international business and finance
rishabbiyani
WEEK9LECTURESLIDE.ppt
The Future of International Business
Introduction: Trend-spotting as an MNE function
- Week 9. Ecology and International Business
- Week 10. The changing geography of IB
a. Emerging operational locations
b. Emerging consumer markets
c. New rivals and new paradigms
Module conclusion:
Final thoughts on your IB career
Trend-spotting
- Competitive intelligence: watch function
- Centralized in HQ or in subsidiaries?
- Circulation of info throughout MNE
- Human capital: promoting a global mindset?
- Forecasting abilities are also a reflection of
- Worldliness/ability to empathize
- General culture
- Courage not to be slave to received wisdom
Sample of major international trends
(derived from regular McKinsey trends)
1. Changing geography of IB (INB 701 wk 10)
2. Ecological imperative (INB 701 wk 9)
3. Technological innovation
Also
- Globalization of labour (= INB 720)
- Ethical business (=INB 701 wk 2)
- Capital markets (=INB 701 wk 8)
- Knowledge management (=INB 701 week 6)
- Socioeconomic and demographic changes (READ THE NEWS!!)
Session I.
Ecology and International Business
Haeckel: ‘ecology’ =Greek for house (οικος or oikos) and speech (λόγος or logos) i.e.
every aspect of a community’s ability to inhabit a place, i.e. Holistic
Interdisciplinary: Malthus (demography/politics) ; Humboldt (botany/economics)
Responsive to natural devastations (Beatrix Potter, John Muir)
Deep ecology (spiritual/aesthetic motives) vs. social ecology (inequalities/crisis
prevention)
Link to toxic economic growth. Minimata, DDT (Rachel Carson ‘Silent Spring’1962)
Takeoff late 1960s/early 1970s disasters: Greenpeace, WWF, Friends of the Earth
Estrangement of management and ecology
Environmentalism associated with utopians/anti-capitalism
Developing countries with other priorities?
Greening seen as time-consuming and expensive
Can costs be passed on to customers? Depends
Short-term investment but long-term payback
Why should company internalise free externalities?
‘Natural capitalism’ (Hawken et al 1999) – companies exist in a physical world, managers should understand resource use
Ecology specifically in an IB setting
“Regime arbitrage’: Temptation for MNE to invest in countries with lax eco-regulations
‘Race to the bottom’: Poor governments desperate for FDI may weaken standards (Kuznets curve)
Globalisation/fragmentation of MNE supply chains: site specialisation increases flows = resource consumption
Do MNE execs focus as much on local ecospheres?
Problem 1. Resource depletion
Resource acquisition is first step for all economic activity
Factors: cost (subsidies?), availability (access)
and substitutability (problem of inertia)
Main problem: overuse of ‘ancient sunlight’
T. Hartmann http://www.youtube.com/watch?v=3QhO9lDa9G8 (2:30)
Hubbert “peak oil” – we rely on finite resources
http://www.davidstrahan.com/blog/?p=75
Outlook for traditional energy sources
2017 global consumption by fuel type in MTOE (million tonnes of oil equivalent /
% total primary consumption / years of proven reserves at current consumption rates
https://www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/statistical-review/bp-stats-review-2018-full-report.pdf
| Total 2017 consumption | Percent of total primary energy consumption | Years of proven reserves vs. current global production | |
| Oil | 4622 | 34.2 | 50.2 |
| Coal | 3732 | 27.6 | 134 |
| Natural gas | 3165 | 23.4` | 52.6 |
| Hydroelectricity | 919 | 6,8 | NA |
| Nuclear | 596 | 4.4 | 90 (2016) c.f. http://www.world-nuclear.org/information-library/nuclear-fuel-cycle/uranium-resources/supply-of-uranium.aspx |
| Other renewables inc. biofuels | 487 | 3.6 | NA |
| Total | 13511 |
Problem 2. Pollution
Concentrated toxic effluents (water, air, land)
c.f. P Drucker: We only manage what we measure, thus corporate reporting initiatives (inc. suppliers)
Impossible for companies to ignore pollution:
Ethical responsibility
Reputational capital
Legal liabilities
Behaviour that was once accepted is now widely rejected
MNE awareness of ecological imperative
- Part of corporate responsibility (CR) agenda – but not only!
Motivation for greening determines strategic approach:
- Positive (play to win); cut costs/dependency; new markets
Negative (play not to lose): codes of conduct; avoid criticisms
Impetus for going green
Top-down Performance metrics; Environmental Management Systems
Bottom-up. Coordinators raising awareness/cascading best practice
TRIPLE BOTTOM LINE ACCOUNTING
Green operations
Eco-efficiency credo: offer more for less
Design closed loop systems where waste output
becomes process input
McDonough ‘Cradle-to-cradle’ Split biological & technical nutrient
flows https://www.youtube.com/watch?v=UIrvWVcb4E8 (3.52)
Concepts including: Biomimicry, lightweighting, upgradeability,
disassembly, lifecycle costing
Green operations (cont.)
Smart companies: data as source of efficiency
Environmentally organised value chains
Industrial ecology: imitate forests (i.e. Kalundborg, DK)
http://www.youtube.com/watch?v=1yCYGOxnpSY (2:36)
Green procurement: reduce Non-Product Ratio by working with
suppliers to cut CO2 emissions, use preferred chemicals, reduce
packaging, consume less water etc.(c.f. Walmart, Staples, Levi)
Green manufacturing
Upgrade and redesign facilitate to use fewer resources like electricity, lighting/heating, water
Pollution prevention/ process certification,
Crossover with ‘lean’ manufacturing logic
Green sectors for the future
Broad consensus that resource productivity will
soon become leading driver of global economic growth
Range of sectors affected include ‘built environment, transport and industry, material productivity including steel, concrete and
timber, chemistry, engineering, water efficiency and
sustainable agriculture’ (Von Weizsäcker et al 2009).
UN expects 20 mio. green jobs by 2030 but hard to predict since some innovations (lighting) linked to others (buildings)
Primary sectors
Centuries-long under-valuation (thus under-pricing) of
natural resources vs. manufactured products or services.
Trend reversal in recent years
Supply : overuse, pollution, urban sprawl reduces farmland
Demand: “dietary globalisation”, global supply chains (“food miles”), waste
Food and drink are growth sectors
Habitats and the way we live
Buildings
Construction/operation – both phases have big footprint
Sub-sectors(i.e. materials, lighting, wiring) have own environmental profile
New build different from “retrofit”; get buildings to function like natural systems
Transportation
Concepts: “hinterland”, “urban infill”, “congestion zones”
Modes: air, rail, shipping, road (inc. electric vehicles)
Landuse
Urbanisation/slums/green belts/migration flows
Smart cities/smart grids – data is logistics!
The big prize: clean energy
Solar, wind, tidal, etc.
Two businesses: equipment; installation
Issues: technological innovation; entrepreneurship; funding
Bill Gates: http://www.breakthroughenergycoalition.com/en/index.html (2.00)
International progress has been variable
Euronews (2018) “Europe’s transition to a green energy future”
https://www.youtube.com/watch?v=FpgqQDJ01K0 (8.19)
CBS (2018) “LA’s booming solar installation business may suffer under Trump’s new tariff”
