Businesses, these are organizations that provides goods and services that are sold to earn profit this is according to (Ronald J. Ebert ? Ricky W. Griffin). He also went ahead and added that all businesses regardless of their sizes, location or even mission operate within a larger external environment that consist of factors that either affect the business positively or negatively and one of the key factor is political-legal environment and followed by economic environment.
Political-legal environment it is the reflection of the relationship between the government and the business in the form of government regulating the business. The political-legal environment it is of great importance since the legal system defines what the business can or cannot do.
Economy, this is the current state of a given country in terms of its money regulation, production and consumption of its goods and services. According to (Ronald J. Ebert ? Ricky W. Griffin) an economic environment refers to the conditions that exist in the economic system in which the company operates hence concluding that the economic system is the nation’s system that allocates its resources among its citizens both individual and organizations. (Robert C. Appleby) he said that an economic system involves two main systems that link consumers with resources which are planned economy and the market economy.
According to (Robert C. Appleby), the fundamental economic problem is allocating scarce resources which are capable of alternative uses with many consumers wants. This shows that a lot of economic attempts have been made that have been used to analyse ways of allocating the limited resources so as to maximise the economic well-being and the best driven solution that was brought on table was the government getting involved in ensuring that this comes into function whereby the government is to privatise all of its businesses.
Privatization of government enterprises was critically influenced by the well documented poor performance of public enterprises. The public enterprises are inefficient because the only look into the objectives of politicians rather than maximizing the enterprise efficiency.
Government enterprises around the globe have proved that they are highly inefficient in the terms of how they conduct their daily operational activities, primarily because they pursue strategies such as those of hiring excess employee that will only satisfy the politicians objectives whereby the politicians control the employees.
Privatization of government enterprises has led to the rise of the cost to the politicians who do try to politicalize and influencing the business operation, hence they subside to private firms necessarily forcing them to remain inefficient and making privatization to be an effective way of restricting of firms and above it all being an effective way to operate a government state owned firms only when combined with monetary policy and new owners with entrepreneurial mind set start to operate the business in order for them to maximize profits.
Privatization it’s all about reforming all the government owned business, this means that combinations of the relocation of control rights over the employees from the politicians running the daily business activities to managers who will highly lead to the increase in cash flow, private investors investing in the business and even managerial ownership of the business. Privatization will necessarily involve maximizing profit by reducing the number of employees and even have less interest in employing excess employees.
The economy has totally deprived; this is as a result to the government running their business and even putting less effort in managing them. The government owned enterprises are full of corruptions which has led to the reduction of cash flow in the market and even reduced the living standards of their employees and leading to the increase in the living cost of their employees.
Privatization, has made it easier for the business to run smoothly in enhancing the economy of the enterprise whereby the cash flow ownership has been transferred from the treasury to the manager.
Reasons for privatization
Government may have their own reasons in privatizing their business and this all depends with the type of business being privatized and even the reasons as to why the government is privatizing the business may vary from each other all depending on the type of enterprise operated by the government.
Privatization being a frequently used strategic option, this strategy has been globally and rapidly used in globalization of the economy hence driving the popularity factor of it. The popularity factor of this strategy is the desire of different nations is to foster the type of economy that will allow their countries to be productive participant in the world markets hence being consistent with the force of free market economies in their operational and legislative contexts.
Government recognizing that investment sources outside government must be tapped in the provision of such infrastructures and services it must involve the private sector that will provides opportunities like sharing risks and even a quick response to market opportunities
The government may even go ahead and choose to privatize its business because of the principles factors that strengthen the private sector which include; a better company labor management that will foster the regulation of hiring employees in the company, relative freedom that will enhance one to operate outside of political and bureaucratic constraints and above it all access to a non-traditional resource for the investment in infrastructure to serve trade that some government owned enterprises may not have.
The beneficial ways of the private sector business have enabled it to rapidly respond to any market change by the quick investment, decisions and plans made hence attracting a lot of government owned business to get privatized. Privatization of these business has improved the economy growth of a country by improving the living standards of the citizens and even reducing their living costs.
Privatization has got strategies, which includes modes and process. Privatization can be partial or full, occurring in ways that include the sales of a company’s assets or shares to domestic or foreign investors involving the granting of leases, concession and above it all management of contracts, employee and buyouts. Countries have deployed different strategies that have positively contributed to the economy of the countries by using separate economic sector at given point in time. The different strategies in the economic sector reflects variations in political ideologies, stage of development, national cultures and long-term development plans.
Privatization has been used as the resulting outcomes, these outcomes affect the future of business in terms of the business structure and organizational culture. And the outcomes are separated into first and second order effect
First-Order effects of privatization
Privatization has created a whole new context in which firms must compete to survive and even succeed. The transformation accompanying privatization changes the whole enterprise structure and the way they are managed hence leading to an observable fundamental changes in the firm’s culture this is according to (Johnson & Loveman, 1995).
Privatization changes manager’s incentives, managers of state owned enterprise usually have limited discretion to initiate and even implement strategic this is according to (Cragg ; Dyck, 199) and above it all they are constrained by the bureaucratic controls that limit the scope of the business activities and authority.
Following privatization, a new set of dynamic occurs in that senior managers are deployed to plan and develop strategies based on the analysis of the industry and market conditions.
Managers have got discretion to define and redefine organizational goals to reflect the objectives of their key stakeholders.
Managers have got greater discretion to align resources allocation with firm’s objectives
Privatization has led to the growth of the economy by enhancing the business management to focus on the market forces, hence managers becoming more accountable to the shareholders. This compels the managers to pursue strategies that will increase shareholder’s wealth.
Second-Order Effects of Privatization
Privatization has created a set of national and organizational changes. These changes in turn have stimulated organizational learning and acquisition of new additional skills that can provide the foundation for enhanced technological opportunities for the firms and above it all connections to capabilities needed to gain access to different domestic and international networks.
Privatization has improved organizational learning. This has been made possible by the changes that privatization induces usually they are very essential and radical that a new organizational mindset is needed to be able to capitalize on the opportunities that become available to the firm.
Privatization has increased the technological opportunities, whereby technological opportunities are the potential products and process of invention and innovation within the industry.
Privatization has led to the gaining of access to network, liberating an economy and therefore an extensive privatization are the catalysts in linking domestic procedures and entrepreneurs to venture capitalist, investors and technology providers outside their national borders.