BU. 438

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BU. 438 SESSION 2
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Chapter 1 Assessing the Environment Political,
Economic, Legal, Technological
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Administrivia
GROUP 1 KEVIN BIANCA MICHAEL P. ELSA CONSTANCE JO
JO
GROUP 3 KATE JON SOLINE ANITA VERENA EIRIK DEVIN
GROUP 2 TYLER DIANA JANINA MIKE S. JENNY TEJA
GROUP 4 JON CR. CYRILLE SANDRA CHRISTINE JOSH GER
ALD
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CHAPTER 1 ASSESSING THE ENVIRONMENT POLITICAL,
ECONOMIC, LEGAL, TECHNOLOGICAL
World Trade Organization Financial Times
CEO Express EU CIA World Factbook
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The Global Business Environment

• The Global Marketplace is
• Complex
• Interdependent
• Dynamic
• Challenges include
• Politics
• Culture
• Technology
• Managers must find a balance between
• Social responsibility
• Company image
• Competitive strategies

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The Global Business Environment

• Globalism trends
• A borderless world
• Increase in exports
• Increase in direct foreign investment
• Dominance of trading blocs

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Regional Trading Blocs
ASEAN In 2006, the bloc had a combined GDP of
about USD 884 billion, growing at an average
rate of around 4 per annum.
  Brunei Darussalam   Cambodia   Indonesia  
Laos   Malaysia   Myanmar   Philippines  
Singapore   Thailand   Vietnam
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The Association of Southeast Asian Nations -ASEAN
Indonesia, Malaysia, Philippines, Singapore,
Thailand, Brunei Darussalam, Vietnam, Laos,
Myanmar, Cambodia.   The ASEAN region has a
population of about 500 million, a total area
of 4.5 million square kilometers, a combined
gross domestic product of US737 billion, and a
total trade of US 720 billion.
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NAFTA
In January 1994, Canada, the United States and
Mexico launched the North American Free Trade
Agreement (NAFTA) and formed the world's largest
free trade area.
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EU
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Regional Trading Blocs

• TRIAD Market
• North America United States, Canada, and Mexico
  
• Pacific Rim Japan, South Korea, Taiwan, Hong
  Kong, Malayans, Singapore, Thailand, Indonesia,
  Brunei, Philippines, Australia, and New Zealand
• European Community Belgium, Denmark, France,
  West Germany, Greece, Ireland, Italy, Luxembourg,
  Netherlands, Portugal, Spain and the United
  Kingdom.
• These three areas account for 80 percent of the
  World's Gross Domestic Products (GDP) and 75
  percent of the world's exports and imports. They
  are known as the " Triad".

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CAFTA

• Resistance to CAFTA is still growing. CAFTA was
  supposed to be implemented by January 1, 2006,
• Around midnight on July 27th of 2005, the House
• of Representatives approved the Central America-
• Dominican Republic-United States Free Trade
• Agreement, CAFTA
• FTAA Free Trade Agreement of the Americas

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Four Tigers
Singapore Hong Kong Taiwan South Korea
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Information Technology

• Information Technology is transforming the
  international managers agenda more than any
  other item
• Information is no longer centrally or secretly
  controlled by governments

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The Globalization of Human Capital

• Forrester Research predicts that 3.3 Million US
  jobs will move offshore by 2015
• 45 of the 500 North American companies surveyed
  state that they use a global sourcing model

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Political Risk Typical risk events
The Political and Economic Environment

• Expropriation of corporate assets
• Forced sale of equity to host-country nationals
• 3. Discriminatory treatment against foreign firms
• 4. Barriers to repatriation of funds (profits or
  equity)

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Political Risk Typical risk events

• 5.Loss of technology or other intellectual
  property
• 6.Interference in managerial decision making
• 7. Dishonesty by government officials

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Some Cross Cultural labels

• Maquiladoras are manufacturing facilities in
  Mexico.
• Korea's Chaebol refers to a South Korean form of
  business conglomerate.
• Japan's Keiretsu Business groupings.
• There are major differences between chaebol and
  keiretsu
• Chaebol are still largely controlled by their
  founding families, while keiretsu are controlled
  by groups of professional managers.
• -Chaebol are centralized in ownership, while
  keiretsu are more decentralized and connected by
  cross-shareholdings.

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Least Corrupt Countries, 2007
Rank Country 1. Finland 2. Iceland 3. New
Zealand 4. Denmark 5. Singapore 6. Sweden
7. Switzerland 8. Norway 9. Australia
10. Netherlands www.transparency.org.
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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

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The Legal Environment

• Managers will comply with the host countrys
  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

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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