4. Macro Environment

Question 1

What is PESTEL

Answer 1

Political
Economic
Social
Techinogical
Ecological
Legal

Question 2

Political factors

Answer 2

Policies and attitudes
Government stability
Spending
Taxation
Foreign policy

Question 3

Economic factors

Answer 3

Globalisation
Interest rates
Exchange rates
Business cycle
Financial infrastructure

Question 4

Social factors

Answer 4

Income levels
Demographic changes
Attitudes and behaviours
Fashions
Education

Question 5

Technological factors

Answer 5

New ideas
Use or R&D
Speed of change
Uncertainty
Cyber crime

Question 6

Ecological factors

Answer 6

Sustainability
Pollution
Disasters
Pressure groups
Nature capital

Question 7

Legal factors

Answer 7

Regulation
Taxation law
Competition law
Employment law
Enforceability

Question 8

What is globalisation

Answer 8

Production and distribution of products and services of a homogenous type and quality on a worldwide basis

Question 9

How does global competition affect firms

Answer 9

• Provides opportunities of new markets to exploit
• Competition in home economy from foreign firms
• Opportunity to relocate parts of business activity to countries able to perform them better/cheaper
• May drive cross-border acquisitions and alliances

Question 10

What are ohmae’s 5 cs

Answer 10

Factors encouraging development of a global business:

Customer
Competition
Company itself
Currency volatility
Country

Question 11

Explain the affect on the customer

Answer 11

Products that satisfy common customer tastes in different countries should do well on a global basis

Question 12

Explain the affect on the company itself

Answer 12

As the company enters additional markets its fixed costs should be spread over ever increasing sales volume

Question 13

Explain competition

Answer 13

Global competitors entering an overseas market could encourage a previously local or regional operator to expand its activities and thus intensify innovation and competition

Question 14

Explain currency volatility

Answer 14

Setting up assembly overseas is a way of reducing the exchange rate risks inherent in exporting and may also help to get around government-imposed trade barriers

Question 15

Explain country

Answer 15

Locating business activities overseas may provide cheaper access to labour, materials and finance, along with the goodwill of host governments.

Question 16

What are porters competitive advantage of nations (diamond )

Answer 16

Strategy (managing finance, competitive advantage within industry or diversify into multiple), structure (national cultural factors that orientate business people towards certain industries), rivalry ( domestic rivalry teaches innovation and competitive success)

Factor conditions - Necessities that enable a business to start. Basic factors include natural resources, climate, labour. Advanced include digital communications and highly educated personnel

Related and supporting industries - Local proximity which makes doing business easier. And development of expertise in related industry e.g. silicon valley tech start ups

Demand conditions - Start locally if successful, demand rises likely to succeed globally, company sets up in different regions

Chance events - Disaster, war, good fortune

Government - Grants, subsidies, export arrangements, shaping demand conditions in home market

Question 17

What are political risks in international business

Answer 17

Stability of government - rapid changes in power / political unrest may affect trade relations. Also corruption/bribes

International relations - between governments, events may affect blocks etc tax, tarrifs, quotas, exchange rate

Ideology of govt - may want to grow domestic economy and may reduce/block foreign goods