The Global Business Environment - Elsevier
The Global Business Environment
Topics
Key Learning System Questions
Chapter 1 (end) Questions 1&2 Chapter 6 B4(a), (b) and (c)
. Free trade (and its alternatives) . National sources of competitive advantage . Outsourcing and offshoring . Globalisation . Fiscal policy . Cross-cultural management . Corporate social responsibility (CSR) . Corporate governance . Regulation . Country and political risks
1
Free trade (and its alternatives)
The Global Business Environment
Free trade
Movement of goods, services, labour & capital without barriers likely to distort the exchange
Alternatives to Free Trade policies
? `Balanced trade': country tries to maintain an even
relationship between respective imports & exports so that neither country runs a large trade deficit
? Protectionism (economic nationalism) trying to
protect the local market by restricting imports by one country, or trade bloc
Protectionism methods (barriers)
? Tariffs: customs duty imposed on goods when
they are moved across a political boundary, effectively increasing the cost, making those goods more expensive than locally produced goods, and would discourage their purchase. (also a source of national revenue)
? Quota systems (restrict imports to a particular
level)
? ``Buy national'' advertising campaigns ? Technical barriers. Standards of quality, health &
safety, packaging, etc. to restrict imports
? Subsidies for local manufacturers
2
Free trade (and its alternatives)
The Global Business Environment
Free trade
Advantages
? Society richer, allows for local specialisation ? Nations can develop resources to gain a
competitive advantage
? Communication between nations reduces conflict ? Quality of the goods generally should improve ? Gaining mutual benefits through trade ? Encourages entrepreneurship & investment ? Encourages exports ? Advances political motives
Disadvantages
? Countries concentrate on particular products & do
not develop alternatives
? Less developed countries lacking technology are
disadvantaged
? Can undermine national cultures (e.g. growing
Americanisation)
? Multinationals can undermine political systems ? Encourages outsourcing abroad (off-shoring): with
jobs lost at home & possible exploitation of labour abroad?
? Compromises national security by reducing
border controls
? Cost of transporting goods: damage to the
environment?
? No protection for young firms in emerging
industries
3
National sources of competitive advantage
The Global Business Environment
Firm strategy, structure
and rivalry
Factor conditions
Demand conditions
Related and supporting industries
(Porter's Diamond) Michael Porter asks:
? Why do certain nations host so many successful
international firms?
? How do these firms sustain superior performance
in a global market?
? What are the implications of this for government
policy & competitive strategy?
Conclusion
Nations do not have particular competitive advantages, but firms in specific industries use their national backgrounds to lever world-class competitive advantages
Porter's Diamond explained Demand conditions
? If home market is substantial firm gets economies
of scale & experience
? If falling sales: an added incentive to export
4
National sources of competitive advantage
The Global Business Environment
Related & supporting industries
? Support of world-class producers of components/
related products
? Success in a related industry may be due to
expertise accumulated elsewhere
Factor conditions
? Advanced factors (e.g. infrastructure, levels of
training, skill, R&D experience) help sustainable competitive success. (Not basic factors such as raw materials, semi-skilled/ unskilled labour, capital availability, etc.)
Firm structure, strategy & rivalry
? National cultures & competitive conditions create
distinctive business focuses
Other events
? Role of government (e.g. subsidies, legislation,
education can benefit of the industrial base)
? Chance events (e.g. wars, civil unrest, chance
factor discoveries, etc.)
National competitive advantage
? Successful firms from a particular country have
linkages between them (`clustering') which allows for the transfer of expertise (e.g. through staff movement, concentration of advanced factors, better supplier/customer relations within the value chain, etc.)
5
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