1. The Global Context Lecture 3 The Global Business Environment

2. Lecture Objective Explain the nature of the global environment Undertake an external environmental audit Analyse the impact on business of changes in the external environment Assess the attractiveness of countries as places to do business

3. ORGANISATION beliefs demographic trends technology ethics laws pressure groups Political events inflation interest rates credit availability treaties Europe ecology social problems media values taxes banks neighbours ideas The External Environment

4. Complex Confusing Dynamic Change is accelerating Turbulent

5. Opportunities New markets Reductions in cost Economies of scale Access to raw materials

6. Threats Increased financial risks Increased political risks Increased exposure to natural disasters

7. Why Scan the Environment? For the most probable opportunities and threats Their potential impact on the organisation Ability of organisation to deal with them

8. Impact Analysis High priority Medium priority High priority Medium priority Low priority Medium priority Low priority Probability of Occurrence Probable Impact on Organisation high medium high low

9. External Environmental Analysis(PESTLE) ORGANISATION SOCIO-CULTURALLEGALTECHNOLOGICALECOLOGICALPOLITICAL ECONOMIC AND FINANCIAL

10. SCREENING AND EVALUATING FOREIGN MARKETS

11. Basic Screening Market indicators – Trade Statistics – GDP – GDP per capita – Growth in GDP – Ownership of cars, TVs, telephones etc.

12. Sources of Information United Nations World Bank International Monetary Fund (IMF) International Labour Office (ILO) Organisation for Economic Co-operation and Development (OECD) CIA Factbook All available on Internet

13. Secondary Screening Ease of operation Risks of doing business

14. Political and Legal Environment Government regulation – Economic policy – Taxes/Incentives – Employment law – Health and safety law – Environmental policy – Competition policy

15. Political Risk Regime change Civil unrest Wars Terrorism Corruption Weak leadership Crime Piracy

16. Economic and Financial Environment Inflation Interest rates Exchange rates Credit availability Financial stability Rates of Return

17. Market Potential – Market Size Population GDP per head Disposable income Distribution of Income

18. Market Potential -Market growth -Population growth -Growth in GDP -Quality of demand -Socio-economic profile

19. Socio-cultural Environment Language Religion Culture/Customs Demographic trends Health/Education Urbanisation Labour force availability and skills Wage levels/Working hours Unionisation

20. Technological Environment Science and technology infrastructure Patent protection Road network/Public transport Telephony/Internet capacity Air transport Ports Power supply and reliability

21. Ecological Environment Resource depletion Global warming/climate change Pollution Water supply Natural disasters Sustainable development

22. Competitive Forces The size of the market Growth rate of the market No. and size of competitors Marketing strategies Production capacity Cost structure Entry Substitutes Power of buyers and sellers