Key strategic decisions relate to: Access to international markets Spotting new markets Building exports The extent to which the business will be competitive in international markets The effect on decision making of the existence of trade blocs Consideration on the necessity and importance of acquisitions
Trade Blocs Trade Blocs influence the ease of access to new markets and affect the relative costs of trading in different regions of the world: EU NAFTA Locating within a trading bloc could help to reduce long term trading costs (e.g. Japanese companies building plants in the UK to help overcome exposure to the Common External Tariff)
International Growth Growth not just through expansion of the size of the firm but also through external growth: Acquisitions – mergers, takeovers Multi-National Corporations – global presence Brings with it a range of issues for the business to consider - PEST
Key factors influencing global business strategy can be summarised under the PEST heading: Political Economic Social Technological
Political Political Change – regime change through coup, violence, etc. Change in government through democratic election can influence future business strategy. e.g. the opportunities that are now available in Russia and Eastern Europe following the collapse of communism Political Uncertainty – in countries like Zimbabwe, Sudan, Venezuela. Political uncertainty can lead to a fall in investment by businesses and influence decisions on expansion and business ventures War/Terrorism – create uncertainty Political Doctrine – can affect the ease with which business is conducted
Economic All these factors need to be considered in any global business venture: Tax Systems Investment Considerations and Allowances Sophistication of Financial Markets – ease with which capital can be moved and raised Commodity Prices – oil, energy, metals Monetary and Fiscal Policies – interest rates, tax regimes, government aid Internal Regulation and Bureaucracy – can be stifling! Exchange Rates
Social Religious Considerations – appropriateness of some business ventures – e.g. selling condoms in staunchly Catholic countries Impact on local communities of business development – availability of jobs, training, environmental impact for these communities Impact on the environment – can impact on the businesses image Ethical considerations Cultural issues The impact on the local environment not only affects human communities but can also inflict widespread ecological damage. This imposes social costs on the environment but also can cost the business large sums in legal costs and compensation. Copyright: Photolibrary Group
Technological Availability and developments in technology can have a powerful influence on global business strategy: e.g. Access to bandwidth PC ownership Mobile devises ownership Technology and sales – processing payments and sales Compatibility of technologies in Business Management – accounting systems, language differences, etc.