12103FA_GBE_LO02_Prof.Ashima.pptGlobal Business Environment
HND
January 14th and 16th 2018
Professor Mrs. Ashima
Unit Anatomy
Unit Name
Global Business Environment
Unit Code
M/508/0530
Unit Type
Specialist
Unit Level
5
Credit Value
15
TQT
150
January 14th and 16th 2018
Activity 04
Value Chain
The batch is divided into three groups. Each group picks a Global brand to draw its Value Chain and presents key activities that take place from the Point of Production to the Point of Consumption.
Understanding Strategic Complexities in the Global Market
here we will list the various complexities
Part 01 (P2)
Understanding Strategic Complexities in the Global Market
here we will list the various complexities
Part 01 (P2)
CHALLENGES IN A GLOBAL ENVIRONMENT
Businesses may face challenges in the following areas:
- Diversity
- Independence
- Ambiguity
- Flux
- Compliance and Regulations
- Culture and Language
- Environmental Impact and Sustainability
- Technology and Communication
Global organizations face a complex set of challenges characterized by diversity both inside and outside the organization – across every aspect of the business itself and its strategy drivers. Inside the organization, executives must manage and respond to more diversity in the (internationalizing) HR pool; more variety in the management systems; more variation in the means and ends ranging from simple financial goals to a more comprehensive view; and different business models for different types of business units. Outside the organization there is higher diversity: heterogeneous customer needs; differing cultural values; a plethora of stakeholders with different claims (investors, customers, employees, regulators etc.); various political, economic and legal environments; and finally, competitors’ differing strategies. Most firms today increasingly face each of these types of diversity. Managing the differences is not trivial, and reducing diversity often means being less responsive.
1. DIVERSITY
Companies must manage the effect of global interdependence to an unprecedented degree: everything is related to everything else, and the impact is felt more rapidly and pervasively. Value webs have replaced traditional value chains. Reputation, financial flows, value chain flows, top management and corporate governance issues have reached advanced levels of interdependence. The less clear-cut the boundaries of a company become, the more it is exposed to impacts on the value chain flow through mistakes, frictions, reverse trends, or even shocks. Interdependence creates opportunities for globalization, but taking advantage of these opportunities raises difficult challenges
2. INTERDEPENDENCE
The business world today is characterized by too much information with less and less clarity on how to interpret and apply insights. A diversity of accounting standards renders financial figures ambiguous. Studies, scenarios, survey results, and reports become less reliable due to an ever-increasing uncertainty. Many businesses find it more and more difficult to discover what their clear value drivers are. Are they image, price, related services, privileged relationships, speed, knowledge, or something else? The cause-effect relationships become blurred.
3. AMBIGUITY
As if these three complexity drivers were not enough, managers have to face yet another one, flux or change. Even if you figure out temporary solutions regarding interdependence, diversity and ambiguity for your specific company, industry, and personal situation, the situation can change the next day. Today’s solutions may be outdated tomorrow
4. FLUX
Whether you are a small business shipping homemade handbags through a website or a consulting firm offering your services to multinational corporations, you must understand and follow various rules and regulations that govern your goods and services. You must comply with the tax laws of different countries as well as statutory export regulations. Some countries have strict policies about the types of business practices allowed in their countries that often include human resource and pension restrictions and rules if you hire a foreign workforce.
5. COMPLIANCE AND REGULATIONS
One of the advantages of a global economy is that more small businesses can compete competitively. However, few small businesses are prepared to handle the customer service calls from China, Vietnam and other emerging markets key to the success of a global competitor. If your sales are increasingly going overseas, you have to find ways to navigate the language barriers that may crop up in emails and phone calls. At the same time, cultural differences can play a big role in your success in the global market. For example, in China, the color red is a symbol of luck, while in other countries, it represents a warning sign. Religious and cultural boundaries must be understood to run effective marketing campaigns abroad.
6. CULTURE AND LANGUAGE
Recycling is rapidly becoming a common practice in most U.S. companies as business leaders realize the impact their behavior has on global environmental issues. You may be challenged to incorporate successful recycling programs because they may be cost-prohibitive or just inconvenient. Energy-saving devices such as compact fluorescent light bulbs make a dent in world energy consumption, but they may not be viable for your office. Challenges abound for developers looking to build new factories or office space. Food, energy and transportation companies all face environmental pressures to use fewer natural resources and offer products made with recyclable materials.
7. ENVIRONMENTAL IMPACT AND SUSTAINABILITY
One of the biggest challenges facing globally competitive marketplaces is the communication issues that crop up when technology doesn’t keep up in every sector. When your company relies on disparate systems that can’t communicate with each other, your bookkeeping gets bogged down, and orders slow or cease. Access to vital information may be compromised when technological systems are not standardized. You’ve got to rely on translations and reports from foreign staff members instead of using a centralized system when the technology you rely on to run your business isn’t compatible with the technology used by your buyers, foreign offices and global sales force.
8. TECHNOLOGY AND COMMUNICATION
Part 02 (M2)
Complexities in context to risk and diversification strategies and supply chain
here we will understand how do companies diversify and their challenges
Part 02 (M2)
Complexities in context to risk and diversification strategies and supply chain
here we will understand how do companies diversify and their challenges
2A. WAYS IN WHICH COMPANIES DIVERSIFY OR GO GLOBAL
Businesses may choose to globalize or operate in different countries in four distinct ways:
- Through Trade
- Investment
- Strategic Alliances
- Licensing or Franchising
Companies may decide to trade tangible goods such as automobiles and electronics (merchandise exports and imports). Alternatively, companies may decide to trade intangible products such as financial or legal services (service exports and imports).
1. THROUGH TRADE
Companies may enter the global market through various kinds of international investments. Companies may choose to make foreign direct investments, which allow them to control companies and assets in other countries. In addition, companies may elect to make portfolio investments, by acquiring the stock of companies in other countries in order to gain control of these companies.
2. INVESTMENTS
Another way companies tap into the global market is by forming strategic alliances with companies in other countries. While strategic alliances come in many forms, some enable each company to access the home market of the other and thereby market their products as being affiliated with the well-known host company. This method of international business also enables a company to bypass some of the difficulties associated with internationalization such as different political, regulatory, and social conditions. The home company can help the multinational company address and overcome these difficulties because it is accustomed to them.
3. STRATEGIC ALLIANCE
Finally, companies may participate in the international market by either licensing or franchising. Licensing involves granting another company the right to use its brand names, trademarks, copyrights, or patents in exchange for royalty payments. Franchising, on the other hand, is when one company agrees to allow a company in another country to use its name and methods of operations in exchange for royalty payments.
4. LICENSING OR FRANCHISING
Part 02 (M2)
Complexities in context to risk and diversification strategies and supply chain
here we will understand how do companies diversify and their challenges
2B. AREAS OF COMPLEXITIES WHILE DIVERSIFYING
Businesses face complexities in the following areas while diversifying:
- Scope of Operations
- Resource Allocation
- Competitive Advantage
- Synergy
The first component encompasses the geographic locations—countries and regions—of possible operations as well as possible markets or niches in various regions. Since companies have limited resources and since different regions offer different advantages, managers must select the markets that offer the company the optimal opportunities.
1. SCOPE OF OPERATIONS
The second component of the global strategy focuses on use of company resources so that a company can compete successfully in the chosen markets. This component of strategy planning also determines the relative importance of various company functions and bases the allocation of resources on the relative importance of each function. For instance, a company may decide to allocate its resources based on product lines or geographical locations.
2. RESOURCE ALLOCATION
Next, management must decide where the company can achieve competitive advantage over other companies in the industry. Management can identify their competitive advantage by determining what the company does better (or can do better) than its competitors. Companies may realize this advantage through a host of techniques such as using superior technology, implementing more efficient organizational practices and distribution systems, and cultivating well-known brands. This component of the strategy involves not only identifying existing or potential areas of competitive advantage but also developing a plan for sustaining areas of competitive advantage. Finally, global strategy should involve establishing a plan for the company that enables its various functions and operations to benefit one another. For example, a company can use one line of products to encourage sales of another line of products and thereby enabling different parts of a business to benefit from each other.
3. COMPETITIVE ADVANTAGE
Many companies are now outsourcing many of their operations internationally. For example, if you call to get information on your credit card, you may well be talking to someone in India or Mexico. Equally, manufacturers often outsource production to low labor cost countries. Concerns over ethical issues, such as slave and child labor, have led to companies outsourcing under controlled conditions—offshore production may be subject to surprise visits and searches and outsourced factories are required to conform to specific criteria.
4. SYNERGY
Part 02 (M2)
Complexities in context to risk and diversification strategies and supply chain
here we will understand how do companies diversify and their challenges
2C. COMPLEXITIES IN THE SUPPLY CHAIN
Businesses face complexities in the following areas of the supply chain:
- Time dimension
- Market dimension
- Resource dimension
- Technology dimension
Customer demands are a challenge as they fluctuate and change quickly. It’s necessary to be able to manage lead times and capacity synchronisation to try and control the global supply chain efficiently.
1. MARKET DIMENSION
New resources can be found all over the world and these must be looked at to see if time and money can be saved. Current resources used by the firm must also be examined to ensure they yield economic outputs. Resource deployment often poses problems including finances, workforce, materials, infrastructure, assets and so on. The global supply chain opens new doors to new resources beyond local and national opportunities.
2. RESOURCE DIMENSION
Apply technology in ways that will benefit the supply chain management and overall business competitiveness is essential. Discovering and implementing new technology can be a challenge especially when working together with multiple suppliers and providers. Technological dimension challenges refers to the development lead time, disruptive technology and the supply chain network challenges.
3. TECHNOLOGY DIMENSION
Time plays an essential role in the global supply chain challenges. Time differences can make or break the chain and it is usually the one who takes the least time getting to the market who benefits the most. It’s essential to be agile and responsive to the market.
4. TIME DIMENSION
Part 03 (D1)
Evaluation of the Opportunities and Challenges faced due to Globalization
here we will see how to evaluate the above mentioned opportunities and challenges with an impact matrix and the use of the AAA Triangle Model
In this article, Pankaj Ghemawat presents a new framework that encompasses all three effective responses to the challenges of globalization. He calls it the AAA Triangle. The A’s stand for the three distinct types of international strategy.
Through adaptation, companies seek to boost revenues and market share by maximizing their local relevance.
Through aggregation, they attempt to deliver economies of scale by creating regional, or sometimes global, operations.
And through arbitrage, they exploit disparities between national or regional markets, often by locating different parts of the supply chain in different places—for instance, call centers in India, factories in China, and retail shops in Western Europe.
Ghemawat draws on several examples that illustrate how organizations use and balance these strategies and describes the trade-offs they make as they do so.
Activity 05
http://www.iese.edu/en/files/AR-Apuntes9.pdf
Case Study Analysis and Presentation
The batch is divided into four groups. Each group presents parts of the following case study.
Tabulate the work
Read this case study to develop the AAA Triangle Model for the company you have chosen
McKinsey & Company: Expansion Strategy
WHAT IS THE EXPANSION STRATEGY OF MCKINSEY & COMPANY ACCORDING THE AAA TRIANGLE MODEL OF PANKAJ GHEMAWAT
HTTP://WWW.CASEINTERVIEWER.COM/ARTICLES/81-MCKINSEY-COMPANY-EXPANSION-STRATEGY
ON THE SIMILAR GROUNDS YOU ARE EXPECTED TO DEVELOP YOUR CONTENT.
Summary of Question No. 02
