Title: Organizational Environments and Global Managment
1Organizational Environments and Global Managment
2Learning Objectives
- Discuss how changing environments affect
organizations. - Understand the components of general and specific
business environments - Describe the process that companies use to make
sense of their changing environments.
3Lets Consider Hasbro
- Toy industry's growth prospects appear to be
maturing - Increasing competition from video games,
children's changing tastes, and consolidation of
the industry's retail customer base. - Toy companies are increasingly dependent on
movies and TV shows for product tie-ins
What are the major external challenges facing
Hasbro?
www.hasbro.com
4Changing Environments
Characteristics ofChanging External Environments
Environmental Change Environmental
Complexity Resource ScarcityUncertainty
5Environmental Change
- Environmental change is the rate at which a
companys environments change - stable environments
- dynamic environments
- Punctuated equilibrium theory
- companies cycle through stable and dynamic
environments
6Punctuated EquilibriumU.S. Airlines
7Environmental Complexity
- Environmental complexity the number of external
factors in the environment that affect
organizations - Simple environments
- have few environmental factors
- Example?
- Complex environments
- have many environmental factors
- Example?
8Resource Scarcity
- Resource scarcity is the degree to which an
organizations external environmenthas an
abundance or scarcity of critical organizational
resources
9Environmental Uncertainty
- Uncertainty is how well managers can understand
or predict the external changes and trends
affecting their businesses
More Uncertainty
More Complexity
More Change
Scarcer Resources
10Types of Environmental Factors
Specific factors directly impinge on particular
organization
General factors affect all companies within an
industry
11Specific Environment Factors
- Customers/Distributors
- Competitors
- Suppliers
- Advocacy groups
12Customers
Monitoring customer wants and needs is critical
for business success
-
- Tastes and demands of current customer groups and
future trends - Segmentation of customers
- Examples Business, residential, government,
global
Who are Hasbros customers?
13Competitors
Who are Hasbros competitors?
14Suppliers
- Organizations that provide firm with input
resources needed to produce goods and services - Raw materials
- Financial capital
- People (unions included here)
- Global networks of suppliers
Who are Hasbros suppliers?
15Advocacy Groups
- Groups of concerned citizens who band together to
try to influence the business practices of
specific industries, businesses, and professions - Techniques to try to influence companies
- public communications
- media advocacy
- product boycotts
What advocacy groups would be concerned with
Hasbros operations?
16Components of the General Environment
- Economy
- Technological
- Sociocultural
- Demographic
- Political / Legal
- Global
17Economy
- Growing vs. shrinking economies
- Future economic activity is difficult to predict
- Economic indices
- Examples?
- Effect on Hasbro?
Department of Labor www.dol.gov
18Technological Component
Effect on Hasbro?
19Sociocultural Component
- Sociocultural Components
- Social structure
- Changes in behavior, attitudes, and beliefs
- National cultural issues
- Public opinion
- What socio-cultural factors affect Hasbro?
20Demographic Component
- Population Variables
- Age, gender, racial, ethnic distributions
- Education levels
- Geographical locations of population
- Future changes in these variables
- What demographic factors affect Hasbro?
US Census Bureau www.census.gov
21Political / Legal Component
Managers must be educated about the laws,
regulations, and potential lawsuits that could
affect business
- Legislation
- Regulations
- Court decisions
- Government
- stability
- Effect on Hasbro?
22Some Federal Regulation Agencies
23Global Factors
- What is the impact of global business on the
United States? - What are some trade rules, agreements, and
institutions that govern global business? - What are the different ways a company can go
global? - How does a company decide where to go global?
24What is Global Business?
- The buying and selling of goods and services by
people from different countries - Direct investment in businesses
- Importing/exporting goods
- System of rules, agreements, and organizations
that govern trade
25Direct Foreign Investment
- Common method of investment in global business by
which a company builds new business or buys
existing business in a foreign country - Direct foreign investment worldwide is worth 1
trillion a year - Data available from U.S Department of Commerce,
Bureau of Economic Analysis http//www.bea.gov
26Trades in Goods and Services
(in millions o f dollars)
From Bureau of Economic Analysis
http//www.bea.gov/bea/newsrelarchive/2006/trad010
6.xls
27US Current Account Balance
- Broad measure of US international trade in
- Goods and services
- Receipts and payments of income
- Net unilateral current transfers (such as gifts)
- In 2005, current account deficit increased to
804.9 billion from 668.1 billion in 2004 - http//www.bea.gov/bea/newsrelarchive/2005/transan
nual05_fax.pdf
28Are American Companies No Longer Competitive in
the World Market?
- U.S. has a 31 percent share of the global
high-technology market - U.S. producers are leading suppliers of high-tech
products globally - U.S. companies produce 30 percent of the world
GNP - Only 5.3 percent of multinational corporations
are U.S. based - Ranking on the Global Competitiveness Index
http//www.weforum.org/
29What are some trade rules, agreements, and
institutions that govern global business?
30Trade Barriers
31Trade Agreements
CAFTA-DR
32GATT
- GATT made it easier and cheaper for consumers in
all countries to buy foreign products - By 2005, average tariffs cut worldwide by 40
percent - Tariffs were eliminated in 10 specific industries
- GATT established protections for intellectual
property
33World Trade Organization (WTO)
- Functions
- Administering WTO trade agreements
- Forum for trade negotiations
- Handling trade disputes
- Monitoring national trade policies
- Technical assistance and training for developing
countries - Cooperation with other international organizations
Location Geneva, Switzerland Established 1
January 1995 Created by Uruguay Round
negotiations (1988-1994) Membership 149
countries (as of 11 December 2005) Budget 169
million Swiss francsfor 2005 Secretariat staff
630 Head Pascal Lamy (director-general)
http//www.wto.org
34Maastricht Treaty of Europe
- Originally, 12 (now 25) European countries
- Four other countries have applied
- Transformed these different countries into the
European Union - Opened up trade among member nations
- Created the Euro currency
EU at a glance
35NAFTA
- North American Free Trade Agreement between
Canada, United States, Mexico - Liberalizes trade among these three nations
- Eliminates most tariffs and barriers
http//www.mac.doc.gov/nafta/
36FTAA
- Free Trade of the Americas
- Proposed agreement to establish a free trade
zone through out the Western Hemisphere - Reduce trade barriers to zero
- Standardize financial markets
- Process for handling trade disputes
http//www.ftaa-alca.org
37ASEAN and APEC
- ASEAN (Association of Southeast Nations)
- Brunei Darussalam, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, Philippines, Singapore,
Thailand, and Vietnam - APEC (Asia-Pacific Economic Cooperation)
- Australia, Canada, Chile, China, Hong Kong,
Japan, Korea, Mexico, New Zealand, Papua New
Guinea, Peru, Russia, Taiwan, United States, and
ASEAN members (except Cambodia, Laos, and Myanmar)
http//www.aseansec.org http//www.apecsec.org
.sg
38CAFTA-DR
- The Central American - Dominican Republic Free
Trade Agreement - Members Costa Rica, El Salvador, Honduras,
Guatemala, Nicaragua and the Dominican Republic - U.S. Congress approved the CAFTA-DR in July 2005
and the President signed it into law on August 2,
2005 - It has been approved by the legislatures in El
Salvador, Guatemala, Honduras, the Dominican
Republic, and Nicaragua. Approval is pending in
Costa Rica
- http//www.ita.doc.gov/cafta/index.asp
39What are the different ways a company can go
global?
40Forms for Global Business
GlobalNew Ventures
41Exporting
42Cooperative Contracts
43Strategic Alliances
44Wholly Owned Affiliates (Build or Buy)
Advantages
- Parent company receives all of the profits and
has complete control
Disadvantages
- Expense of building new operationsor buying
existing business - Losses can be immense if the venture fails
45How does a company decide where to go global?
- Examine the business climate
- Think about cross cultural adaptation
- Prepare people for successful international
assignments
46Finding the Best Business Climate
Access toGrowingMarkets
Location toBuild
MinimalPoliticalRisk
World Bank World Development Indicators
47Growing Markets
- Purchasing Power
- comparison of a standard set of goods and
services in different countries - more means greater growth potential
- Degree of Global Competition
- the number and quality of companies already in
the market
48Choosing an Office/Manufacturing Location
- Quality factors
- work force quality
- company strategy
- Quantity factors
- kind of facility
- tariff and nontariff barriers
- exchange rates
- transportation and labor costs
- capital/financial markets
49Minimizing Political Risk
- Political uncertainty
- risk of major changes in political regimes
- Policy uncertainty
- risk associated with changes in laws and
government policies directed at businesses
World Banks Governance Indicators
Transparency Internationals Corruption
Perceptions Index
50Becoming Aware of Cultural Differences
- Power distance
- Individualism/collectivism
- Masculinity and femininity
- Uncertainty avoidance
- Short-term/long-term orientation
51Preparing for an International Assignment
Language andCross-Cultural Training
Considerationof Spouse, Family, and Dual-Career
Issues
52Language and Cross-Cultural Training
Documentary Training
Cultural Simulation
Field Experiences
53Spouse, Family, and Dual-Career Issues
Adaptability Screening
Intercultural Training
54Making Sense of Changing Environments
Environmental Scanning
Evaluating External Environments
Interpreting Environmental Factors
Acting on Threats and Opportunities
Understanding the external environment
helps managers make strategic plans for the
firms future