INTERNATIONAL
BUSINESS ENVIRONMENT:
Lecture 1
Introduction to IBE and
analyzing the IBE environment
(PEST, SWOT, 5 forces, Canalysis)
Matevž Rašković
Ljubljana, 21. 2. 2012
Expectations
THE INTERNATIONAL BUSINESS
ENVIRONMENT OF TODAY
Global balance of trade?
Global FDIs
A new FDI trend
The rise of China: Exports
China: eyeing the no. 1 place
China vs. US comparison
The rise of the BRIC(S)
BRIC(S) as a super power
BRIC(S) and Slovenia?
Scandinavia
represents less than 5
% of EU exports
EU-27: > 71 %
Germany: > 19 %
Italy: > 12 %
France: > 8 %
Austria: > 8 %
Former Soviet Union: < 5 %
(Russia < 3 % )
USA: < 2 %
Arab markets (without Turkey): < 2 %
Turkey: + 1 %
Ex-YU: > 14 % (share
is slowly declining)
Central & South
America: < 1 %
Mostly Mexico &
Brazil)
?
China: < 0,5 %
(1.34 billion market)
India: < 0.5 %
(1.1 billion market)
Total BRIC: < 4 %
(almost 3 billion
market)
Australia & NZ: < 0,2%
Brazil: < 0.2 %
(196 million market )
Source: Statistical Office of the Republic of Slovenia, 2011
World of brands
Top brands in 2011
Geographical distribution
Top brand changes
Top industry changes
The impact of the crisis
Top companies
2011
And the little ZARA dress you bought
last week
• Fabric bought in Asia
• cut in a factory in Spain
• sown by seamstresses in
Portugal
• printed in Tunisia
• and sold in Ljubljana!
THE COMPLEXITY OF TODAY
http://www.youtube.com/watch?v=lUMf7FWGdCw
http://www.youtube.com/watch?v=sc4HxPxNrZ0&feature=fvw
http://www.youtube.com/watch?v=Nse09-dKATI
http://www.youtube.com/watch?v=Z4gt62uAasE&feature=related
MAIN DIFFERENCES: DOMESTIC vs.
INTERNATIONAL BUSINESS
•
Geography & distance
•
Information (cause & effect)
•
Additional economic concepts
•
Culture
•
Markets- widespread & fragmented
•
Volumes
•
Politics
•
Governments & regulations
•
Technology
THE BASIC APPROACH IN IB
Seek &
look
Spot &
target
Understand
(information)
How to do good business?
Manage /
interact
ANALYZING THE IB ENVIRONMENT:
AN OVERVIEW
WHY IS ANALYSIS IMPORTANT?
Ford Pinto
ANALYSIS LEVELS
• MACRO (COUNTRY) LEVEL:
• PEST / PESTL
• PORTER’S DIAMOND
• SWOT
• MEZZO (INDUSTRY) LEVEL:
• PORTER’S 5 FORCES
• COMPETITIVE POSITIONING
• C-ANALYSIS
3 KEY ISSUES:
1. APPLICABILITY &
RELEVANCE
2. RISK MITIGATION
3. SUPPORT FOR
DECISION-MAKING
• MICRO (COMPANY) LEVEL:
• INTERNAL COMPANY ANALYSIS (capabilities, resources, etc)
• DUE DILLIGENCE
EXAMPLE: PORTER’S DIAMOND
Which factors are
key for your
business
venture?
What drives
demand?
Decision-making
factors
Elasticity?
Apply the data so it is relevant to your company and line of business!
PEST ANALYSIS 1/3
PEST ANALYSIS 2/3
PEST ANALYSIS 3/3
Always ask
What?
What do I need to know to make a better and informed
decision?
Why?
Why do I need to know this (cause & effect)?
Where?
Where do I get this information and data?
How
much?
How much resources are needed for this?
How?
How will I be able to use and apply this info and data in
my business processes?
PEST: GINI coefficient
PEST: example of population structure
Variables:
Gender
Age
Education level
Literacy
Religion
Ethnicity
Marital status
Children
Size of family
PEST: example quality of life
http://www.youtube.com/watch?v=Dbqzbxyd9y4
http://www.youtube.com/watch?v=ZpHpz4rTA04
PEST: example CPI (Transparency Int.)
http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results
Example: Doing Business (World Bank)
www.doingbusiness.org
12 pillars of competitiveness
World Economic Forum, 2010/20101
EXAMPLE: WEF (Competitiveness)
2 views:
1) Absolute progress and 2) relative progress
World Economic Forum, 2010/20101
WEF: Slovenia
World Economic Forum, 2010/2011
EXAMPLE: Innovation Scoreboard
Pro Inno Europe: 2011.
EXAMPLE: Innovation Scoreboard
Pro Inno Europe: 2011.
EXAMPLE: socio-cultural environment
•
Hofstede’s indices
• PDI
• UAI
• IND
• MAS
• LTO
•
World Values Survey
•
GLOBE project
•
Country of origin effect (COO) & consumer ethnocentrism
• CET-SCALE (between 17 and 119; i.e. Slovenia: 53.74)
•
Consumer profiles
Schwartz: values
Schwartz, 2008/2009.
Culture & national character
Terracciano et al. (2005): National Character Survey.
PORTER’S 5 FORCES (quick recap)
EXAMPLE: Slovene retail market
PORTER’S 5 FORCES TOOLBOX
The bargaining power
of suppliers
•supplier switching costs
•ddifferentiation of inputs
•presence of substitute inputs
•supplier concentration
•threat of forward integration
•cost of inputs
•importance of volume to supplier
The threat of new entrants
•barriers to entry
•brand equity
•switching costs
•capital requirements
•access to distribution
•absolute cost advantages
•learning curve advantages
•expected retaliation
•government policies
The bargaining
power of customers
• bargaining leverage
• buyer volume
•buyer switching costs
•buyer information availability
•ability to backward integrate
•availability of substitutes
•buyer price sensitivity
•price of total purchase
The intensity of
competitive rivalry
•number of competitors
•rate of industry growth
•intermittent industry
overcapacity
•exit barriers
•diversity of competitors
•informational complexity
The threat of substitutes
•brand equity
•buyer propensity to substitute
•fixed cost allocation
•relative price performance
•level of ad expense
of substitutes
•buyer switching costs
•perceived level of product
differentiation
C-ANALYSIS
• Doing a profile of your main competitors
• SWOT of your main competitors
•
•
•
•
•
•
Brand image
Positioning
Capabilities
Competitive advantage
Skills
Human capital
Understanding the value chain
Understanding global value chains
EXAMPLE: COMPETITIVE POSITIONING
Valicon, 2009.
EXAMPLE: Gorenje positioning
Gorenje, 2008.
MARKET SCREEING MODEL:
DECIDING WHICH MARKETS TO
ENTER
WHICH MARKET TO
ENTER?
WHICH INDUSTRY WHICH SEGMENT?
TO ENTER?
EXAMPLE: IDEAS
Highest per capita BEER
consumption in liters
Rank
Country
Consumption
1
Czech Republic
156.9
2
Ireland
131.3
3
Germany
115.8
4
Australia
109.9
5
Austria
108.3
6
United Kingdom
99.0
7
Slovenia
93.3
8
Belgium
93.0
9
Denmark
89.9
10
Finland
85.0
Highest per capita COFFEE
consumption in kilograms
EXAMPLE: IDEAS
Highest per capita GUN
ownership in # guns per 100
• 1st USA: 90 guns per 100 people
• 2nd Yemen: 61 guns per 100 people
• 3rd Finland: 56 guns per 100 people
• 4th Switzerland: 46 guns per 100 people
• 5th Iraq: 39 guns per 100 people
• 6th Serbia: 38 guns per 100 people
Top 20 countries in terms of
frequency of sex
INFORMATION RESOURCES
• Alibaba: www.alibaba.com
• Transparency international: www.transparency.org
• CIA factbook: www.cia.gov/library/publications/the-worldfactbook/
• WTO:http://stat.wto.org/CountryProfile/WSDBCountryPFVie
w.aspx?Language=E&Country=SI
• World Bank – Doing business: www.doingbusiness.org
• Innovation Scoreboard: www.proinno-europe.eu