ORGANIZATION AND ENVIRONMENT

Trouble at Amana In 1967, Amana introduced the first microwave, and gained 60% of the market. A decade later, its market share declined to 6%. WHY?  Mis-forecast: microwave will SUBSTITUTE for traditional ways of cooking  Misunderstood the market: assumed that the market DOESN ’ T care about the price  Unprepared for new entrants: Low priced Japanese competitors

The Increase of Gas Price  Tesla Motors ’ s plan: Produce battery in Th á i Lan, transport to England to assembly, and sell the cars in US. But now, they produce battery in California.  GM: Past several years, SVU and mini-truck were well sold in China. Now, people are looking for more economy cars.

How Gaz Price Affect Strategies  Reconsidering global strategy Global strategy suggests that firms can make different components in different countries. High gaz price means that transportation would be very expensive  Reconsiderting values of the product Gaz consumption becomes a crital factor

How Current Recession Affect Business  Falling stock and slumping dividends  Credit impairment and bankruptcy  Employee lay-offs and benefit cut  Cut to quality  Reduce consumer access Small firms would be more vulnerable to the recession

Environment Factors  … are those that have impacts on the organizational performance but are not directly controlled by the organization

ENVIRONMENT AND STRATEGY Economic Political Technological Social ORGANIZATIONAL PERFORMANCE Global Demographic

Macroenvironment – PEST Political Government stability Taxation policy Foreign trade regulations Social welfare policies Legal framework Economic Business cycles GNP trends Interest rates Money supply Inflation Unemployment Disposable income

Political Factors: Example

Ranking On “Easy To Do Business”  Rank 155 countries  Based on various indicators  Surveys law firms/ organizations

Which indicators make up the ranking? Starting a business Procedures, time, cost and minimum capital to open a new business Dealing with licenses Procedures, time and cost of business inspections and licensing (construction industry) Hiring and firing workers Difficulty of hiring index, rigidity of hours of index, difficulty of firing index, hiring cost and firing cost Registering property Procedures, time and cost to register commercial real estate Getting credit Strength of legal rights index, depth of credit information index

Which indicators make up the ranking? (con.) Protecting investors Indices on the extent of disclosure, extent of director liability and ease of shareholder suits Paying taxes Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit Trading across borders Number of documents, number of signatures and time necessary to export and import Enforcing contracts Procedures, time and cost to enforce a debt contract Closing a business Time and cost to close down a business, and recovery rate

IFC Rank Countries on “Easy to do Business”, Singapore 2. New Zeala 3. Hong Kong 4. U.S.A. 12. Thailand 15.Japan 19. Korea 23. Malaysia 46.Taiwan 89. China 93. Vietnam 122. Indonesia 144. Philippines 145. Cambodia 167. Laos Singapore 2. New Zealand 3. Hong Kong 5. Korea 7. USA 18. Malaysia 19. Taiwan 26. Thailand 29. Japan 78.Vietnam 90.China 95. Philippines 114. India 135. Cambodia 148. Laos

TI’s Ranking on Corruption New Zealand100. China 7. Singapore90. India 15. Japan85. Philippines 17. Hong Kong 119. Vietnam 35. Taiwan133. Indonesia 50. Malaysia156. Cambodia 43. South Korea 85. Thailand

The Political Environment Map Low corruption High corruption Easy Difficult NZ Singapore HK Japan Taiwan Malaysia SK Thailand China India Vietnam Indonesia Philippines

Macroenvironment – PEST Socio-cultural Population demographics Income distribution Social mobility Lifestyle changes Attitudes to work and leisure Consumerism Levels of education Technological Government spending on research Government and industry focus on technological effort New discoveries /developments Speed of technology transfer Rates of obsolescence

Figure 22. Forms of corruption, in terms of enterprises’ viewpoints, in last twelve months 17

2.2. Firms’ experiences  In HCM City and Can Tho, a big % of firms paid informal fees each year, and also many firms paid more than 2% of revenue  Some sign of decrease in corruption in HCMC and Dong Thap. (Source: PCI)

3.2. Transparency: Negotiation with tax was still an important business practice  30 – 40% of firms in Can Tho and HCMC admitted negotiation with tax.  The number fluctuated greatly in Dong Thap  Some sign of improvement in Can Tho 2008 – 2011

Video: Fake Products in China  What impacts do counterfeiting products have on: a) Chinese economy (short and long term)? b) Real products (Chinese and other countries ” )? Consumers?  Why is it so hard to stop counterfeiting in China (using PEST model)?  What should managers (Chinese and foreign) do to protect their real products under this situation?