Current Issues Future Challenges

1
Current Issues - Future Challenges

• Aim To discuss some of the issues likely to have
  an impact on the future development of the
  global business environment.

2
Current Issues - Future Challenges (cont.)

• What, in your opinion, are the major challenges,
  present and future, in the global business
  environment?

3
Current Issues - Future Challenges (cont.)

• The local view
• Key Influences on Modern Economies
• Globalisation and Competition
• Technological Change
• The Knowledge Driven Economy
• The Rise of Services
• Changing Work Patterns
• Environment/Quality of Life
• (Strategy 2010, 1999)

4
Key Influences on Modern Economies (cont.)

• Globalisation and Competition
• Competitive regions will take a share of the
  opportunities others will fall further behind
• competition will intensify
• competitive process changing collaborative
  relationships, networks, clusters.

5
Key Influences on Modern Economies (cont.)

• Technological Change
• Technological change leads to innovations in both
  processes and products
• innovative firms have faster growth and higher
  profits compete on quality rather than price
• leads to decline in demand for unskilled/low
  skilled labour and increase in demand for
  employees with higher skill levels
• younger, better educated and, frequently, female
  workers benefit at the expense of older,
  frequently, male employees.

6
Key Influences on Modern Economies (cont.)

• The Knowledge Driven Economy
• Knowledge more important as a factor of
  production than resources
• knowledge is more than just information
  includes know-how.
• culture of partnership important in order to
  utilise knowledge and creativity of employees
• may necessitate organisational change, linkages
  with other companies, closer ties with
  educational and research institutions
• knowledge-based activity is less
  location-dependent.

7
Key Influences on Modern Economies (cont.)

• The Rise of Services
• Service sector likely to be main source of output
  and employment growth
• generally, more prosperous regions have a higher
  proportion of employment in services
• larger regional service sectors also tend to have
  a larger share of higher value added activities.

8
Key Influences on Modern Economies (cont.)

• Changing Work Patterns
• traditional employment male, manufacturing,
  full-time
• atypical employment patterns part-time,
  contract work
• part-time work as choice or as a poor substitute
• by 2010 50 of all employment part-time
• particularly relevant in retailing, hotel and
  catering, computing, professional services.

9
Key Influences on Modern Economies (cont.)

• Environment/Quality of Life
• Increasing awareness of environmental issues
• economic growth to be sustainable
• affluent societies become more concerned to
  enhance the quality of life
• rise in ethical consumption nature of
  production process, exploitation of workforce or
  suppliers, company reputation etc.
• (adapted from Strategy 2010, 1999)

10
Global Issues

• The biggest challenge the world is faced with in
  the 21st. Century, is poverty.
• (Klaus Schwab, President of the World Economic
  Forum, Davos, 2001)
• Extreme poverty declined only slowly in
  developing countries during the 1990s
• share of population living on less than 1 a day
  fell from 28 (1987) to 23 (1998)
• absolute numbers remained constant as numbers
  increased.

11
Poverty (cont.)

• Number of people living on less than 1 a day
  (mill)
• 1987 1998
• East Asia/Pacific 417.5 278.3
• South Asia 474.4 522.0
• Eastern Europe/Central Asia 1.1 24.0
• Latin America/Caribbean 63.7 78.2
• Middle East/ North Africa 9.3 5.5
• Sub-Saharan Africa 217.2 290.9
• Total 1,183.2 1,198.9
• (World Bank, 2002)

12
September 11th./war on terrorism

• increases cost and risk of doing business abroad
• global trade grew by 7 throughout the 90s, 12
  in 2000, stagnated in 2001
• impoverished states in long-term decline can be
  refuge for terrorists
• restrictions on freedom of movement/economic
  migration

13
The end of globalisation?

• Think regional, act local forget global
• ( Alan Rugman, 2001)
• Globalisation never existed
• global business dominated by small number of
  multinational enterprises (MNEs)
• MNEs operate mostly regionally rather than
  globally
• Concentration on EU, NAFTA, Japan.

14
The end of globalisation? (cont.)

• Exports (1997)
• From To () Internal ()
• EU NAFTA 8.7 Asia 9.4 60.6
• NAFTA EU 15.4 Asia 22.4 49.1
• Asia NAFTA 21.1 EU 14.7 53.1
• Total number of MNEs 45,000 (UN)
• Largest 500 account for 80 of global FDI
• Of these, 434 are from the Triad countries

15
The end of globalisation? (cont.)

• Not only is globalisation a myth global
  strategy is a myth.
• (A. Rugman, 2001)
• Example
• Coca-cola adjusts drinks formula and can size for
  local markets.
• McDonalds adjusts offerings in line with market
• Conclusion
• most successful companies design strategies
  geared towards triad-based trade
• focus on triad and local factors

16
The end of globalisation? (cont.)

• What is your opinion?

17
Summary

• The local view
• Globalisation and Competition
• Technological Change
• The Knowledge Driven Economy
• The Rise of Services
• Changing Work Patterns
• Environment/Quality of Life
• Global issues
• Poverty
• September11th/war on terrorism
• The end of globalisation?