Global business environment

Presented By-SANDEEP

Definitions of World Business Environment

Environment refers to all external forces which have a bearing on the functioning of business. these forces are almost givens within firm and their management must operate in a specific country and they vary from country to country increasing globalization notwithstanding.

Business environment objectives

Before we describe business environment objectives, it is desirable to be clear about vision, mission and objectives.

• Vision-a vision is broad explanation of what the firm exists and where it is trying to lead. the vision provides the point of reference on the horizon –a beacon of light.

• Mission-a mission statement outlines the fundamental purpose of the organization.

Objectives Of Global Business Environment

• Profit• Growth• Power• Employee satisfaction and development• Quality products and services• World market leadership• Joy of creation• Service to society

Factors Which Affecting Business Environment

1)External environment• Political-legal• Economic• Technological• Physical• Cultural• global

Contd.

2)Internal environment• Suppliers• Rival firms• Buyers• New entrants• Substitute products

Global Business Strategy Formulation

Why globalize?– causes the flow of ideas, services, and capital

across the world– offers consumers new choices– permits the acquisition of a wider variety of

products– facilitates the mobility of labor, capital,

and technology– provides challenging employment

opportunities– reallocates resources, makes preferential

choices, and shifts activities to a global level7

Global Strategy FormulationHow Do Organizations Globalize?• Stage One: Passive Response

Importing: firm makes products and sells abroadExporting: to foreign countries

• Stage Two: Initial EntryHiring foreign representation Contracting with foreign manufacturers

• Stage Three: Fully-established operationsLicensing/FranchisingForeign Direct Investment (FDI)

- Joint Ventures - Foreign Subsidiary

Global Expansion of BusinessGlobal Expansion of Business

ImportingExporting

LicensingFranchising

Joint VenturesStrat. Alliances

Wholly-owned For. Subsidiary

Low HighLevel of Foreign involvement and investment needed by a global organization

©The McGraw-Hill Companies, Inc., 2000

Global business Strategy Formulation

• Exporting: selling abroad, either directly to target customers or indirectly by retaining foreign sales agents and distributors

• Importing: selling other countries products in the home country, either directly to target customers or indirectlyAdv: quick and relatively inexpensive

test the waters and learn about customers

Disadv: high transportation coststariffs and quotasdanger of poor intermediary selection

Global business Strategy Formulation

• Licensing: an arrangement where a firm (licensor) grants a foreign firm the right to use intangible (“intellectual”) property such as patents, copyrights, manufacturing processes, or trade names for a specified period of time, usually in return for a percentage of the earnings, called royalty

Adv: small or insignificant investmentDisadv: loss of control

Global business Strategy Formulation

• Franchising: an arrangement where a parent company (franchisor) grants a foreign firm (franchisee) the right to do business in a prescribed manner. Usually involves a longer time commitment by both parties than required under licensing agreementsAdv: small or insignificant investmentDisadv: loss of quality control

Foreign Direct Investment

• Strategic Alliance: – a cooperative agreement between potential or

actual competitors– an agreement between firms that is of strategic

importance to one or both firms; competitive viability

• Joint Venture:– the participation of two or more companies jointly

in an enterprise in which each party contributes assets, owns the entity to some degree, and shares risk

• Wholly Owned Foreign Subsidiaries– provide for tightest controls by foreign firms– very costly but can yield high returns

Review

• Definition global business environment

• Objectives of global business environment

• Factors which affecting global business environment

• Global business strategy formulation

• How to implement global business strategy formulation

• List type of strategy for global environment

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