Management
The nature and scope of strategic management has been fundamentally transformed by neoliberalism. Discuss.
Introduction
It must be brought to light that modifications and changes in the social and political system in the external environment can certainly bring changes in the way businesses and institutions work. This is because the field of management and business is strongly influenced by the changes taking place in the external environment. When political scenario undergoes radical changes and social movements begin to rise, then the way management in business is being carried out also undergoes some form of modification to keep up with the newly introduced change. The concept of neoliberalism was originally coined in the year 1938 by a German scholar however, the foundation of neoliberalism was provided by the work of Adam Smith which was carried out in the eighteenth century and published in his book The Wealth of Nations as well as in the Laissez Faire economics. The idea gained significance in the decade of late nineties. Many politicians, scholars, and sociologists support the theory of neoliberalism and are known as Libertarians.
Advocates of neoliberalism believe in the fact that as long as government dictates rules, regulations and policies, no significant contribution can be made towards the economy. The economy can only become strong and stable if the authority gets transmitted from public to private sector (Bockman 14). In almost every economy, the government enjoys the authority to set up taxes and business regulations. The exchange rates are very stringent and there are very fewer opportunities for businesses in the private sector. It must be highlighted here that neoliberalism is an extension of the classical liberalism of freedom and personal interests, however, the approach is new. The believers of neo liberalism stressed that there should be minimal or no intervention by the government in the matters of economy. When the government intervenes, the trade and business growth chances become very less. Free markets are also not available for boosting the economic situation of a country.
Why Neoliberalism is Favored?
In simple terms, neo liberalism is based on the idea that the government should limit its rights and let the private sector come forward and play its role in the shaping up of the economy (Sewpaul 463). Also, the functions such as transport, mail, energy and maintenance of infrastructure must be assigned to the private sector. This is because when the government has a less role to play in these functions, new ideas would be brought to light. In other words, innovation would be introduced which will give a boost to the economy. Taxes are very high and fixed in the public sector but if neo liberalism is allowed to take over, then the taxes would be reduced at national and international levels. This would encourage international businesses to grow rapidly in a country thus, bringing a rapid growth in the economy. Another positive aspect of neoliberalism is that the trade barriers between countries are lowered which encourages international trade. When trade barriers are low, the international relationships among nations also improve (Davies 22).
Although the whole concept of neoliberalism is based on giving a boost to the economy but critics who support capitalism have a strong reason to oppose neoliberalism from flourishing. They state that although the concept is aimed at simplifying the trade and encouraging more entrepreneurs to come forward to showcase their talent and innovative abilities but neoliberalism does not take into account the poor or unprivileged class. The public institutions take the responsibility of those who are deprived of basic facilities by providing them food, shelter, and small jobs. If the government stops intervening in national matters and privatizes its departments, the lower class will suffer a lot who depend on government aid to survive (Duménil, Gérard, and Dominique Lévy 73). Those who are in favor of neoliberalism believe that every human being is gifted with skills and potential to do something extraordinary to make both ends meet. People who depend on the government for basic necessities are the ones who are actually playing a part in thinking high of the institution which is hampering economic progress. Once more businesses are allowed to commence their operations at low tax rates, relaxed regulations, and more market reach, job opportunities will be created for the unemployed class and improve their lives. Wage inequality is essential for the survival and progress of a society (Watson 22).
Strategic Management and Neoliberalism
It is important to highlight the concept of strategic management at this point. Strategic management is all about ensuring that there is a proper formulation and implementation of strategies so that organizational goals can be achieved. It is important that the strategies are present in strong alienation with the ultimate mission and vision of the organization as well as it takes the internal and external environment factors into account (Carter, Chris, Stewart R. Clegg, and Martin Kornberger 7). It has been learned that neoliberalism offers freedom to existing and new businesses to make huge profits by facilitating the market deregulations, globalization of the economy and market fundamentalism (Knights, David, and Glenn Morgan 34). The decision-making process for senior and executive managers have become quite simplified. Previously, it used to be very difficult for managers to take decisions on the basis of negotiations and compromise on their innovative approach. Because of least involvement of government into the organizational matters, dealing with trade unions has become easy as there is a little or no need to negotiate with them on important issues. Based on the principles of neoliberalism, businesses can also expand on an international basis as the laws and trade policies become less stringent and more focused on improving trade linkages among nations. Offshoring the product and operation facility has also become quite common a practice. When organizations enter into mergers or acquisitions, they do not have to face any hindrances which were offered by government intervention.
Another worth mentioning influence of neoliberalism on strategic management is that neoliberalism focuses on individual gains rather than collective gains as proposed by Keynesian egalitarianism. Neo liberalism is not in favor of societal gains as it hampers productivity and limits business initiatives. Neoliberalism also proposes that businesses should invest in projects which are short term and distribute the profit to its shareholders. A very favorable aspect of neoliberalism has been its focus on encouraging the private organizations and groups to diversify into financial services. As a result of this move, many companies have begun to generate half of their yearly earnings from financial services.
Conclusion
Neoliberalism is an extension of classic liberalism which is based on the idea of providing freedom and free markets to businesses so that the economy can prosper. Neo liberlism facilitates the concept of strategic management by offering freedom of decision making and improved trade relationship. Taxes and regulations are lowered down so that more trade can take place and economic situation improves.
References
Bockman, Johanna. "Neoliberalism." Contexts 12.3 (2013): 14-15.
Carter, Chris, Stewart R. Clegg, and Martin Kornberger. A very short, fairly interesting and reasonably cheap book about studying strategy. Sage, 2008.
Davies, William. "Neoliberalism: a bibliographic review." Theory, Culture & Society (2014): 0263276414546383.
Duménil, Gérard, and Dominique Lévy. "Neoliberal Managerial Capitalism: Another Reading of the Piketty, Saez, and Zucman Data." International Journal of Political Economy 44.2 (2015): 71-89.
Knights, David, and Glenn Morgan. "The concept of strategy in sociology: a note of dissent." Sociology (1990): 475-483.
Sewpaul, Vishantie. "Neoliberalism." International Encyclopedia of the Social & Behavioral Sciences (2015): 462-468. Print.
Watson, Ian. "Wage inequality and neoliberalism: The Australian experience." Journal of Industrial Relations (2015): 0022185615598191.
