The Strategic
Environment
Globalization of Markets
International Business
Strategy
301REN
Unit: 4 Knowledgecast: 1
Module Learning Outcomes
• Demonstrate a sound appreciation of current
strategic management concepts
• Assess current developments in the organisational
environment and alternative responses related to
strategy
Overview of the Globalization
of Markets
•
Globalization and technological advances have altered
the international business landscape more than any
other trends.
•
In
this
class,
globalization
refers
to
the
interconnectedness of national economies and
the growing interdependence of buyers, producers,
suppliers, and governments around the world.
•
Globalization allows firms to view the world as
one large marketplace for goods, services, capital,
labor, and knowledge.
Phases of Globalization
•
Phase 1: 1830 to late 1800s
Aided by railroads and ocean transport; the rise
of manufacturing and trading companies
•
Phase 2: 1900 to 1930
Fueled by electricity and steel; early MNEs
•
Phase 3: 1948 to 1970s
GATT, post-war era; reduction of trade barriers
worldwide; rise of global capital markets
•
Phase 4: 1980 to present
Fueled by Internet and other technologies; rapid
liberalization in emerging markets
The Drivers and Dimensions of
Market Globalization
1. Drivers of Market Globalization
• Worldwide reduction of barriers to trade and
investment
• Market liberalization and adoption of free
markets
• Industrialization, economic development, and
modernization
• Integration of world financial markets
• Advances in technology
The Drivers and Dimensions of
Market Globalization
2. Dimensions of Market Globalization
• Integration and interdependence of national
economies
• Rise of regional economic integration blocs
• Growth of global investment and financial flows
• Convergence of buyer lifestyles and preferences
• Globalization of production activities
• Globalization of services
Dimensions of Market Globalization
• Globalization of production: To cut costs,
firms manufacture in low labor-cost locations,
such as Mexico and Eastern Europe. Firms
also source services from abroad.
• Globalization
of
services:
Banking,
hospitality, retailing, and other service
industries are rapidly internationalizing. Firms
outsource business processes and other
services in the value chain to vendors
overseas. And, in a new trend, many people go
abroad to take advantage of low-cost services.
Dimensions of Market Globalization
• Growth of global investment and financial
flows:
Associated with rapid growth
in foreign direct investment
(FDI), currency trading, and
global capital markets.
Dimensions of Market Globalization
• Integration and interdependence of
national economies: Results from firms’
collective international activities. Governments
contribute by lowering trade and investment
barriers.
• Rise of regional economic integration blocs:
Free trade areas are formed by two or more
countries to reduce or
eliminate barriers to trade
and investment.
Four most important economic
blocks
EU (European Union)
MERCOSUR (Mercado Comun del
Cono Sul - Southern Cone Common
Market)
NAFTA (North American
Free Trade Agreement)
ASEAN (Association of
Southeast Asian Nations)
Other regional trade blocks, regional economic
partnerships and free trade associations
•
ANDEAN (Andean Community Countries)
•
BSEC (Organization of the Black Sea Economic Cooperation)
•
CARICOM (Caribbean Community)
•
Caribbean Community (CARICOM)
•
CIS (Commonwealth of Independent States)
•
SADC (Southern Africa Development Community)
•
COMESA (Common Market for Eastern and Southern Africa)
•
ECOWAS (Economic Community of West African States)
•
EFTA (European Free Trade Association)
•
GCC (Gulf Cooperation Council)
•
MEFTA (Middle East Free Trade Area)
•
Pacific Community
•
SAARC (South Asian Association for Regional Cooperation)
Four Types of Risk in IB
Four Types of Risk in IB
Commercial Risk
Types of Risks
in International
Business
Cross-Cultural Risk
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Cultural distance
Negotiation patterns
Decision-making styles
Ethical practices
Country (Political and
Legal) Risk
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Weak Partner
Operational Problems
Timing of entry
Competitive intensity
Poor execution of strategy
Currency/Financial Risk
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Currency exposure
Asset valuation
Foreign taxation
Inflationary and transfer pricing
Global sourcing
Social/political unrest and instability
Economic mismanagement; inflation
Distribution of income; size of middle class
Government intervention, bureaucracy, red tape
Market access; barriers; profit repatriation
Legal safeguards for intellectual property right
Knowledgecast Summary
• Demonstrate a sound appreciation of current
strategic management concepts
• Assess current developments in the organisational
environment and alternative responses related to
strategy
Seminar
Environmental Audit –
In this seminar, we will continue to explore environmental
analysis using the Mini case study (INSIDE DYSON: a distinctive
company?) found on page 115 of one of your recommended
reading text –Exploring corporate strategy by Johnson and
Scholes 9th edition
Be prepared to present your answers to the questions that
follow in a power point presentation as a group and be ready to
answer questions from your colleagues and Tutor . Each group
will have 7 minutes presentation time and 3 minutes Q&A.
Group Activity
Preparation for Regular Assignment
In this group activity, you will continue to work in your
consultancy groups to research and gather information on your
main case study in preparation for your regular assignment (group
presentation)
It will also serve as an opportunity to seek clarification and ask
for support from your tutor on all aspects of the assignment
including scope and rubric.