Macro Environment Analyses
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Chapter 2: External Analysis: The Identification of Opportunities and Threats: 2-7b Global Forces Book Title: Strategic Management: An Integrated Approach: Theory and Cases Printed By: Pearl Chen ([email protected]) © 2020 Cengage Learning, Inc.
2-7b Global Forces
The last half-century has seen enormous changes in the world’s economic system. We review these changes in some detail in Chapter 8, where we discuss global strategy. For now, the important points to note are that barriers to international trade and investment have tumbled, and more and more countries have enjoyed sustained economic growth. Economic growth in Brazil, China, and India has created new, large markets for companies’ goods and services and is giving companies an opportunity to grow their profits faster by entering these markets. Falling barriers to international trade and investment have made it much easier to enter foreign nations. For example, 30 years ago, it was almost impossible for a Western company to set up operations in China. Today, Western and Japanese companies are investing approximately $100 billion annually in China. By the same token, falling barriers to international trade and investment have made it easier for foreign enterprises to enter the domestic markets of many companies (by lowering barriers to entry), thereby increasing the intensity of competition and lowering profitability. Because of these changes, many formerly isolated domestic markets have now become part of a much larger, more competitive global marketplace, creating both threats and opportunities for companies. Interestingly, although barriers to cross border trade and investment have been falling for 60 years, the decision by the United Kingdom to leave the European Union (Brexit), and the protectionist instincts of the current president of the United States, Donald Trump, may indicate that for now at least, the tide may be turning.
Chapter 2: External Analysis: The Identification of Opportunities and Threats: 2-7b Global Forces Book Title: Strategic Management: An Integrated Approach: Theory and Cases Printed By: Pearl Chen ([email protected]) © 2020 Cengage Learning, Inc.
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