Unit 18 Global Business Environment : Assignment

Unit 18 Global Business Environment
Prepared By :Ms. Dina Al Natour

LO1 Analyse the key factors which drive globalization

After studying this chapter, you should be able to:
 Definition of globalization
 Concept of globalization in terms of different dimensions (cultural, economic, political and
social)
 What are the factors that drive globalization
 (cost , market, environment , competition, skills )
 The significant impact of the digital revolution
 A PESTEL analysis

01 WHAT IS
GLOBALIZATION?

What Is Globalization?
Globalization is a process of interaction and
integration among the people, companies,
and governments of different nations, a
process driven by international trade and
investment and aided by information
technology. This process has effects on the
environment, on culture, on political systems,
on economic development and on human
physical well-being in societies around the
world.

What Is Globalization?
Globalization is the free movement of
goods, services and people across the world
in a seamless and integrated manner.

What Is Globalization?
Globalization can be thought of to be the
result of the opening up of the global
economy and increase in trade between
nations.
In other words, when countries that were
closed to trade and foreign investment open
up their economies and go global, the result
is an increasing interconnectedness and
integration of the economies of the world.
This is a brief introduction to globalization.

What are the factors that drive globalisation? Different drivers of globalization and
they can basically be separated into five
different groups: Technological drivers Political drivers Market drivers Cost drivers Competitive drivers

What are the factors that drive globalisation? Technology shaped and set the foundation
for modern globalization. Innovations in the
transportation technology revolutionized the
industry. The most important developments among
these are the commercial jet aircraft and the
concept of containerisation in the late 1970s
and 1980s. Finally the rapid growth of the Internet is the
latest technological driver that created global
e-business and e-commerce.

What are the factors that drive globalisation? Technological advancement drives
globalization by making it easier for people,
goods, and ideas to move across borders. For
example, advancements in transportation
have made it possible to move vast amounts
of people and product around the world .

What are the factors that drive globalisation? Political drivers Liberalized trading rules and deregulated
markets lead to lowered tariffs and allowed
foreign direct investments in almost all over
the world. The institution of GATT (General
Agreement on Tariffs and Trade) 1947 and the
WTO (World Trade Organization) 1995 as well
as the ongoing opening and privatization in
Eastern Europe are some examples of latest
developments.

What are the factors that drive globalisation? organisations like the World Trade
Organisation (WTO) promote free trade
between countries, which help to remove
barriers between countries.

What are the factors that drive globalisation? Market drivers As domestic markets become more and more
saturated, the opportunities for growth are
limited and global expanding is a way most
organizations choose to overcome this
situation. Common customer needs and the
opportunity to use global marketing channels
and transfer marketing to some extent are
also incentives to choose internationalization.
(Ferrier, 2004)

What are the factors that drive globalisation? Cost drivers Sourcing efficiency and costs vary from
country to country and global firms can take
advantage of this fact. Other cost drivers to
globalization are the opportunity to build global
scale economies and the high product
development costs nowadays. (Ferrier, 2004)

What are the factors that drive globalisation? Countries such as India have lower labour
costs and also high skill levels. Labour
intensive industries such as clothing can take
advantage of cheaper labour costs and
reduced legal restrictions.

What are the factors that drive globalisation? Competitive drivers With the global market, global inter-firm
competition increases and organizations are
forced to “play” international. Strong
interdependences among countries and high
two-way trades and FDI actions also support
this driver.

digital revolution The Digital Revolution refers to the
advancement of technology from analog
electronic and mechanical devices to the
digital technology available today. The era
started to during the 1980s and is ongoing.
The Digital Revolution also marks the
beginning of the Information Era. The Digital Revolution is sometimes also
called the Third Industrial Revolution.

Significant impact of the digital revolution Digital technologies are fundamentally
changing how people and businesses work
together. They adapt their business models to
meet ever increasing customer expectations.

Significant impact of the digital revolution Creating better products and services at lower
costs Impact of social media and other applications Twitter, Facebook, cloud computing, digitized
design, manufacturing and distribution
systems

02 PESTLE ANALYSIS TO
ILLUSTRATE THE BROADER AND
GLOBAL INFLUENCES ON AN
ORGANISATION.

Environmental analysis:
 A PESTEL analysis or PESTLE
analysis is a framework or tool used to
analyse and monitor the macro-
environmental factors that may have a
profound impact on an organisation’s
performance. This tool is especially
useful when starting a new business or
entering a foreign market.

PESTLE Analysis
 It includes those factors that create
opportunities and threat to business
units. Following are the elements of
Macro Environment.
 Political factors
 Economic factors
 Social factors
 Technological factors
 Environmental factors
 Legal factors

PESTLE Analysis
 Political Factors: For example,
Government policies, taxation changes,
foreign trade regulations, political risk in
foreign markets, changes in trade blocks
(EU).
 These are all factors that need to be
taken into account when assessing the
attractiveness of a potential market.

PESTLE Analysis
 Economic Factors: For example, business
cycles, interest rates, personal income,
exchange rates, unemployment rates, GDP
trends.
 These factors may have a direct or indirect
long term impact on a company, since it
affects the purchasing power of consumers
and could possibly change demand/supply
models in the economy. Consequently it also
affects the way companies price their
products and services.

PESTLE Analysis
 Social Factors: For example,
population changes, income distribution,
lifestyle changes, consumerism,
changes in culture and fashion.
 These factors are especially important
for marketers when targeting certain
customers. In addition, it also says
something about the local workforce and
its willingness to work under certain
conditions.

PESTLE Analysis
 Technological Factors: For example,
new discoveries and technology
developments, ICT innovations,
increased spending on R&D.
 These factors may influence decisions to
enter or not enter certain industries, to
launch or not launch certain products or
to outsource production activities
abroad.

PESTLE Analysis
 By knowing what is going on
technology-wise, you may be able to
prevent your company from spending a
lot of money on developing a technology
that would become old.

PESTLE Analysis
 Environmental (‘Green’) Factors: For
example, environmental protection
regulations, energy consumption, global
warming, waste disposal and re-cycling.

PESTLE Analysis
 Legal Factors: For example,
competition laws, health and safety laws,
employment laws, licensing laws, IPR
laws.

PESTLE Analysis
 If an organisation trades globally this
becomes especially tricky since each
country has its own set of rules and
regulations. In addition, you want to be
aware of any potential changes in
legislation and the impact it may have on
your business in the future.
Recommended is to have a legal advisor
or lawyer to help you with these kind of
things.

THANK YOU