International Business Strategy301LON

Unit: 4 Knowledgecast: 1

The Strategic Environment

Globalization of Markets

• Demonstrate a sound appreciation of current strategic management concepts

• Assess current developments in the organisational environment and alternative responses related to strategy

Module Learning Outcomes

Overview of the Globalization of Markets

• Globalization and technological advances have altered the international business landscape more than any other trends.

• In this class, globalization refers to the interconnectedness of national economies and the growing interdependence of buyers, producers, suppliers, and governments around the world.

• Globalization allows firms to view the world as one large marketplace for goods, services, capital, labor, and knowledge.

Phases of Globalization • Phase 1: 1830 to late 1800s

Aided by railroads and ocean transport; the rise of manufacturing and trading companies

• Phase 2: 1900 to 1930Fueled by electricity and steel; early MNEs

• Phase 3: 1948 to 1970sGATT, post-war era; reduction of trade barriers worldwide; rise of global capital markets

• Phase 4: 1980 to presentFueled by Internet and other technologies;

rapid liberalization in emerging markets

The Drivers and Dimensions of Market Globalization

1. Drivers of Market Globalization

• Worldwide reduction of barriers to trade and investment

• Market liberalization and adoption of free markets

• Industrialization, economic development, and modernization

• Integration of world financial markets

• Advances in technology

The Drivers and Dimensions of Market Globalization

2. Dimensions of Market Globalization

• Integration and interdependence of national economies

• Rise of regional economic integration blocs

• Growth of global investment and financial flows

• Convergence of buyer lifestyles and preferences

• Globalization of production activities

• Globalization of services

Dimensions of Market Globalization• Globalization of production: To cut costs,

firms manufacture in low labor-cost locations, such as Mexico and Eastern Europe. Firms also source services from abroad.

• Globalization of services: Banking, hospitality, retailing, and other service industries are rapidly internationalizing. Firms outsource business processes and other services in the value chain to vendors overseas. And, in a new trend, many people go abroad to take advantage of low-cost services.

Dimensions of Market Globalization

• Growth of global investment and financial flows:

Associated with rapid growth in foreign direct investment (FDI), currency trading, and global capital markets.

Dimensions of Market Globalization

• Integration and interdependence of national economies: Results from firms’ collective international activities. Governments contribute by lowering trade and investment barriers.

• Rise of regional economic integration blocs: Free trade areas are formed by two or more countries to reduce or eliminate barriers to trade and investment.

Four most important economic blocks

MERCOSUR (Mercado Comun del Cono Sul - Southern Cone Common Market)

NAFTA (North American Free Trade Agreement)

EU (European Union)

ASEAN (Association of Southeast Asian Nations)

Other regional trade blocks, regional economic partnerships and free trade

associations • ANDEAN (Andean Community Countries) • BSEC (Organization of the Black Sea Economic Cooperation) • CARICOM (Caribbean Community) • Caribbean Community (CARICOM) • CIS (Commonwealth of Independent States)• SADC (Southern Africa Development Community)• COMESA (Common Market for Eastern and Southern Africa)• ECOWAS (Economic Community of West African States)• EFTA (European Free Trade Association) • GCC (Gulf Cooperation Council) • MEFTA (Middle East Free Trade Area)• Pacific Community

• SAARC (South Asian Association for Regional Cooperation)

Four Types of Risk in IB

Four Types of Risk in IB

Commercial Risk

Types of Risksin International

Business

Country (Political and Legal) Risk

Cross-Cultural Risk

Weak Partner Operational Problems Timing of entry Competitive intensity Poor execution of strategy

Currency exposure Asset valuation Foreign taxation Inflationary and transfer

pricing Global sourcing

Social/political unrest and instability Economic mismanagement; inflation Distribution of income; size of middle class Government intervention, bureaucracy, red tape Market access; barriers; profit repatriation Legal safeguards for intellectual property right

Cultural distance Negotiation patterns Decision-making styles Ethical practices

Currency/Financial Risk

• Demonstrate a sound appreciation of current strategic management concepts

• Assess current developments in the organisational environment and alternative responses related to strategy

Knowledgecast Summary

SeminarEnvironmental Audit – In this seminar, we will continue to explore environmentalanalysis using the Mini case study (INSIDE DYSON: a

distinctive company?) found on page 115 of one of your recommended reading text –Exploring corporate strategy by Johnson and Scholes 9th editionBe prepared to present your answers to the questions that follow in a power point presentation as a group and be ready

to answer questions from your colleagues and Tutor . Each group will have 7 minutes presentation time and 3 minutes Q&A.

Group Activity

Preparation for Regular AssignmentIn this group activity, you will continue to work in your consultancy groups to research and gather information on

your main case study in preparation for your regular assignment

(group presentation)

It will also serve as an opportunity to seek clarification and ask

for support from your tutor on all aspects of the assignmentincluding scope and rubric.