2. Describe how changing contextual forces in the global business environment impact the competitive position of a firm
Understand the role that globalization, including trade agreements and trade associations, has played in shaping the business landscape
Define the primary dimensions of the external environment of a firm, including the components of the general and task environments
Differentiate between the four components of the internal environment of a firm, including owners, boards of directors, employees, and culture
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3. Managing in Difficult Times
Business leaders
Respond to changes in the global business environment and try to change it
Lobby to influence the government’s role in business
Identify growing market niches or target consumer segments and invest in research and development
Are proactive in adapting their strategies to an ever- changing global marketplace
Deal with a broader array of stakeholders including public advocacy groups, community forums, and the media
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4. Globalization
Integration and interdependence of economic, technological, socio-cultural, and political systems across diverse geographic regions
Advocated by leading economists and politicians post World War II
Movement led to the creation of several international trade agreements
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5. Globalization Global Trade Agreement World Bank
International Monetary Fund
GATT
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6. Table 2.5 - Selected Regional Trade Agreements
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7. European Union
Created a single market by a system of laws that apply in all member states, guaranteeing the freedom of movement of people, goods, services, and capital
Introduced a common currency, the Euro
Designed to build a single market
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8. NAFTA Came into effect in 1994
U.S., Canada, and Mexico signed the treaty to eliminate tariffs
Maintains trading restrictions on certain agricultural products
Industries have benefitted from the opening of borders
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9. ASEAN Established in 1967 to support three goals
Accelerating economic growth
Promoting social and cultural development
Ensuring peace and stability
Designed to create freer flow of goods and services within the ASEAN countries
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10. MERCOSUR Established in 1991
Created to promote economic growth and integration through reduction of tariffs and free flow of goods
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11. Comparative Advantage
Countries should specialize in producing goods for which they have the lowest opportunity cost of production
Specialization in a particular product, helps become a efficient producer
Free trade leads to a more efficient allocation of resources
Results in all countries that are involved in trade benefiting from access to cheaper goods
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12. The Business Environment
Represents all of the external forces that affect the firm's business
General environment
Includes the technological, economic, political/ legal, and socio-cultural dimensions that affect a firm’s external environment
Task environment
Includes entities that directly affect a firm on a constant basis and include competitors, suppliers, and customers
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13. Figure 2.2 - The Firm’s Business Environment
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14. The General Environment
Technological dimension
The processes, technologies, or systems that a firm can use to produce outputs
Economic dimension
The general economic environment in the markets where the firm performs activities
Political dimension
Refers to the political events and activities in a market that affect a firm
Legal dimension
The regulations and laws that a firm encounters in its
markets
Socio-cultural dimension
Demographic characteristics as well as the values and customs of a society
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15. Social Values
The deeply rooted system of principles that guide individuals in their everyday choices and interactions
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16. Table 2.7 - Universal Social Dimensions
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17. The Task Environment Competitor Supplier Customers
Any organization that creates goods or services targeted at a similar group of customers
Supplier
A company that provides resources or services for a firm to help in its creation of products and services
Customers
The people or other organizations that buy a firm’s products and services
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18. The Internal Environment
A group of parties or factors that directly impact a firm, including owners, the board of directors, employees, and
culture
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19. The Internal Environment
The people or institutions that maintain legal control of an organization
Owners
A group of individuals elected by shareholders and charged with overseeing the general direction of the firm
Board of directors
The people who make the products and provide the services that allow a firm to exist
Employees
Pattern of basic assumptions about the way in which an organization and individuals in it should work and interact with each other
Culture
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20. KEY TERMS
Board of directors Comparative advantage Competitor Customers Economic dimension Employees External environment General environment Globalization Internal environment
Legal dimension Owners Political dimension Social values Sociocultural dimension Supplier Task environment Technological dimension
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