Week 42a Enterprise and its Environment and Managing in a Global Environment

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Week 4/2aEnterprise and its Environment and
Managing in a Global Environment
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Week 4/2aEnterprise and its Environment and
Managing in a Global Environment
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Week 4/2aEnterprise and its Environment and
Managing in a Global Environment
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The Environment of Business

• Specific (Task)
• Suppliers
• Competitors
• Customers
• Government
• Labour supply

• General (Mega)
• Political/legal
• Economic
• Socio-cultural
• Technological
• Global

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The Environment of Business
MEGA-ENVIRONMENT (General Environment)
INDUSTRY ENVIRONMENT
Socio-cultural
Technological
TASK ENVIRONMENT (Specific Environment)
Government
Political
Customers/Clients
Government agencies
Competitors
Suppliers
Labour
Economic
Global
Technological
Political/legal
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The Environment of Business
MEGA-ENVIRONMENT (General Environment)
Political/legal
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The Environment of Business
MEGA-ENVIRONMENT (General Environment)
Economic
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The Environment of Business
MEGA-ENVIRONMENT (General Environment)
Socio-cultural
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The Environment of Business
MEGA-ENVIRONMENT (General Environment)
Technological
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The Environment of Business
MEGA-ENVIRONMENT (General Environment)
Global
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Degree of Environmental Uncertainty

• MODERATELY LOW
• UNCERTAINTY
• Large number of dissimilar
• external elements
• 2. Elements stay the same or
• change slowly
• Example Insurance companies

• LOW UNCERTAINTY
• Small number of dissimilar
• external elements
• 2. Elements stay the same or
• change slowly
• Example Funeral parlours

• HIGH UNCERTAINTY
• Large number of dissimilar
• external elements
• 2. Elements change rapidly
• unpredictably
• Example Software companies

• MODERATELY HIGH
• UNCERTAINTY
• Small number of dissimilar
• external elements
• 2. Elements change rapidly
• unpredictably
• Example Womens apparel

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Environmental Scanning in Levi-Strauss
Interpretation Shrinking market potential in
largest market segment.
Environmental Factors Social e.g. Population
changes, leisure time recreation, fashion
trends, preferences for natural fabrics
Scanning E.g. Changing age distribution in U.S.
market monitoring trends in birthrate and
population discovers that teenager market segment
in the U.S. is shrinking.
E.g. Imports of jeans to the U.S. monitoring
growth in Far East production and quota
agreements suggests import growth in U.S.
Imports will probably gain a higher share of U.S.
market for Levi Strauss products. Continue.
Economic e.g. Economic growth and inflation,
imports to the U.S., clothing spending, retail
changes.
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Environmental Scanning in Levi-Strauss
Interpretation Slowed rate of this environmental
force.
Environmental Factors Governmental e.g. Import
barriers, retail price maintenance, metrication,
flame-proofing standards in clothes.
Scanning Eg. Monitoring U.S. government consumer
protection bodies finds reduced budgets and less
attention to flammability research, suggesting
less chance of new standards for general clothing.
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Why Do Companies Go Abroad?
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Why Do Companies Go Abroad?
The distinction between domestic and foreign
firms is increasingly blurred. Companies that do
not develop a global vision are likely to lose
out.
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Country Attractiveness in a Financial Services
company
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InternationalStrategies
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Advantages and Disadvantages of Various Modes of
Entry Choices
Joint Venture

• Knowledge of local markets
• Lower development costs and risk
• Access to closed markets

• Potential for conflict of interest
• Loss of competitive advantage

Wholly Owned Subsidiary

• Maximum control over proprietary knowledge /
  technology
• Greater strategic flexibility
• Efficiencies of global production system

• Large capital outlay
• Lack of local knowledge
• Increased risk

Strategic Alliances

• Access to closed markets
• Pooled resources increase partners
  capabilities
• Complementary skills assets

• Loss of competitive advantage
• Potential 0ver-estimation of partners
  capabilities

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Advantages and Disadvantages of Various Modes of
Entry Choices
Exporting

• Economies of scale
• Lower foreign expenses

• No low cost sales
• High transportation costs
• Potential tariffs

Turnkey Project

• Access to closed markets

• Competition from local client
• Loss of competitive advantage

Licensing

• Quick expansion
• Lower expenses and risks
• Lower political risk

• Loss of competitive advantage
• Limited ability to use profits in one
  country to increase competition in another
  country

Franchising

• Quick expansion
• Lower development costs and risks
• Lower political risk

• Loss of competitive advantage
• Potential quality control problems
• Limited ability to use profits in one country
  to increase competition in another country

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Examples of Strategic Alliances

• General Electric Snecma of France
• Toshiba IBM
• Mitsui General Electric
• Toyota GM, TRW
• Canon Hewlett-Packard
• Mitsubishi Caterpillar

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Example of Globalized Production

• Of the 20,000 sticker price of a General Motors
  Lemans
• 6,000 goes to South Korea, where the car was
  assembled
• 3,000 goes to Japan for sophisticated high-tech
  parts (engines, transaxles, electronics)
• 800 goes to Taiwan, Singapore, and Japan for
  small parts
• 500 goes to Great Britain for advertising and
  marketing services
• 1,000 goes to Ireland for data processing
• 7,600 goes to GM and its external professional
  firms in the United States

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International Business Terms

• International Business
• International Management
• International Trade
• Multinational Corporation
• Global Corporation

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Economic Integration and Free Trade
goods and services are traded freely among member
countries
members dismantle barriers to trade among
themselves and establish a common trade policy
for non-members
no barriers to trade exist among members and a
common external trade policy is in force.
Furthermore, capital, labor, and technology move
freely among member countries.
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Examples of Economic Integration

• European Union
• Association of Southeast Asian Nations
• Asia Pacific Economic Cooperation
• North American Free Trade Agreement ( US6
  trillion output! )
• Mercado Común del Sur (MERCOSUR)
• Economic Community of West African States
  (ECOWAS)

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The Political and Legal Environment
Trade Barriers
Subsidies
Political Risks
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The Socio-CulturalEnvironment
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The Technological Environment
Suitable Technology
Social Conditions
Economic Conditions
Willingness and Ability
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The Business Team and the Global Economy
Expanding abroad entails a coordinated effort by
a companys business team, including
Marketing
Staffing
Production
They must analyze (1) how to manage their
functions abroad and (2) how to work together to
obtain the companys objectives.
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Key human resource management factors for global
firms
Selection Cultural sensitivity is key selection
criterion Training Length of assignment
determines depth of training Cross-cultural
training is critical to success Career
Development International assignments should be
part of career advancement plan Compensation and
Benefits Incentives and quality-of-life concerns
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The Global Manager
Approaches to managing an international subsidiary
Home Market Orientation
Individual Foreign Markets
Integrated Worldwide Marketing
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Why International Assignments End in Failure

• Career blockage
• Culture shock
• Lack of pre-departure cross-cultural training
• Overemphasis on technical qualifications
• Getting rid of a troublesome employee
• Family problems

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Success Factors for International Managers

• Cross-cultural sensitivity
• Business knowledge
• Courage
• Motivates others
• Personal integrity
• Insight
• Commitment to success

• Takes risks
• Uses feedback
• Culturally adventurous
• Willing to learn
• Open to criticism
• Seeks feedback
• Maintains flexibility

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Global Strategy Audit Steps
Identify SBUs to Audit
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International Management
Organizing
Planning
Leading
Controlling
Each function must be managed in alignment with
the current culture and environments where the
organization is located
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Managing in a Cultural and Ethical Environment
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Ethical Challenges in the Workplace
The Nature of Ethics
Ethics and the Law
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Ethical Behavior at Work
Individual Standards
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Fostering Workplace Ethics
5 Major Steps

• Get top managements commitment
• Publish a code of ethics
• Establish compliance mechanisms
• Involve personnel at all levels
• Measure results

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Organizational Culture
ORGANIZATION
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How do managers shape culture?
Formal Policies
Signs and Symbols
CULTURE
Stories / anecdotes
Rites and Ceremonies
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Corporate Social Responsibility

Managerial Capitalism
Stakeholder Theory
The Moral Minimum
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How to Improve Social Responsiveness
Social Auditing
Whistle Blowing
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Diversity Management
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Barriers to Diversity
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ManagingDiversity Maximizing Advantagesand
Minimizing Barriers
Leadership
Research Measurement
Education Training
Management Systems
Evaluation
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END OF LECTURE Thank You!