4. Macro Environment Flashcards
What is PESTEL
Political
Economic
Social
Techinogical
Ecological
Legal
Political factors
Policies and attitudes
Government stability
Spending
Taxation
Foreign policy
Economic factors
Globalisation
Interest rates
Exchange rates
Business cycle
Financial infrastructure
Social factors
Income levels
Demographic changes
Attitudes and behaviours
Fashions
Education
Technological factors
New ideas
Use or R&D
Speed of change
Uncertainty
Cyber crime
Ecological factors
Sustainability
Pollution
Disasters
Pressure groups
Nature capital
Legal factors
Regulation
Taxation law
Competition law
Employment law
Enforceability
What is globalisation
Production and distribution of products and services of a homogenous type and quality on a worldwide basis
How does global competition affect firms
- 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
What are ohmae’s 5 cs
Factors encouraging development of a global business:
Customer
Competition
Company itself
Currency volatility
Country
Explain the affect on the customer
Products that satisfy common customer tastes in different countries should do well on a global basis
Explain the affect on the company itself
As the company enters additional markets its fixed costs should be spread over ever increasing sales volume
Explain competition
Global competitors entering an overseas market could encourage a previously local or regional operator to expand its activities and thus intensify innovation and competition
Explain currency volatility
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
Explain country
Locating business activities overseas may provide cheaper access to labour, materials and finance, along with the goodwill of host governments.
What are porters competitive advantage of nations (diamond )
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
What are political risks in international business
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
