Chapter 3 Analyzing the external strategic environment

1. Chapter 3Analyzing the external strategic environment Bess Luker- Mamie Duprie- Alicia Estrada- Taylor Watts- Ryan Dupriest

2. What will be covered • Globalization • Global Trends • Risk and Uncertainty • Scenario Analysis • Business and Society

3. Globalization • World’s major economics and intensified competition • 70-85 % of U.S. Economy • Business Growth • Flow of Information

4. Understanding Globalization • Focus on the trade and regard the free flow of capital • Political Globalization • Economic Globalization • Technological Globalization • Psychological Globalization

5. Regionalism: A Stepping Stone on the path Toward a global Economy • Globalization a work in progress • Triad • EU • NAFTA • ASEAN • EUROMED • APEC • Mercosur

6. 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.

7. 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.

8. 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

9. 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

10. 1. Population Trends • Population is rising • Highest in areas not capable • Aging of population • Women in the workforce

11. 2. Urbanization • Migration from rural to urban areas( less than half of population lives in cities) • Mega cities will become common

12. 3. The Spread of Infectious disease • Greater levels of migration = greater likelihood of epidemics. • Impact on economic growth

13. 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

14. 5. Environmental degradation • Effects on ecosystems • Droughts • Water pollution • Deforestation • Erosion • Kyoto Treaty- reduce greenhouse gas and gas emissions world wide.

15. 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

16. 7. Knowledge Dissemination • Emergence of a global economy • Internet economy • Smart products

17. 8. Information Technology • Internet • Ex. Yamaha-Motor’s online dealer management system • Intranet • Quality of people’s lives

18. 9. Biotechnology • Greatest potential in three areas • Medicine • Agriculture • Environment • Long run

19. 10. Nanotechnology • One atom at a time • Molecular manufacturing

20. 11. Conflict • Berlin Wall • Terrorism ex. 9/11 • Companies must develop security standards

21. 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

22. 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

23. Risk and Uncertainty • Predictability • Certainty • Risk • Uncertainty

24. 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

25. The Global Scenario Group • Three fundamentally different social visions of the future • Conventional worlds • Barbarization • Great transitions

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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