Analyzing the External Strategic Environment: Understanding Globalization and Global Trends

1. http://www.youtube.com/watch?v=ljbI-363A2Q

2. Chapter 3 Analyzing the External Strategic Environment Strategy: A View From the Top Katy Lovett, CJ Baker, and Matt Snowden

3. Understanding Globalization • Economist: trade and free flow of capital as defining issue • Also, flow of technology and real time information • Numerous other characterizations depending on perspective

4. Regionalism • Regional trade blocks account for almost 60% of world trade • EU- 25 %, NAFTA- 8% • ASEAN, EUROMED, APEC all promote free trade in their respective regions

5. New Powerhouses: India and China • Outsourcing to India for technology (Ex Dell, according to Forbes.com) • China has low cost labor • Western civilizations have to work within the government regulations overseas which can pose a problem

6. Global Tectonics • Environmental tectonics- interactions between people and their environments (ex. Population and urbanization) and affect quality of life • Technological tectonics-advances in technologies, power global growth and development • Societal tectonics- shifts in international governance

7. 12 Global Trends • What do companies need to be ready for? • Corporate strategy should depend heavily on these factors

8. Population Trends • Predicted to be 9 billion by 2050 • Aging population in Europe, the U.S., and Japan will be a problem • Better suited job opportunities?

9. Urbanization • By 2030 60% of the world’s population will live in cities. • Are governments and companies ready for the new demands presented by this challenge?

10. Spread of Infectious Disease • Health care will need to be improved to service more people • Biological terrorism could be a weapon

11. Resource Management • Fresh water resources? • Enough food? • Energy?

12. Environmental Degradation • Pollution, global warming, and deforestation all need attention before they become a threat • World’s living ecosystems will be the hardest hit

13. Economic integration • Economies have become interdependent, and will continue to mesh together • Governments will need to work together as we all become more intertwined with other countries

14. Knowledge Dissemination/ Information Technology • Knowledge is changing business models and information that is spread throughout the world • “Smart” products are here, such as PDAs and cell phones • Companies need to be prepared to change almost overnight to keep up • Attainable to get instant results and answers to questions

15. Biotechnology/Nanotechnology • Medicine, agriculture, and the environment will all be highly affected by greater knowledge • DNA based computers? • Reduce waste, cost of transportation

16. Conflict/ Governance • Companies must develop security standards and work with the Government to comply to current regulations • Rules must be obeyed on local/national level, and also within the market • Unpredictability should be a factor in corporate strategy

17. Global Knowledge Economy- Strategic Implications • Economy is now governed by the laws of abundance • The effect of location is diminished • Knowledge and information “leak” to where demand is high and barriers are low • Knowledgeable products can have price premiums over comparable products depending on the context

18. Global Knowledge Economy- Strategic Implications cont…. • Knowledge security • Human capital is key component of value • Faster technology on a global scale • Reduced appeal of mass marketing

19. Risk and Uncertainty • Success of a new product introduction depends on how competitors will act, the quality of components from outsiders, and state of the economy • Uncertainty presents unique problems • Collapses

20. Scenario Analysis • One of the most widely used techniques for constructing possible futures of a business’ external environment • Divided into two categories • Things we know about • Elements we consider unknown

21. Scenario Analysis • 4 steps • Deciding what possible future developments to look in to • What forces are likely to have the greatest ability to shape the future • Constructing a comprehensive set of future scenarios based on different combinations of possible outcomes • Generating forecasts that allow an assessment of alternative futures

22. Global Futures: The Global Scenario Group • Convened by the Stockholm Environment Institute • Created a number of scenarios based on three different social visions • Conventional Worlds • Barbarization • Great Transitions

23. Conventional Worlds • Scenario 1: Market Forces Incorporates mid-range population and development projections and typical technological change assumptions • Scenario 2: Policy Reform Goal is to achieve greater social equity and environmental protection

24. Barbarization • Scenario 3: Breakdown Crises combine and spin out of control • Scenario 4: Fortress World Response to a breakdown

25. Great Transitions • Scenario 5: Eco-Communalism Incorporates the green vision of localism, face-to-face democracy, and small technology • Scenario 6: New Sustainability Paradigm Shares some goals of Eco-Communalism, but would seek to change the character of the urban, industrial situation

26. New Compact Between Business and Society? • Size means scrutiny • Cutting costs raises compliance risk • Strategy mush involve society • Reducing risks means building trust • Satisfying shareholders means satisfying stakeholders

27. New Compact Between Business and Society? • Global growth requires global gains • Productivity requires sustainability • Differentiation relies on reputation • Good governance needs good representation

28. Summary • Globalization • Scenario Analysis • Business Society Concept “There are forces at work which no company can control”