1. CHAPTER 3 ANALYZING THE EXTERNAL STRATEGIC ENVIRONMENT Bess Luker- Mamie Duprie- Alicia Estrada- Taylor Watts- Ryan Dupriest

2. What will be covered  Globalization  Global Trends  Risk and Uncertainty  Scenario Analysis  Business and Society

3. Globalization  World’s major economics and intensified competition  70-85 % of U.S. Economy  Business Growth  Flow of Information

4. Understanding Globalization  Focus on the trade and regard the free flow of capital  Political Globalization  Economic Globalization  Technological Globalization  Psychological Globalization

5. Regionalism: A Stepping Stone on the path Toward a global Economy  Globalization a work in progress  Triad  EU  NAFTA  ASEAN  EUROMED  APEC  Mercosur

6. New Powerhouses: India and China  India: Investment is growing, foreign capital and technology are coming in, Western-style competition is taking hold, and state intervention is diminishing.  China: has combined inexpensive labor with technology to create a major, global competitive advantage.  A key challenge for Western companies doing business in China is that the government still controls many aspects of the business environment.

7. Global Tectonics and Their Strategic Implications  The maturity of many Western markets has forced firms to expand beyond the confines of the developed world into areas with greater potential that carry a level of risk far greater than that to which they are accustomed.]  Greater participation means more growth.

8. Global Tectonics  Describes the process by which developing trends in technology, nature, and society slowly revolutionize the business environment, much like Earth’s tectonic plates shift the ground beneath our feet.  Environmental tectonics  Technological tectonics  Societal tectonics

9. 12 Global Trends Present the most significant challenges for companies in the next 30 years. 1. Population Trends 2. Urbanization 3. The spread of infectious Diseases 4. Resource management 5. Environmental degradation 6. Economic integration 7. Knowledge dissemination 8. Information technology 9. Biotechnology 10. Nanotechnology 11. Conflict 12. Governance

10. 1. Population Trends  Population is rising  Highest in areas not capable  Aging of population  Women in the workforce

11. 2. Urbanization  Migration from rural to urban areas( less than half of population lives in cities)  Mega cities will become common

12. 3. The Spread of Infectious disease  Greater levels of migration = greater likelihood of epidemics.  Impact on economic growth

13. 4. Resource management  Access to fresh water is a key concern.  Possibility of future conflicts over water resources.  Energy availability is a ongoing concern  Wind Farms

14. 5. Environmental degradation  Effects on ecosystems  Droughts  Water pollution  Deforestation  Erosion  Kyoto Treaty- reduce greenhouse gas and gas emissions world wide.

15. 6. Economic integration  Cross-boarder economic activity  Airbus Consortium Britain Germany Spain France  Multinational Corporations (MNC’s)  Some industries are more regulated than others Steal Industry Telecommunications

16. 7. Knowledge Dissemination  Emergence of a global economy  Internet economy  Smart products

17. 8. Information Technology  Internet  Ex. Yamaha-Motor’s online dealer management system  Intranet  Quality of people’s lives

18. 9. Biotechnology  Greatest potential in three areas  Medicine  Agriculture  Environment  Long run

19. 10. Nanotechnology  One atom at a time  Molecular manufacturing

20. 11. Conflict  Berlin Wall  Terrorism ex. 9/11  Companies must develop security standards

21. 12. Governance  Two interrelated sets of laws  Rule of law  Ex. 2009 Lead law banning sale of motorcycles for children  Market defines the second set of laws  Dimensions:  Management structures  Business culture  Cross-border investment  Global investors

22. A Global Knowledge Economy- Strategic Implications 1. Laws of abundance 2. Location is diminished 3. National laws, barriers, and taxes 4. Knowledge-enhanced products and or services 1. ex. Yamaha’s EFI and ATV power steering 5. Higher Inherent value 6. Human capital

23. Risk and Uncertainty  Predictability  Certainty  Risk  Uncertainty

24. Scenario Analysis  One of the most widely used techniques  A disciplined method  Two categories  Things we believe we know something about  Elements we consider uncertain or unknowable  The objective  The scenario-building process  Decide  Identify  Construct  Generate

25. The Global Scenario Group  Three fundamentally different social visions of the future  Conventional worlds  Barbarization  Great transitions

26. Conventional Worlds  Envision the global system evolving without major surprises  World economy grows rapidly and developing countries  Scenario 1: incorporate mid-range population & development projects typical technology change assumption  Scenario 2: Adds strong, comprehensive and coordinated government action

27. Barbarization  Envision the grim possibility that the social, economic, and moral underpinning of civilization deteriorate  Scenario 3: Crises combine and spin out of control  Scenario 4: features and authoritarian response to threat of breakdown

28. Great Transitions  Explore visionary solutions to sustainability challenge  Scenario 5: Incorporates the green vision  Scenario 6: Shares some of the goals of scenario 5 but seeks to change the character

29. Compact Between Business and Society  “Business as usual” might no longer be and option and traditional strategies change  Size means scrutiny- the larger the company is the more exemplary performance in ethical behavior, employee practices etc  Cutting costs raises compliance risk- the more a company cuts cost the more potential for noncompliant ethical practice

30. Compact Between Business and Social Continue  Strategy must involve society- forward thinking companies have to think about social and environmental problems  Reducing risks means building trust- classic risk managements also expands events arising in society  Satisfying shareholders means satisfying stakeholders- Company pays attention to business- society relationships

31. Compact Between Business and Social Continue  Global growth requires global gains- global perspective recognizes strong communities  Productivity requires sustainability- environmental management, safety, etc.  Differentiation relies on reputation- United States 50 million people $225 billion large influence  Good governance needs good representation- corporate scandals generating strict controls