http://www.youtube.com/watch?v=ljbI-363A2Q
Strategy: A View From the TopKaty Lovett, CJ Baker, and Matt
Snowden
Chapter 3 Analyzing the External Strategic Environment
Understanding GlobalizationEconomist: trade and free flow of capital as
defining issue
Also, flow of technology and real time information
Numerous other characterizations depending on perspective
RegionalismRegional trade blocks account for almost
60% of world trade
EU- 25 %, NAFTA- 8%
ASEAN, EUROMED, APEC all promote free trade in their respective regions
New Powerhouses: India and ChinaOutsourcing to India for technology (Ex
Dell, according to Forbes.com)
China has low cost labor
Western civilizations have to work within the government regulations overseas which can pose a problem
Global TectonicsEnvironmental tectonics- interactions
between people and their environments (ex. Population and urbanization) and affect quality of life
Technological tectonics-advances in technologies, power global growth and development
Societal tectonics- shifts in international governance
12 Global Trends
What do companies need to be ready for?
Corporate strategy should depend heavily on these factors
Population TrendsPredicted to be 9 billion by 2050
Aging population in Europe, the U.S., and Japan will be a problem
Better suited job opportunities?
UrbanizationBy 2030 60% of the world’s population will
live in cities.
Are governments and companies ready for the new demands presented by this challenge?
Spread of Infectious DiseaseHealth care will need to be improved to
service more people
Biological terrorism could be a weapon
Resource ManagementFresh water resources?
Enough food?
Energy?
Environmental DegradationPollution, global warming, and
deforestation all need attention before they become a threat
World’s living ecosystems will be the hardest hit
Economic integrationEconomies have become interdependent,
and will continue to mesh together
Governments will need to work together as we all become more intertwined with other countries
Knowledge Dissemination/ Information TechnologyKnowledge is changing business models
and information that is spread throughout the world
“Smart” products are here, such as PDAs and cell phones
Companies need to be prepared to change almost overnight to keep up
Attainable to get instant results and answers to questions
Biotechnology/NanotechnologyMedicine, agriculture, and the environment
will all be highly affected by greater knowledge
DNA based computers?
Reduce waste, cost of transportation
Conflict/ GovernanceCompanies must develop security
standards and work with the Government to comply to current regulations
Rules must be obeyed on local/national level, and also within the market
Unpredictability should be a factor in corporate strategy
Global Knowledge Economy- Strategic Implications
Economy is now governed by the laws of abundance
The effect of location is diminished
Knowledge and information “leak” to where demand is high and barriers are low
Knowledgeable products can have price premiums over comparable products depending on the context
Global Knowledge Economy- Strategic Implications cont….
Knowledge security
Human capital is key component of value
Faster technology on a global scale
Reduced appeal of mass marketing
Risk and Uncertainty
Success of a new product introduction depends on how competitors will act, the quality of components from outsiders, and state of the economy
Uncertainty presents unique problems
Collapses
Scenario Analysis
One of the most widely used techniques for constructing possible futures of a business’ external environment
Divided into two categoriesThings we know aboutElements we consider unknown
Scenario Analysis
4 steps1. Deciding what possible future
developments to look in to2. What forces are likely to have the greatest
ability to shape the future3. Constructing a comprehensive set of
future scenarios based on different combinations of possible outcomes
4. Generating forecasts that allow an assessment of alternative futures
Global Futures: The Global Scenario Group
Convened by the Stockholm Environment Institute
Created a number of scenarios based on three different social visionsConventional WorldsBarbarization Great Transitions
Conventional Worlds
Scenario 1: Market ForcesIncorporates mid-range population and development projections and typical technological change assumptions
Scenario 2: Policy ReformGoal is to achieve greater social equity and
environmental protection
Barbarization
Scenario 3: BreakdownCrises combine and spin out of control
Scenario 4: Fortress WorldResponse to a breakdown
Great Transitions
Scenario 5: Eco-CommunalismIncorporates the green vision of localism, face-to-face democracy, and small technology
Scenario 6: New Sustainability ParadigmShares some goals of Eco-Communalism, but would seek to change the character of the urban, industrial situation
New Compact Between Business and Society?
Size means scrutiny
Cutting costs raises compliance risk
Strategy mush involve society
Reducing risks means building trust
Satisfying shareholders means satisfying stakeholders
New Compact Between Business and Society?
Global growth requires global gains
Productivity requires sustainability
Differentiation relies on reputation
Good governance needs good representation
Summary
Globalization
Scenario Analysis
Business Society Concept
“There are forces at work which no company can control”