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Chapter 2: The External Management Environment

Welcome back for another round of exciting management case studies!  Today we will get in close touch with a major global problem: climate change.  Management and organisations are not separate from the rest of the world and nothing illustrates the connection of an organisation to the external environment like this particular example.   Let’s check out some organisations that are involve in managing this issue, the components of their external environment and what they mean for managers.

To start with…

…refresh your knowledge of the various factors in the external environment that managers should be aware of as part of their job. Figures 2.1 (p. 30) and 2.2 (p. 32) in your textbook describe these in detail, so you should definitely have a closer look at them before sinking your teeth into this case.  Once you’ve done that, check out this description of the Adani coal mine battle involving a mining company, governments, and environmental groups.

So, to summarise…

Adani Group is a leading infrastructure conglomerate from India operating internationally.  It has operations in Australia, where it operates mines, ports and power plants.  Over the last few years has tried to expand its operations in the Carmichael mine Queensland, into what will become the largest coal mine, with six open-cut pits and up to five underground mines.  The cost of the project is estimated at $22 billion, and will include a 31.5 kilometres of permanent rail line, which will form part of a 389-kilometre heavy haul line from the mine in the Galilee Basin, west of Rockhampton, to the Abbot Point port, south of Townsville.  The life span of the mine is estimated to be between 25 and 60 years, according to the Queensland Government, but the railway will remain in Queensland after that time. 

The coal itself is meant to supply Indian power plants with enough coal to generate electricity for up to 100 million people, after it is processed through the Abbot Point Coal Terminal, off the coast of Bowen in north Queensland.  This way, the coal will provide processing jobs in Queensland, Australia.

The jobs relating to this mine are an important point, and it is a major reason why the Queensland Government, the Australian Govenrment, and many Australian businesses support the expansion of the mine.  The Adani Group predicts the first stage of construction will provide more than 500 positions, mainly for planners and engineers.  Once operational, the Group estimated the mine will provide 2,500 to 3,000 full-time jobs.  The Adani Group has estimated the entire project will create 10,000 jobs through direct and indirect employment.

However, in 2015, Adani Consultant Dr Jerome Fahrer told the Land Court in Brisbane the mine would actually create fewer jobs.  He gave a net figure of 1,464 – about 15% of what the Adani Group has been stating – and the court accepted this estimation.

Why was the court involved in the first place?  At that time (December 2015), Coast and Country, a community conservation group from Queensland, took the project to the land court to try to stop the Queensland government from issuing Adani's mining leases and approvals.  The environmental group was concerned that the expansion of the mine would threaten black throated finch populations, damage ground water from nearby springs, contribute to climate change, and that the economic benefits would be less than those forecast by Adani.

The environmental groups are getting better and better at battling the coal mine project.  By now, it is supported by the activist group GetUp!, has a $1 million budget, nine full-time staff including polling and social media experts, and hundreds of volunteers.  In response to their actions, Adani have tried to get the Australian Prime Minister to introduce a law that would not allow activists from taking legal action against them.  The environmental groups, including the Australian Conservation Foundation, are launching a campaign targeting 13 marginal coalition seats in Queensland, NSW and Victoria.  The campaign uses cutting-edge and traditional tactics, contacting voters by telephone, advertising, and a social media.  In addition, by challenging their socially responsible image with a satirical video, the environmental group SumOfUs targeted Westpac bank, to join a many other financial institutions who refused funding for the $22 billion project.

On the other hand, local politicians, such as the Mayor of Rockhampton, Margaret Strelow, see the mine as a business opportunity that needs to be grabbed.  Adani is holding a roadshow explaining the mine and its effects on the local economy, and 300 local businesses attending are keen to get involved.  This also means jobs for locals, and economic growth, at least for a few decades. 

Some issues to notice and pay particular attention to here are…

  • The effects of the environment on organisation
  • The external environment of the organisation
  • Customer responsiveness
  • Managerial responses

Consider the following questions for discussion…

  1. Figure 2.1 on page 30 describes the organisation through a system view.  How would you describe the elements which are relevant to the Adani Group?  To the Australia Government and Queensland Government? And the environmental groups?
  2. Figure 2.2 on page 32 of your textbook lists the elements of the organisation’s specific environment, and describes them in detail on pages 39-43.  If you were a manager in Adani Group, the Queensland Government, or the environmental groups, which of these elements would you be particularly attuned to these days?  Why?  How would they affect your daily work?
  3. What businesses and organisations would be affected by the expansion of the mine?  Which ones would be affected favourably and which ones would be damaged?  Keep in mind that tourism is an important sector in Queensland, and the expanding mine is said to damage the Great Barrier Reef.
  4. How would you, as a manager of a business that is strongly affected by the condition of the Great Barrier Reef, prepare for the predictions?