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Chapter 3Analyzing the external strategic environment Bess Luker- Mamie Duprie- Alicia Estrada- Taylor Watts- Ryan Dupriest
What will be covered • Globalization • Global Trends • Risk and Uncertainty • Scenario Analysis • Business and Society
Globalization • World’s major economics and intensified competition • 70-85 % of U.S. Economy • Business Growth • Flow of Information
Understanding Globalization • Focus on the trade and regard the free flow of capital • Political Globalization • Economic Globalization • Technological Globalization • Psychological Globalization
Regionalism: A Stepping Stone on the path Toward a global Economy • Globalization a work in progress • Triad • EU • NAFTA • ASEAN • EUROMED • APEC • Mercosur
New Powerhouses: India and China • India: Investment is growing, foreign capital and technology are coming in, Western-style competition is taking hold, and state intervention is diminishing. • China: has combined inexpensive labor with technology to create a major, global competitive advantage. • A key challenge for Western companies doing business in China is that the government still controls many aspects of the business environment.
Global Tectonics and Their Strategic Implications • The maturity of many Western markets has forced firms to expand beyond the confines of the developed world into areas with greater potential that carry a level of risk far greater than that to which they are accustomed.] • Greater participation means more growth.
Global Tectonics • Describes the process by which developing trends in technology, nature, and society slowly revolutionize the business environment, much like Earth’s tectonic plates shift the ground beneath our feet. • Environmental tectonics • Technological tectonics • Societal tectonics
12 Global Trends Present the most significant challenges for companies in the next 30 years. • Population Trends • Urbanization • The spread of infectious Diseases • Resource management • Environmental degradation • Economic integration • Knowledge dissemination • Information technology • Biotechnology • Nanotechnology • Conflict • Governance
1. Population Trends • Population is rising • Highest in areas not capable • Aging of population • Women in the workforce
2. Urbanization • Migration from rural to urban areas( less than half of population lives in cities) • Mega cities will become common
3. The Spread of Infectious disease • Greater levels of migration = greater likelihood of epidemics. • Impact on economic growth
4. Resource management • Access to fresh water is a key concern. • Possibility of future conflicts over water resources. • Energy availability is a ongoing concern • Wind Farms
5. Environmental degradation • Effects on ecosystems • Droughts • Water pollution • Deforestation • Erosion • Kyoto Treaty- reduce greenhouse gas and gas emissions world wide.
6. Economic integration • Cross-boarder economic activity • Airbus Consortium • Britain • Germany • Spain • France • Multinational Corporations (MNC’s) • Some industries are more regulated than others • Steal Industry • Telecommunications
7. Knowledge Dissemination • Emergence of a global economy • Internet economy • Smart products
8. Information Technology • Internet • Ex. Yamaha-Motor’s online dealer management system • Intranet • Quality of people’s lives
9. Biotechnology • Greatest potential in three areas • Medicine • Agriculture • Environment • Long run
10. Nanotechnology • One atom at a time • Molecular manufacturing
11. Conflict • Berlin Wall • Terrorism ex. 9/11 • Companies must develop security standards
12. Governance • Two interrelated sets of laws • Rule of law • Ex. 2009 Lead law banning sale of motorcycles for children • Market defines the second set of laws • Dimensions: • Management structures • Business culture • Cross-border investment • Global investors
A Global Knowledge Economy- Strategic Implications • Laws of abundance • Location is diminished • National laws, barriers, and taxes • Knowledge-enhanced products and or services • ex. Yamaha’s EFI and ATV power steering • Higher Inherent value • Human capital
Risk and Uncertainty • Predictability • Certainty • Risk • Uncertainty
Scenario Analysis • One of the most widely used techniques • A disciplined method • Two categories • Things we believe we know something about • Elements we consider uncertain or unknowable • The objective • The scenario-building process • Decide • Identify • Construct • Generate
The Global Scenario Group • Three fundamentally different social visions of the future • Conventional worlds • Barbarization • Great transitions
Conventional Worlds • Envision the global system evolving without major surprises • World economy grows rapidly and developing countries • Scenario 1: incorporate mid-range population & development projects typical technology change assumption • Scenario 2: Adds strong, comprehensive and coordinated government action
Barbarization • Envision the grim possibility that the social, economic, and moral underpinning of civilization deteriorate • Scenario 3: Crises combine and spin out of control • Scenario 4: features and authoritarian response to threat of breakdown
Great Transitions • Explore visionary solutions to sustainability challenge • Scenario 5: Incorporates the green vision • Scenario 6: Shares some of the goals of scenario 5 but seeks to change the character
Compact Between Business and Society • “Business as usual” might no longer be and option and traditional strategies change • Size means scrutiny- the larger the company is the more exemplary performance in ethical behavior, employee practices etc • Cutting costs raises compliance risk- the more a company cuts cost the more potential for noncompliant ethical practice
Compact Between Business and Social Continue • Strategy must involve society- forward thinking companies have to think about social and environmental problems • Reducing risks means building trust- classic risk managements also expands events arising in society • Satisfying shareholders means satisfying stakeholders- Company pays attention to business- society relationships
Compact Between Business and Social Continue • Global growth requires global gains- global perspective recognizes strong communities • Productivity requires sustainability- environmental management, safety, etc. • Differentiation relies on reputation- United States 50 million people $225 billion large influence • Good governance needs good representation-corporate scandals generating strict controls