IBM Lecture External Elements of the Business Context, Globalisation 28 November 2005
Organisation do not operate in a vacuum, a business must be analysed within its environment. (external environment) can be understood as the sum total of the factors external to the org, which can influence the behaviour of the business and how it develops. External environment models:
1.Fahey and Narayanan grouped these complex interactions into four broad factors that influence the org, PEST (political econs social and tech). (PEST ModeL)
2.Porter 5 Force model, it says that, organisation will thrive (growing) when a force is determined as a “weak” force. that means, weak competitors, weak consumer expectation, etc.
3.Buyer Behaviour. this including 2 behaviours, which is Consumer behaviour (very much influenced by values, advertisement, mass media, global brand, etc) and another oen is Organisation behaviour. (depends on a number of factors)
PEST analysis may also help in identifying “long term drivers of change”, for example, given the increasing globalisation of some markets, it is important to identify the forces leading to this development. these include rapid change in tech, leading to shorter life spans of such tech, etc. PEST analysis also help to examine the differential impact of external influences on organisations either historically or in terms of likely “future impact”. and ask to what extent such external influences will affect different org, perhaps competitors, differently.
Globalisation and Business.
Theories:
1. Hirst and Thompson argued that globalisation is severely a continuation of long term processes. (expanding by opening a branch to cope bigger market e.g McD)
2. Kenichi Ohmae : world is now integrated and so borderless, Global village and markets, he interested in answering “how to manage well in a borderless world”.
the biggest factor that contributes globalisation is advance technology. Globalisation also influences not only the external environment, but also internal environment as well. one result has been an
International division of labour (Outsourcing), simply said, the more technical, research based and service related skills are often sited in developed countries, with the so called third world or developing countries being used as manufacturing bases, using low-skilled and very much cheap labour.
Problems: identify the country, selection of overseas partners, reconfiguring the structure, variation in exchange rate, etc.
“Global benchmarking is seen to result from increased interaction between businesses in different parts of the world, and sharing of knowledge between them.” (Grint)
Altough many theorists argue that globalisation results in a convergence (standardisation) of practises, culture and consumer demand, others believe that globalisation also brings a need to protect identify and an interest in the diversity of cultures (divergence).
Multinational Companies::
1. an international company has its base in one country (home country), trades overseas from that single base.
2. a multidomestic company has a home base in one country (home country), but has then established operations in a number of other countries. (host country)
3. a transnational company (TNC) is an organisation that is consciously attempting to be global by disassociating itself from one home country.
4. a global company has no national identity whatsoever. (usually those that have merged a number of different firms, each with different original home bases.
Grint’s 8 reasons why Multinational Companies (MNCs) differ from the past.
1. knowledge, due to need to discover raw materials for the manufacture of good
2. competition, take advantage of cheaper labour markets and more lax (not strict) regulation.
3. markets, offering a new market for products, rather than only the opportunity for manufacturing.
4. information technology, rapid tech innovations that allow events and processes to be experienced simultaneously throughout the world.
5. governance, no universally recognised global form of governance.
6. nation-states. the increase of power base of the MNCs, (more powerful compared to the nation itself)
7. risk, trying to aim to a focus on avoiding risk (risk averse)
8. virtual economy, flexibility of being able to move money and operations to the country which can offert the most beneficial terms.