Business+Environment (1)

8/2/2019 Business+Environment (1)

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GLOBALIZATION


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GLOBALIZATION

It can be defined as a process ofeconomic integration of the entire world

through the removal of barriers to freetrade and capital mobility as well asthrough

diffusion of knowledge and information

It would mainly consist of Globalisation of Production

Globalisation of Markets (Theodare Lewitt


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DRIVING FORCES

Market Needs

Technology

Cost Quality

Communications & Transportation

Leverage- Experience Transfer,Systems Transfers, ResourceUtilization, Global Strategy


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RESTRAINING FORCES

Market Differences

History

Management Myopia

Organisational Culture

National Controls/ Barriers to Entry


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UNDERLYING FORCES

Orientations of Management (EPRG)

International Monetary Framework

World Trading System Regional Trade Agreement

Global Peace

Domestic Economic Growth

Communications & TransportationTechnology

Global/ Transnational Corporations


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World Economies

Beginning of 1990s saw growth of US asa major Economy followed by Japan andGermany

It could be attributed to ,willingness of USbusiness to cut their workforce,reorganizetheir operations, invest heavily in R & D

OECD; organization for economic andCooperation Development (OECD); Agroup of 30 wealthy members countriesthat facilitates a forum for the discussionof economic, social and governanceissues across the world.


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International Traderegulations

International Business has seen theemergence of trade and investmentliberalization

GATT ; General agreement on Tariffs andTrade; was established to negotiate tradeconcession among member countries. Itgave way to WTO

WTO; World Trade Organisation; dealswith the rules of trade among membercountries. One of the most importantfunction is to act as a dispute settlementmechanism


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The TRIAD

The 3 major trading and investment blocs inthe international arena: the US, EU andJapan

US has the largest economy of the worldwith GDP of over 10$ trillion

NAFTA ;North American Free tradeagreement between the Canada, the US andMexico

EU; today there are 15 members and largenumber are applicants

The collective GDP of EU is greater than USor Ja an


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Technology

Communication technology

Technology for production of Goods

and Services Quality standards and technology

inputs


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Reasons For EnteringInternational Business

Growth

Profitability

Achieving Economics of Scale Risk Spread

Access to Imported Inputs

Uniqueness of Product or Service Business Opportunities due to life cycle

Spreading R & D Costs


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Evolutionary process ofGlobal Business

Domestic Business

Export Business

International Business

Multinational Business

Global Business / TransnationalBusiness

Glocal Business


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Domestic Business Guided by titanic syndrome

Export Business Extending to similar market

International Business Extends Business, manufacturing and other

activities in other countries

Ethnocentric approach

It normally has an international division

Focus is on home country market

Business strategy is extension


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Multinational Business

Adaptation of Business mix

Multidomestic strategy,each subsidy is anindependent entity

Polycentric approach

Global Business

Will either have a global Business strategy ora global sourcing strategy but not both

Key assets are in home country


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Transnational Business Works in integration, linking global resources

with global markets at a profit

Geocentric in approach Recognizes similarities and differences and

adopts a world view to add value

Key assets are dispersed interdependent and

specialized Experience and knowledge are shared globally

Glocal Business


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EPRG Framework

Ethnocentric orientation

Polycentric orientation

Regiocentric orientation

Geocentric orientation


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ETHNOCENTRIC; home country issuperior,sees similarities in foreigncountries

POLYCENTRIC; Each host country is

unique, sees differences in foreigncountries

REGIOCENTRIC; sees similarities anddifferences in world region; is

ethnocentric or regiocentric in its view ofthe rest of the world

GEOCENTRIC; world view,sees similaritiesand differences in home and host

countries


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GLOBALIZATION INDEX

It is a ranking of globalised countriescarried out by A T Kearnery

It has following key components Economic Integration;trade,

portfolio,FDI,investment income

Personal Integration;telephone, travel,remittances, personal transfers

Technology Integration;Internet users,Internet hosts, secure Internet services

Political Integration;internationalorganisations, UN peacekeeping, treaties andgovernment transfers


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International Economic

Environment


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An Overview

Capital rather than trade movement isdriving world economy

Production has become uncoupled fromemployment

Primary products have become uncoupledfrom industrial products

The contest between capitalism andsocialism is over.This has led to collapseof communism as a model fororganisation of economic activity and asan ideology.


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Economic Systems

Market allocation; US Japan, WEurope

Command allocation; formerUSSR,China,Cuba

Mixed Systems;moving towards

privatisation


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Stages of MarketDevelopment

Low Income Countries; income less than400$ per capita, third worlds Limited industralisation and high percentage

of population engaged in agriculture andsubsistence farming

High birth rate

Low literacy rate

Heavy reliance on foreign aid Political instability and unrest

Concentration in Africa south of Sahara


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Lower Middle Income countries;income between 400$- 2000$ per

capita, countries in early stage ofindustralisation

Consumer markets are expanding

Cheap and motivated labor force Upper Middle Income countries;

income between 2000$- 12000$ per

capita

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Business+Environment (1)