically and sells them
outside the country, and countertrading occurs when a firm barter for goods. Licensing is
when a firm allows a foreign firm to pay a fee to make or distribute the first firm’s product or
service. Franchising is similarly with licensing with having trade-off by sharing the profit
through using firm’s brand. When firms join forces to share the risks and rewards of starting
a new enterprise together in a foreign country, they form a joint venture. A foreign subsidiary
that is totally owned and controlled by an organization is a wholly owned subsidiary
Several other effects to the business environment caused by globalization which are
manager need to consider economic systems, economic development, infrastructure and
resources, and currency exchange rates in foreign markets. Managers need to be aware of
governmental systems and the potential for political risk. Managers need to bridge
cross-cultural gaps by understanding basic cultural perceptions embodied in language,
interpersonal space, communication, time orientation, religion, and law and political stability.
2.2 SWOT Analysis and Its Usefulness as Analyzing Tool for Companies
2.2.1 Strategic Planning and Its Importance
Many companies are engaged in strategic planning today. Strategic planning is a way
of helping an organization to be more productive by helping to guide resource allocation to
achieve goals (Gurel, 2017) . It is a strategic tool for managing or, in other words, it is part of
strategic management. Strategic planning is intended to influence the strategic direction of an
entity over a given period of time and to organize and implement deliberate and evolving
strategic decisions.
Strategic management is the ongoing decision-making process that allows an
organization to achieve its goals. Strategic management enables an organization to be more
proactive than reactive in defining its own future; it enables an organization to undertake and
influence actions rather than simply responding to them, and thus exercise control over its
own destiny (Wolf, 2013). Strategic management consists of five steps which are:
1. Establishing the vision and mission..
2. Establish the grand strategy (using SWOT and forecasting).
3. Formulate the strategic plan.
4. Carry out the strategic plan.
5. Maintain strategic control.
2.2.2 SWOT Analysis
One of the phases of the strategic management process is external and internal
analysis, also called SWOT Analysis. SWOT Analysis is a tool used for strategic planning
and strategic management in organizations. It can be used effectively to build organizational
strategy and competitive strategy (Gurel, 2017). SWOT become popular and many of the
companies use it since using the SWOT analysis can give the whole picture of the company
from outside and inside environment.
The starting point for analysis is the SWOT analysis where S stands for strength, W
stand for weakness, O stands for opportunity, and T stands for Threat. For S and W, it is for
the internal analysis of the company while the O and T is for the analysis on the external of
the company. This term is used widely since the SWOT analysis take the important role of
development of the company
Figure 2.2: SWOT analysis
A SWOT analysis provides managers with a realistic understanding of where the
organization is relative to its internal and external environments because when they know all
aspects that may affect the company, they can make a proper decision about how they can
maximize the strength of their company, resolve the weakness, catch up with some
opportunities and also reduce the possibility of the threat impacting the company.
2.3 How Environmental Uncertainties Influence Companies, Managers, and
Employees
2.3.1 Uncertainties and “Environmental Uncertainties”
There is a saying that comes from an American famous mathematician named John
Allen Paulos that says: “Uncertainty is the only certainty there is, and knowing how to live
with insecurity is the only security.”. It does a good job in representing how uncertainty is
something to be taken for granted in any context of time and location and the best way to
cope up with it is to embrace the fact that uncertainty would always be happening, not
avoiding it, and prepare its anticipation.
One of the uncertainty resources is called “environmental” uncertainties or “business
environmental” uncertainties. From the book, it could be known that environmental
uncertainties are the uncertainties that is coming from the external key variables coming from
outside the companies, which the company only have little to no power to influence (Kinicki
and Williams, 2018). The examples of environmental uncertainties are the performance of
suppliers, sub-contractors, competitors, consumer behaviour, weather, technology
advancement, and others, which is presented by the following figure
Figure 2.3.1: Examples of Uncertainty in Business (Civelek, 2015)
The environment uncertainties has a great impact on the company, its managers and
its employees. The explanation could be found below.
2.3.1 Environmental Uncertainties Influence to Companies
Companies would always expect that their business would run well and the goals are
achieved. It is the task of the company to make sure that everything is under control.
Therefore, companies should always monitor the way the companies are currently doing and
to seek and forecast the variables there is something that could affect the company. Yet, the
companies are always facing the risk of uncertainties which would hinder the project to
achieve the goals. To mitigate the risk of uncertainties and to adapt when the risk is
happening, the company would be forced to do some actions or revision.
For example, if a competitor has managed to launch a similar product earlier than our
company, it would significantly impact on our own product's sales and promotion. Therefore,
in the future, in order for the company to survive in business operation, the company might
change its policy to prioritize time over the quality of the product or the cost.
The other example is like when the weather is unpredictable, a project might be
postponed until the weather is tolerable. In the future, the company might have to reschedule
the project timeline to keep up with the lost time.These are examples where the uncertainty is
affecting the company.
2.3.1 Environmental Uncertainties Influence to Managers
Managers are the people who are expected from the company to make the business
survive and under control. Even to the extent of doing it on a daily basis, managers are
decision makers and planners of the company. Thus, the quality of the managers would be
tested when they have to forecast the environmental uncertainties and make necessary plans
to anticipate each of the found uncertainties that could affect the company.
According to the Cambridge Dictionary (2019), planning is the act of deciding how to
do something. Besides that, not only how to do something, planning is also include the setting
up goals and its milestones. This planning is the basis on how the company's react to
uncertainties. Without good planning, a company is planning to fail. What kind of reaction,
policies, culture, ethical view, and etc, it is up to the manager’s plan who manage the
company to anticipate the environmental uncertainties. This is how the environmental
uncertainty is affecting the quality of the managers.
2.3.1 Environmental Uncertainties Influence to Employees
An employee is the workers who work for a business, organization or community.
These individuals are the organization's staff. In general, any person hired by an employer to
do a specific job is an employee. Uncertainties are also faced by the employees of the
company, especially on what could affect the quality of what they are being responsible and
being worked on.
The simple example that could affect employee performance is weather. When the
weather is very harsh, it hinders the employee to come to the office, making the employee
could not work on the job. Therefore, the company may need to facilitate the employee so
they could do their work on the go and to communicate with teammates, even without being
in an office.
The other example of uncertainties is that each of the employee are often tasked with
a repetitive work. Even though it is repetitive, employee might even find new troubles every
time the employees start doing the work again. This is due to the way that, even though it is
repetitive, there are still supporting aspects that may be different from each place and time to
another. For example, when an employee is being tasked to do monthly audit, there would
always be a new problem that each month could happen..
3. Review or Summary of Additional/Supplemental Information of Topics
3.1 Globalization’s Additional Research
By having the research, it is likely found that there are several effects by which
globalization are affecting today’s management and business environment. Firstly,
heterogeneous workplace, as of globalization, organizations around the globe are increasingly
heterogeneous work environments. Indeed, even representatives at a similar organization may
originate from an assortment of nations and societies and have various perspectives on and
moving toward their work. Managers must regard decent variety and adequately carry
individuals of differing foundations to work agreeably together. Foreign assignments, a
manager might be approached to take on an outside task. This requires the administrator to
meet people's high expectations of living in another nation, acing significant social and
language contrasts. Managers are progressively required to oversee representatives and
groups a few time zones away. With a remote group, a chief can't appear at a worker's work
area to address an issue. Administrators today should be skilled at innovation just as
overseeing remotely through email, telephone call, videoconferencing and different mediums.
Economics of scale, by selling crosswise over numerous mainland’s business can get
economies of huge scale creation. Location Flexibility, this makes them extremely
aggressive. numerous cutting-edge creation strategies and administration arrangements can be
dispensed anyplace. This permits to them gain the benefits of minimal effort work and other
asset charges. Managers should discover answers for multiculturalism, multinationality,
propensities and ways of life of their workers, and create methodologies which would
accommodate these
3.2 SWOT Analysis Additional Research
By conducting an external analysis, an organization identifies the critical threats and
opportunities in its competitive environment and also examines how competition in this
environment is likely to evolve and what implications that evolution has for the threats and
opportunities an organization is facing. While external analysis focuses on the environmental
threats and opportunities facing an organization, internal analysis helps an organization
identify its organizational strengths and weaknesses. It also helps an organization understand
which of its resources and capabilities are likely to be sources of competitive advantage and
which are less likely to be sources of such advantages. Based on SWOT Analysis,
organizations can choose the appropriate strategy.
3.3 Environmental Uncertainties Analysis Additional Research
Through further research, findings about the other knowledge of environmental
uncertainties are found. Here are several of them:
3.3.1 What makes things uncertain
According to Barbow et al (2000), uncertainty occurs when the details of something
uncertain, complex, unpredictable, and/or probabilistic circumstances. It also occurs when the
individual finds unavailable, contradictory or unreliable data or knowledge.
3.3.2 The effects of Uncertainty on Someone’s Behaviour
Uncertainty influences the cognitions, beliefs, desire and actions of individuals (Van
den Bos & Lind, 2002). Thus, uncertainty is contributing in someone’s ability to make
decisions.
3.3.3 Principle of Uncertainty
There are some distinctive characteristics of uncertainty that discussed in academic
research, which are:
A. Uncertainty is fundamentally self-cognitive; is in the eyes of the beholder.
Even a person who possesses much information on the issue may still feel
uncertain (D.E. Brashers, 2013).
B. Uncertainty is multilayered and interconnected (Barrow, 1995). When things
are in the air at once, to start from making one thing visible can change the
whole scene. Likewise, when there are multiple uncertainties at once, the
resolution of one issue may let another appear or shift (Barrow & Kline,
2000).
C. Uncertainty is temporal; it can be short-lived or chronic (Lazarus & Folkman,
1984; Michel, 1990).
4. Discussion of how the topic is implemented in McDonald and Lippo Group
4.1 Company Profile
4.1.1 McDonald’s Corporation
Figure 4.1.1: McDonald’s Company Logo
McDonald's Corporation is an American fast food company founded in 1940 as a
restaurant in San Bernardino, California, United States operated by Richard and Maurice
McDonald. They rehabilitated their business as a hamburger stand and later turned the
company into a chain restaurant, unveiling the Golden Arches logo at a Phoenix, Arizona
location in 1953. In 1955, a businessman, Ray Kroc joined the company as a franchise agent
and went on to buy the chain from the McDonald brothers. McDonald's had its original
headquarters in Oak Brook, Illinois, but moved to Chicago in early 2018 with its global
headquarters.
McDonald's is the world's largest revenue restaurant chain, serving around 69 million
customers per day in more than 100 countries in 37,855 outlets (Chicago Tribune, 2018).
While McDonald's is best known for its hamburgers, cheeseburgers, and french fries, chicken
products, breakfast items, soft drinks, milkshakes, wraps, and desserts are also available. The
company has added salads, fish, smoothies and fruit to its menu in response to changing
consumer tastes and a negative backlash due to the unhealthiness of their food (Robbins,
2017). Revenues from the McDonald's Corporation come from the franchisees ' rent,
royalties, and fees, as well as sales in restaurants operated by the company. McDonald's is the
world's second-largest private employer with 1.7 million employees (after Walmart with 2.3
million employees), according to two reports published in 2018. (MSN, 2018)
4.1.2 Lippo Group
Figure 4.1.2: Lippo Group Logo
Lippo Group is an Indonesian-based conglomerate company. The company operates
as an international provider of services for property development and management. Mochtar
Riady is the founder of it. In Asia and North America, Lippo has a collective presence. Lippo
Group is one of Indonesia's leading real estate developers and is known for several
large-scale projects such as Lippo Village.
The Lippo Group began with Lippo Bank, which was later used as a platform for
regional development projects. In 2001, by providing international training (using English)
for specially selected accounting and computer science students, the Lippo Group delved into
the education market with the newly minted Putian University (in Putian, Fujian Province,
China).
Lippo Group controls in excess of $15 billion in assets with significant investments in
retail, media, real estate, banking, natural resources, hospitality, and healthcare industries.
The group's flagship operating platforms include OUE Singapore, Lippo Karawaci Indonesia,
Hypermart, Matahari, Siloam Hospitals Indonesia, First REIT, LMIR REIT, Auric Pacific,
and Lippo Incheon Development.
4.2 Globalization Impact on Companies
Globalization has a major impact on company around the world, and its impact can be
demonstrated in two ways: positive impact and negative impact. Its positive impact is the
promotion of innovation development, the promotion of rational resource allocation and the
promotion of human civilization. The negative impact is based on the global economy's
turmoil and global economic crisis. Generally speaking, the positive impact of globalization
on people is greater than its negative impact.
4.2.1 Globalization Impact on McDonald’s
Because of globalization, McDonald’s could introduce the american cuisine to the
world, which is burger along with a side dish of french fries and the drink of Coca-Cola. In
fact, McDonalds and Coca Cola are sharing the same vision so when the two groups are
embracing the new country as their market.
Because of globalization, McDonald’s culture on being a restaurant is also change.
For example, a restaurant is supposed to be a place where the family could enjoy a gourmet
food, since the concept is if you want to eat fast, you eat something at home. Yet,
McDonald's introduced the world with a different idea, which is to make a restaurant, often
with a good facilities, yet offer a food that is fast and easy to make. Because of globalization,
McDonald could open their franchises all over the world, offering their idea of delicacy while
still adapting to the local taste and culture.
4.2.2 Globalization Impact on Lippo Group
Lippo Group is one of the biggest and richest group in Indonesia due to its activity in
doing multinational partnership with the company that is located outside Indonesia.
Therefore, globalization is actually also benefiting the Lippo Group
The Lippo Group in fact starts their business partnership for the first time with a
company that is coming from China. If globalization in that era is not vast enough to let the
founder of Lippo Group to engage a business partnership with the China’s company, Lippo
Group would not be as big as right now.
As Lippo Group to expand the business in Indonesia, Lippo Group sees that in
Indonesia, several of business idea is still not yet could be implemented massively. For
example, back in the day, when Lippo Group are investing in assets such as apartments, and
building department stores, the development of Indonesia’s area is still not yet good in all
areas. Therefore, to wait for the Indonesia’s area to be better in condition, Lippo Group invest
their money on doing business practices outside the country.
4.3 SWOT Analysis Implementation upon Companies
4.3.1 SWOT Analysis upon McDonald’s
McDonald's has been outperforming the market this year and recently set a new
all-time high. A SWOT analysis -- a look at strengths, weaknesses, opportunities, and threats
-- can help assess whether the fast-food giant can keep the growth on a high-calorie diet.
Strengths:
1. McDonald's has successfully rolled out new items like coffees, smoothies, and
Angus burgers, expanding the range of menu choices.
2. With a strong product offering, the company has grown income throughout the
recession, notching strong increases in same-store sales.
3. Operations are spread around the world, meaning the company is not exposed to just
one currency or economy.
4. Even trading near its highs, McDonald's serves up sizzling dividend yields that top
the 10-year Treasury. The yield comes with a side order of annual dividend hikes
dating back to 1976. The annual dividend payment has gone from 55 cents per share
in 2005 to $2.20 this year.
Weaknesses:
1. It will be harder and harder to find prime locations to build a set of golden arches. The
U.S. is saturated with its restaurants, so growth will have to occur internationally,
posing potential cultural challenges.
2. While the annual dividend hikes are likely to continue, the dividend growth rate has
been slowing and will probably continue to slow or level off.
Opportunities:
1. There are opportunities for new restaurants outside the United States, and McDonald's
has been taking advantage of them. China is a great opportunity for the company, as is
much of Asia.
2. Menu innovations are limited only by imagination.
3. Low interest rates provide cheap capital for growth. In addition to dollar-denominated
debt, McDonald's recently became the first foreign company to issue
yuan-denominated bonds in Hong Kong.
Threats:
1. Governments are considering regulations targeting fast food.
2. McDonald's faces competition from strong peers such as recent 11 O'Clock Stock pick
Yum! Brands and Burger King.
3. New product rollouts often have to go head-to-head with established players like
Starbucks coffee or Jamba smoothies.
4. Commodity price increases could increase costs while a weak economy limits the
ability to pass the price hikes through to consumers.
From the SWOT analysis, there are several points that may impact on the
development of the company. They will consider to optimize the strength and their
opportunity to be developed such as rolled the new item, strong product offering, get the new
restaurant outside the US and low interest rate. But, on the other hand, they must give more
attention to their weaknesses and threats and find the best decision to overcome those
problems.
4.3.2 SWOT Analysis upon Lippo Group
Lippo Group is dealing with multiple big business at once. In this study, the author
would choose one of its unit business to be analyzed, which is Mall Lippo Cikarang.
Strengths:
1. Strategically located at KM30, east of Jakarta
2. Better environment, infrastructure and complete public facilities for industrial and
residential tenants
3. Strong management with more than 20 years of experience in property development.
4. Solid cash flow with zero debt
Weaknesses:
1. Low landbank inventory could restrain cash flow and increase acquisition costs,
which will crimp its profit margin.
Opportunities:
1. New toll gate access at KM34+7 should increase property values as well as
company’s profitability
Threats:
1. Depleting industrial land with higher acquisition costs can hurt the company’s
profitability
2. A possible slump in demand for industrial land in Cikarang, while it expects
industrial supply of land to be increase in the Karawang area
Same with the McDonald's company, the Lippo group also have several strengths that
may be optimized such as it strategic location that may attract more customers to buy their
product, their environment, and their management side. But, based on their weakness, they
must consider how they can manage the low land bank inventory in the future, depleting
industrial land, and prepare a plan of possible slump in demand.
4.4 Cases of Environmental Uncertainties on Companies
4.4.1 Cases of Environmental Uncertainties on McDonald’s
As could be seen from the company’s profile, McDonald's is a very big chain
restaurant. Since it is opening its franchise internationally, McDonald's face a lot of
uncertainty, especially in the way people perceive McDonald and the way McDonald should
adapt their franchises into the local taste, which would be used as an example in this study.
McDonald's has faced a lot of problems in terms of its image on operating its
business. Environmentalist, consumer association, animal activist, food health agency,
anti-corruption agency and etc, are a group of people who often deemed that McDonald's is
an “evil” restaurant, doing unethical things for the sake of getting profit. Yet, it is actually
back to the franchise who commit the unethical act. Yet, the brand of “McDonald” is actually
getting affected as a whole. This is one of the uncertainties that has made McDonald's have to
be careful in managing their branches. To always emphasize on promoting goodness to each
local area of the franchises is something McDonald’s always been upholding to.
Furthermore, McDonald's is also face uncertainty in each country. Each country has
their own taste and preference. Therefore, McDonald adapt the restaurant to be suitable to the
local taste. For example, in Indonesia, the people love spice very much. Therefore, they open
a menu which provides extra spiciness to cope up with the condition. Furthermore,
Indonesian people could not eat without rice. Therefore, McDonald's has decided to change
its main course from burgers and frenchfries into chicken and rice, affecting its supply chain
entirely.
4.4.2 Cases of Environmental Uncertainties on McDonald’s
Lippo Group is one of the biggest companies who do multiple types of business at
once, such as in journalism (BeritaSatu), department stores and malls (Matahari, Hypermart,
Lippo Mall), internet connection provider (First Media), assets (Meikarta), film showing
(Cinemaxx), e-money (OVO), and many more. It is a very arduous thing to do for a single
group to be able to manage that much and diverse business operations. It would face
uncertainties that is very varying from one type of business to another, and it is up to the
Lippo Group to plan and mitigate the bad risk from it.
One of the environment uncertainties that could be faced by Lippo Group is the way
competitor is doing its activity. As could be known, First Media is a leading wireless fidelity
internet provider that is targeting the segmentation of middle-income consumer. In the
meantime, its greatest competitor is pursuing a little bit higher income consumer. Lippo
Group should anticipate when the competitor decided to breach a new market by launching a
subdivision product that is competing with First Media.
The other case that could happen is how their cinema business, Cinemaxx, is really
relying on the production of film out there, which is not in control of Cinemaxx. As can be
seen, the launch of Avengers: Endgame movie has made cinema over the world to be
overflowing with people who want to watch the video. In the end, Cinemaxx react with using
all the available studios to show Avengers: Endgame only to pursue high profit while the film
is still booming on the media. This kind of uncertainty is what makes Lippo Group adapt with
the condition of the market.
5. Conclusion
By doing this study, it could be known that the three aspects mentioned are greatly
impacting on how organizations do their business operation. First, from globalization, with
the help of globalization, the sharing of information, ideas, integration of culture, is
happening faster. It often brings benefit to companies. Yet, globalization flow also brings bad
impact to the company which could lead to conflict, such as culture clash. Second, SWOT
analysis is a very helpful tool to know in what kind of condition a company is actually
located in. Furthermore, to recognize all of the SWOT element, which are strength, weakness,
threat, and opportunity, is a fundamental for company to accomplish if they want to achieve a
greater height of self-quality. Lastly, the way uncertainties are happening in the environment
is also contributing to the way company run business. Uncertainties comes from all sources in
any kind of form, and it is the task of the company to anticipate all the uncertainties and make
necessary preparational actions according to that. If a company could implement the actions
of the mentioned three things, the company would be in better condition in the future.
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