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Chapter 1 Assessing the Environment – Political, Economic, Legal, Technological. Kristopher Blanchard North Central University. The Global Business Environment. The Global Marketplace is complex, interdependent, and dynamic Challenges include politics, culture, and technology

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chapter 1 assessing the environment political economic legal technological

Chapter 1 Assessing the Environment – Political, Economic, Legal, Technological

Kristopher Blanchard

North Central University

the global business environment
The Global Business Environment
  • The Global Marketplace is complex, interdependent, and dynamic
  • Challenges include politics, culture, and technology
  • Managers must find a balance between social responsibility, company image, and competitive strategies
  • More focused on Global Management
the global business environment1
The Global Business Environment
  • Global competition is characterized by networks that bind countries to one another
  • Globalism trends
    • A borderless world
    • Increase in exports
    • Increase in direct foreign investment
    • Dominance of trading blocs
regional trading blocs
Regional Trading Blocs

“The dominance of the United States is already over. What is emerging is a world economy of blocs represented by NAFTA, The European Union, and ASEAN. There’s no one center in this world economy.”

- Peter Drucker

Fortune, January 12, 2004

regional trading blocs1
Regional Trading Blocs
  • TRIAD Market
  • European Union
  • Asian Market
    • China, Japan, South Asia
  • NAFTA
  • CAFTA
the triad
The TRIAD
  • Three regional free-trade blocs
    • Western Europe, Asia, and North America
  • Grouped around three dominant currencies
    • Euro, Yen, and Dollar
  • In 2004, these trade blocs were expanding their boarders to include neighboring countries
comparative management in focus india
Comparative Management in Focus - India
  • India has witnessed a change in values, habits and options during the last decade
  • The economy, second fastest growing in the world, is expected to grow close to 7% this year
  • Fastest growing telecom market with more than one million new mobile phone subscriptions per month
comparative management in focus india1
Comparative Management in Focus - India
  • Indians are buying 10,000 motorcycles a day
  • India had 192 million households in 2001
    • Only 31.6% have a television
    • Only 2.5% have a car, jeep or van
  • Foreign investors have invested $5 billion into the Indian stock market
information technology
Information Technology
  • Information Technology is transforming the international manager’s agenda more than any other item
  • Information is no longer centrally or secretly controlled by governments
  • Information technology is boosting productivity and electronic commerce around the world
the globalization of human capital
The Globalization of Human Capital

Globalization means we share jobs as well as goods.

- FINANCIAL TIMES,

August 27, 2003

the globalization of human capital1
The Globalization of Human Capital
  • Forrester Research predicts that 3.3 Million US jobs will move offshore by 2015
  • 45% of the 500 US companies surveyed state that they use a global sourcing model
the political and economic environment
The Political and Economic Environment
  • One important aspect is the phenomenon of ethnicity
    • Driving force behind political instability
  • Firms must assess political risks
    • Government actions that could adversely affect the long-run profitability or value of a firm
political risk 7 typical risk events
Political Risk – 7 Typical risk events
  • Expropriation of corporate assets without prompt and adequate compensation
  • Forced sale of equity to host-country nationals, usually at or below depreciated book value
  • Discriminatory treatment against foreign firms in the application of regulations or laws
  • Barriers to repatriation of funds (profits or equity)
political risk 7 typical risk events1
Political Risk – 7 Typical risk events
  • Loss of technology or other intellectual property (such as patents, trademarks, or trade names)
  • Interference in managerial decision making
  • Dishonesty by government officials, including canceling or altering contractual agreements, extortion demands, and so forth
managing political risk
Managing Political Risk
  • Avoidance – either the avoidance or withdrawal of investment in a particular country
  • Adaptation – adjust to the political environment
  • Dependency – keeping the host nation dependent on the parent corporation
  • Hedging – minimizing the losses associated with political risk events
economic risk
Economic Risk
  • A country’s level of economic development generally determines its economic stability
  • Economic risk falls into 2 categories
    • Government changes its fiscal policies
    • Government modifies its foreign-investment policies
  • Managers are constantly reassessing economic risk
the legal environment
The Legal Environment
  • Manager’s will comply with the host country’s legal system
    • Common Law – past court decisions act as precedents to the interpretation of the law
    • Civil Law – comprehensive set of laws organized into codes, interpretation is based on reference to codes and statues
    • Muslim law – based on religious beliefs, it dominates all aspects of life
the legal environment1
The Legal Environment
  • Commenting on Contract Law

“In China, the old joke goes, a contract is a pause in the negotiation.”

- VANESSA CHANG, KPMG PEAT MARWICK

the technological environment
The Technological Environment
  • Corporations must consider the accelerating macro-environmental phenomenon of technoglobalism (rapid developments in information and communication technologies)
  • Corporations must consider the appropriability of technology
global e business
Global E-Business
  • E-business – the integration of systems, processes, organizations, value chains and entire markets using Internet-based and related technologies and concepts.
  • E-commerce - refers directly to the marketing and sales process via the Internet
global e business1
Global E-Business
  • Convenience in conducting business worldwide; facilitating communication across borders contributes to the shift toward globalization and a global market.
  • An electronic meeting and trading place, which adds efficiency in conducting business sales.
  • A corporate Intranet service, merging internal and external information for enterprises worldwide.
  • Power to consumers as they gain access to limitless options and price differentials.
  • A link and efficiency in distribution.
looking ahead
Looking Ahead
  • Chapter 2 – Social Responsibility and Ethics
    • The Social Responsibility of MNC’s
    • Ethics in Global Management
    • Managing Interdependence
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