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 level
7
 Global Strategy Formulation
How Do Organizations Globalize?
• Stage One: Passive Response
Importing: firm makes products and sells abroad
Exporting: to foreign countries
• Stage Two: Initial Entry
Hiring foreign representation
Contracting with foreign manufacturers
• Stage Three: Fully-established operations
Licensing/Franchising
Foreign Direct Investment (FDI)
- Joint Ventures
- Foreign Subsidiary
 Global Expansion of Business

Wholly-
Importing Licensing Joint Ventures owned For.
Exporting Franchising Strat. Alliances Subsidiary

Low High
Level 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 indirectly
Adv: quick and relatively inexpensive
test the waters and learn about
customers
Disadv: high transportation costs
tariffs and quotas
danger 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 investment

Disadv: 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 agreements
Adv: small or insignificant investment
Disadv: 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
 A Lot Of Thanks To Listening Me
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