2. Chapter 3 Analyzing the External Strategic Environment
Strategy: A View From the Top
Katy Lovett, CJ Baker, and Matt Snowden

3. Understanding Globalization
Economist: trade and free flow of capital as defining issue
Also, flow of technology and real time information
Numerous other characterizations depending on perspective

4. Regionalism
Regional trade blocks account for almost 60% of world trade
EU- 25 %, NAFTA- 8%
ASEAN, EUROMED, APEC all promote free trade in their respective regions

5. New Powerhouses: India and China
Outsourcing 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

6. Global Tectonics
Environmental 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

7. 12 Global Trends What do companies need to be ready for?
Corporate strategy should depend heavily on these factors

8. Population Trends Predicted to be 9 billion by 2050
Aging population in Europe, the U.S., and Japan will be a problem
Better suited job opportunities?

9. Urbanization
By % of the world’s population will live in cities.
Are governments and companies ready for the new demands presented by this challenge?

10. Spread of Infectious Disease
Health care will need to be improved to service more people
Biological terrorism could be a weapon

11. Resource Management
Fresh water resources?
Enough food?
Energy?

12. Environmental Degradation
Pollution, global warming, and deforestation all need attention before they become a threat
World’s living ecosystems will be the hardest hit

13. Economic integration
Economies have become interdependent, and will continue to mesh together
Governments will need to work together as we all become more intertwined with other countries

14. Knowledge Dissemination/ Information Technology
Knowledge 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

15. Biotechnology/Nanotechnology
Medicine, agriculture, and the environment will all be highly affected by greater knowledge
DNA based computers?
Reduce waste, cost of transportation

16. Conflict/ Governance
Companies 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

17. 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

18. 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

19. 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

20. Scenario Analysis
One of the most widely used techniques for constructing possible futures of a business’ external environment
Divided into two categories
Things we know about
Elements we consider unknown

21. Scenario Analysis 4 steps
Deciding what possible future developments to look in to
What forces are likely to have the greatest ability to shape the future
Constructing a comprehensive set of future scenarios based on different combinations of possible outcomes
Generating forecasts that allow an assessment of alternative futures

22. Global Futures: The Global Scenario Group
Convened by the Stockholm Environment Institute
Created a number of scenarios based on three different social visions
Conventional Worlds
Barbarization
Great Transitions

23. Conventional Worlds Scenario 1: Market Forces
Incorporates mid-range population and development projections and typical technological change assumptions
Scenario 2: Policy Reform
Goal is to achieve greater social equity and environmental protection

24. Barbarization Scenario 3: Breakdown
Crises combine and spin out of control
Scenario 4: Fortress World
Response to a breakdown

25. Great Transitions Scenario 5: Eco-Communalism
Incorporates the green vision of localism, face-to-face democracy, and small technology
Scenario 6: New Sustainability Paradigm
Shares some goals of Eco-Communalism, but would seek to change the character of the urban, industrial situation

26. 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

27. New Compact Between Business and Society?
Global growth requires global gains
Productivity requires sustainability
Differentiation relies on reputation
Good governance needs good representation

28. Summary Globalization Scenario Analysis Business Society Concept
“There are forces at work which no company can control”