1. Emerging Issues in Management (Mgmt 440) The Dynamic Environment (Chapter 2) Professor Charles H. Smith Summer 2010

2. Case Study – Royal Dutch Shell PLC Read case study on pages 20-22 and discuss with small groups. Provide one example of each of the following global scenarios described on page 21 Low Trust Globalization. Open Doors. Flags. Why should a company, country or person spend time, energy and money on scenarios?

3. Underlying Historical Forces Changing the Business Environment Industrial revolution – emphasize Inequality Population growth Technology – emphasize Globalization Nation-states Dominant ideologies Great leadership Chance

4. Underlying Historical Force – Industrial Revolution Traditionally, societies relied on subsistence economies and perhaps then some trade. Industrial revolution occurs due to confluence of conditions such as Sufficient capital, labor and natural resources, ideas and institutions that permitted social mobility and encouraged individual initiative. Existence of political and personal liberties. In other words, people and businesses had freedom to take risks necessary to advance and improve.

5. Underlying Historical Force – Industrial Revolution cont. Examples of countries that have experienced industrial revolution Britain – early to mid 19 th Century. United States and Western European countries – mid to late 19 th Century. Japan and Soviet Union – 1 st half of 20 th Century. Other Asian countries – 2 nd half of 20 th Century. Industrial revolution results in astounding economic growth, production of material things, and provision of services – see Figure 2.1 on page 23 showing GDP during 18 th -20 th Centuries.

6. Underlying Historical Force – Technology The 1450’s – printing press invented Immediate commercial success in publishing industry due to ability to publish more books. Positive side effect – facilitated free market of ideas Luther – wider distribution of his ideas which gave rise to the Protestant Reformation. Galileo – arrested in Italy (Roman Catholic country) for “heretical” ideas about astronomy but still published in Holland (Protestant country).

7. Underlying Historical Force – Technology cont. Five “waves of innovation” from late 18 th Century to the present Late 18 th Century-mid 19 th Century – water power, textiles, iron. 2 nd half of 19 th Century – steam, rail, steel. Steam engine cut travel time for transatlantic voyages, which greatly increased immigration from Europe to U.S. Brought new labor “underclass” (e.g., Irish, Italians) to take place of recently-freed African slaves and new political ideas (e.g., communism) to U.S.

8. Underlying Historical Force – Technology cont. Five “waves of innovation” from late 18 th Century to the present cont. 1 st half of 20 th Century – electricity, chemicals, internal- combustion engine. 2 nd half of 20 th Century – petrochemicals, electronics, aviation. 1990-present – digital networks, software, new media, biotechnology.

9. Seven Key Environments of Business Economic Technological Cultural Government – emphasize Legal – emphasize Natural Internal

10. Key Business Environment – Government Governments both stimulate and constrain business. Two long-term global trends in government Expansion of government activity and spending. Rising democratization.

11. Key Business Environment – Government cont. Expansion of government activity and spending U.S. example – in 1913, government spending was only 8% of GDP but, in 2005, it had risen to 35% due to Increased social welfare programs; e.g., Great Depression, Great Society. Much more regulation of business to protect consumers; e.g., products liability, insider trading.

12. Key Business Environment – Government cont. Rising democratization – overall decrease in authoritarian governments and increase in democracies since 1900. In 1900, no full democracies since no country with complete suffrage. By 1950, 22 democracies; by 2006, 90 democracies.

13. Key Business Environment – Legal Three branches of U.S. federal government Legislative (Congress) – statutes. Executive (President) – treaties, regulations, executive orders. Judicial (Courts) – common or case law. “Checks and balances” – e.g., when Congress passes a statute and then courts decide whether statute is constitutional.

14. Key Business Environment – Legal Is judicial branch “ahead” of other branches of government in the sense that courts will do what politicians afraid to do? Examples found in civil rights areas School desegregation. Rights for those accused of crimes. Interracial and same-sex marriage. Why is this? Could it be because judges are not as accountable to electorate as politicians are? Is this evidence that the “checks and balances” provided in U.S. Constitution work (or do not work)?

15. Key Business Environment – Legal cont. Legal trends which constrain business Steady growth in complexity and quantity of case law, statutes, regulations and other legal requirements. Expansion of legal protections for stakeholders. Constant evolution of the law – examples to discuss in class T.J. Hooper case on page 41. Legalization of same-sex marriage.

16. Key Business Environment – Legal cont. Legal trends which constrain business cont. Codes of conduct – company’s voluntary decision to go beyond legal requirements can be eventual inspiration for law; e.g., voluntary decision by corporation to extend medical benefits to employee’s same-sex partner now required by law in some states.