1. Kristopher Blanchard North Central University
Chapter 1 Assessing the Environment – Political, Economic, Legal, Technological
Kristopher Blanchard
North Central University

2. The Global Business Environment
The Global Marketplace is complex, interdependent, and dynamic
Challenges include politics, culture, and technology
Managers must find a balance between social responsibility, company image, and competitive strategies
More focused on Global Management

3. The Global Business Environment
Global competition is characterized by networks that bind countries to one another
Globalism trends
A borderless world
Increase in exports
Increase in direct foreign investment
Dominance of trading blocs

4. Regional Trading Blocs
“The dominance of the United States is already over. What is emerging is a world economy of blocs represented by NAFTA, The European Union, and ASEAN. There’s no one center in this world economy.”
- Peter Drucker
Fortune, January 12, 2004

5. Regional Trading Blocs
TRIAD Market
European Union
Asian Market
China, Japan, South Asia
NAFTA
CAFTA

6. The TRIAD Three regional free-trade blocs
Western Europe, Asia, and North America
Grouped around three dominant currencies
Euro, Yen, and Dollar
In 2004, these trade blocs were expanding their boarders to include neighboring countries

7. Comparative Management in Focus - India
India has witnessed a change in values, habits and options during the last decade
The economy, second fastest growing in the world, is expected to grow close to 7% this year
Fastest growing telecom market with more than one million new mobile phone subscriptions per month

8. Comparative Management in Focus - India
Indians are buying 10,000 motorcycles a day
India had 192 million households in 2001
Only 31.6% have a television
Only 2.5% have a car, jeep or van
Foreign investors have invested $5 billion into the Indian stock market

9. Information Technology
Information Technology is transforming the international manager’s agenda more than any other item
Information is no longer centrally or secretly controlled by governments
Information technology is boosting productivity and electronic commerce around the world

10. The Globalization of Human Capital
Globalization means we share jobs as well as goods.
- FINANCIAL TIMES,
August 27, 2003

11. The Globalization of Human Capital
Forrester Research predicts that 3.3 Million US jobs will move offshore by 2015
45% of the 500 US companies surveyed state that they use a global sourcing model

12. The Global Manager’s Role

13. The Political and Economic Environment
One important aspect is the phenomenon of ethnicity
Driving force behind political instability
Firms must assess political risks
Government actions that could adversely affect the long-run profitability or value of a firm

14. Political Risk – 7 Typical risk events
Expropriation of corporate assets without prompt and adequate compensation
Forced sale of equity to host-country nationals, usually at or below depreciated book value
Discriminatory treatment against foreign firms in the application of regulations or laws
Barriers to repatriation of funds (profits or equity)

15. Political Risk – 7 Typical risk events
Loss of technology or other intellectual property (such as patents, trademarks, or trade names)
Interference in managerial decision making
Dishonesty by government officials, including canceling or altering contractual agreements, extortion demands, and so forth

16. 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

17. Economic Risk
A country’s level of economic development generally determines its economic stability
Economic risk falls into 2 categories
Government changes its fiscal policies
Government modifies its foreign-investment policies
Managers are constantly reassessing economic risk

18. The Legal Environment
Manager’s will comply with the host country’s 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

19. - VANESSA CHANG, KPMG PEAT MARWICK
The Legal Environment
Commenting on Contract Law
“In China, the old joke goes, a contract is a pause in the negotiation.”
- VANESSA CHANG, KPMG PEAT MARWICK

20. The Technological Environment
Corporations must consider the accelerating macro-environmental phenomenon of technoglobalism (rapid developments in information and communication technologies)
Corporations must consider the appropriability of technology

21. 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

22. Global E-Business
Convenience in conducting business worldwide; facilitating communication across borders contributes to the shift toward globalization and a global market.
An electronic meeting and trading place, which adds efficiency in conducting business sales.
A corporate Intranet service, merging internal and external information for enterprises worldwide.
Power to consumers as they gain access to limitless options and price differentials.
A link and efficiency in distribution.

23. Looking Ahead Chapter 2 – Social Responsibility and Ethics
The Social Responsibility of MNC’s
Ethics in Global Management
Managing Interdependence