the global context lecture 3 the global business environment
TRANSCRIPT
The Global Context
Lecture 3
The Global Business Environment
Lecture Objective
• Explain the nature of the global environment
• Undertake an external environmental audit
• Analyse the impact on business of changes in the external environment
• Assess the attractiveness of countries as places to do business
ORGANISATION
beliefs
demographic trends
technology
ethics
laws
pressure groups
Political events
inflation
interest rates
credit availability
treaties
Europe
ecology
social problemsmedia
values
taxes
banks
neighbours
ideas
The External Environment
The External Environment
Complex
Confusing
Dynamic
Change is accelerating
Turbulent
Opportunities
New markets
Reductions in cost
Economies of scale
Access to raw materials
Threats
Increased financial risks
Increased political risks
Increased exposure to natural disasters
Why Scan the Environment?
For the most probable opportunities and threats
Their potential impact on the organisation
Ability of organisation to deal with them
Impact Analysis
High priority
High priority
Medium
priority
High priority
Medium
priority
Low priority
Medium
priority
Low priority
Low priority
Probability ofOccurrence
Probable Impact on Organisation
high
medium
mediumhigh
low
low
External Environmental Analysis(PESTLE)
SOCIO-CULTURALSOCIO-CULTURAL
LEGALLEGAL
TECHNOLOGICALTECHNOLOGICALECOLOGICALECOLOGICALPOLITICALPOLITICAL
ECONOMIC AND FINANCIAL
ECONOMIC AND FINANCIAL
ORGANISATIONORGANISATION
SCREENING AND EVALUATING FOREIGN MARKETS
Basic Screening
• Market indicators
– Trade Statistics
– GDP
– GDP per capita
– Growth in GDP
– Ownership of cars, TVs, telephones etc.
Sources of Information
• United Nations• World Bank• International Monetary Fund (IMF)• International Labour Office (ILO)• Organisation for Economic Co-operation and
Development (OECD)• CIA Factbook
• All available on Internet
Secondary Screening
• Ease of operation
• Risks of doing business
Political and Legal Environment
• Government regulation– Economic policy– Taxes/Incentives– Employment law– Health and safety law– Environmental policy– Competition policy
Political Risk
• Regime change• Civil unrest• Wars• Terrorism• Corruption• Weak leadership• Crime• Piracy
Economic and Financial Environment
• Inflation• Interest rates• Exchange rates• Credit availability• Financial stability• Rates of Return
Market Potential
– Market Size• Population• GDP per head• Disposable income• Distribution of Income
Market Potential
- Market growth- Population growth- Growth in GDP
- Quality of demand- Socio-economic profile
Socio-cultural Environment
• Language• Religion• Culture/Customs • Demographic trends• Health/Education• Urbanisation• Labour force availability and skills• Wage levels/Working hours• Unionisation
Technological Environment
• Science and technology infrastructure• Patent protection• Road network/Public transport• Telephony/Internet capacity• Air transport• Ports• Power supply and reliability
Ecological Environment
• Resource depletion• Global warming/climate change• Pollution• Water supply• Natural disasters• Sustainable development
Competitive Forces
• The size of the market• Growth rate of the market• No. and size of competitors• Marketing strategies• Production capacity• Cost structure• Entry• Substitutes• Power of buyers and sellers