The Global Environment

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The Global Environment

• CHAPTER 3

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LEARNING OBJECTIVES

• Understanding home country environment.
• Understanding the international
  environment-concept of EU, NAFTA, ASEAN
• Understanding the nature of countries cultural,
  economic, legal and political, competitive
  environments,trade barriers, exchange rates and
  labor relations.

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Domestic Environment

• Domestic political climate.
• Government may attach tariffs (taxes) or place
  quotas (number or limits) on certain imports.
• Domestic competitive climate.
• Domestic competitors may be developing
  strategies.
• To penetrate foreign markets.
• To manufacture their products in a foreign
  country where labor is cheaper.

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Domestic Environment

• Domestic Political/legal climate.
• Legal Climate
• Domestic - Competitive Climate
• Domestic -Economic Climate
• Government policies.

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International Environment

• World trade today is moving toward a system of
  three regional free-trade blocs (western Europe,
  Asia, and north America), called TRIAD market.
• This market is grouped around the three dominant
  currencies (the deutsche mark, the yen, and the
  dollar).

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International Product Life Cycle

• International product life cycle is a theory that
  helps managers assess which products are in
  danger of foreign competition.
• This theory also posits that firms in advanced
  nations innovate, transfer the innovation to
  foreign markets, and firms in foreign markets
  eventually produce the innovation and become
  strong competitors.

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• A company is practicing dumping when it sells a
  product in a foreign market at a price lower than
  it sells it for in the home market or at below
  production costs.

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The International Environment

• Focus on countries and country blocks
• e.g., NAFTA, EU, ECOWAS.
• International institutions.
• e.g., IMF, WTO, etc.
• International agreements.
• e.g., OPEC.

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GLOBALISM

• Globalism is a global competition characterized
  by networks that bind countries, institutions,
  and people in an interdependent global economy.
• As a result of this global economic integration,
  the growth rate of world trade has risen faster
  than that of world gross domestic product (GNP).

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The International Managers Contingency Role

• You could end up at the home office coordinating
  operations with foreign affiliates.
• You could travel to various countries negotiating
  export sales or negotiating deals with suppliers,
  customers or franchise parties.

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The International Managers Contingency Role

• International management requires a contingency
  management approach to complex and dynamic
  environments, each of which has its own unique
  requirements.

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The International Managers Contingency Role

• An astute international manager will analyze the
  new environment, anticipate how it may affect the
  future of the home company, and then develop
  appropriate strategies and operating styles.
• The environments an international manager should
  be concerned with are subdivided into domestic,
  international and foreign.

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Individual Nations Environment

• Cultural environment.
• Economic environment.

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Individual Nations Environment

• Industrial development and technological needs.
• Legal and political systems.
• Rules of competition.
• Labor laws and enforcement.
• Foreign investment policy.
• Product policy.
• Foreign exchange policy.

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INDIVIDUAL NATIONS ENVIRONMENT (Continued)

• Competition
• Cartels
• Bribery
• Government ownership of business
• Economic conditions
• Managerial orientation (short vs long)
• Trade barriers
• Tariffs and quotas

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INDIVIDUAL NATIONS ENVIRONMENT (Continued)

• Monetary barriers
• Non-tariff protection
• Impact of exchange rate fluctuations
• Industrial relations and labor unions

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Source Of Information

• Through private corporation
• Governments
• United nations and other regional agencies
• Chamber of commerce and trade organizations
• Research universities and business periodicals