The Global Business Environment Flashcards
What is the external environment?
- Comprises of all the external influences that affect firms’ decisions and performances
What are the two levels of the external environment?
- Immediate or operational environment - external factors which have a more immediate effect on a day to day basis e.g Porter’s Five Forces
- General or contextual environment - external macro factors which have a more general impact on businesses e.g PEST;E
What are the layers of business environment?
- The organisation
- Competitors and markets
- Industry (or sector)
- The macro environment
What does the political and legal environment comprise of?
- Political systems
- Political instability: wars, regime changes
- Competition policy - anti trust regulations, HHI
- Trade policy e.g trade wars China vs US
- Nationalism: expropriation
- Employment law: discrimination
- FDI and local content restrictions
- Legal system efficiency
- Business procedures - permits and licenses
What does the economic and financial environment comprise of?
- Economic growth - GDP
- Tax rates
- Interest rates - cost of debt
- Exchange rates - prices of foreign currency
- Credit availability - access to finance
- Inflation - price levels
What does the socio-cultural environment comprise of?
- Language
- Culture/customs/religion
- Population and demographic trends
- Education
- Urbanisation
- Labour force availability
- Wage levels/working hours/income distribution
- Unemployment
What does the technological environment consist of?
- Science and technology infrastructure: gov policy and support
- Innovation: e-commerce
- Patent and copyright protection - piracy
What does the ecological environment consist of?
Ecological concerns: resource depletion, global warming/climate change, pollution
Pressures for green business
Natural disasters: earthquakes, mudslides, flooding
What are the opportunities of the macro environment?
- New markets
- Cost reductions
- Economies of scale
- Access to resources
- Lax business climate
What are the threats of the macro environment?
- Competition
- Financial risks
- Increased political risks
- Increased complexity
What is a SWOT analysis?
It provides a summary of strengths and weaknesses and opportunities and threats
How can the external environment be canned?
Trend extrapolation: identifying trends, useful if there is adequate historical data
Scenario writing; description of how future developments will impact the business, helps managers anticipate potential changes and consider appropriate responses, useful in emerging industries
What is stakeholder management and why is it important?
Business should take into account the actions and concerns of their stakeholders.
They need to be managed effectively, otherwise a business may suffer.
Look beyond profitability and consider obligations to society.
What is a stakeholder?
Any individual, group or organisation that is affected or can affect the activities of a business
What are examples of stakeholders?
- Governments
- Local communities and citizens
- Private organisations
(social political) - Unions
- Joint venture partners and alliances
- Regulatory authorities
- Supply chain associates
(industry structure) - Investors, share owners and lenders
- Customers and users
Employees
(resource base)
