MG4031 Management Principles - Chapter 3

MG4031 Management Principles - The Global Business Environment

• The course covers the global business environment, specifically focusing on the reading material from Chapter 3 of "Modern Management" (pages 81-123).
• Learning objectives include understanding terms like global external business environment and globalization, their impact on organizations, and global trade. Also, understanding the roles of regional trading alliances in competition. Appreciating shifting global economic power, particularly regarding BRIC nations (Brazil, Russia, India, China, & South Africa), as well as factors in the macro environment (political/legal, economic, technological, and socio-ethical contexts). Furthermore, modelling the immediate competitive environment (competitors, suppliers, customers, new entrants, substitute products).
• The global business environment is defined as all factors affecting an organisation that lie outside its immediate control. It is not an excuse for poor performance; environmental scanning, to anticipate and manage these external influences, is vital for survival.
• Environmental scanning is a systematic way of monitoring and interpreting data to identify potential opportunities and threats. It's a critical process for organisations impacting future decisions.
• Key components of external scanning include trends (market and industry), competition (competitive advantages, weaknesses), technology (impact on efficiency), customers (changing customer base), and labour supply (access to talent).
• Globalization is the increasing and deepening interactions and connections between individuals, groups, and organizations across the world. It's a shift towards a single global marketplace driven by the spread of free market capitalism. Globalisation has led to significant changes in the global economic order.
• Globalisation presents both substantial opportunities and challenges. The world economy has changed dramatically since the end of the Cold War, with significant pressures on natural resources, climate, and traditional industries and livelihoods. Increased political polarisation, rising populism, nationalism, conflict and debates about emerging de-globalisation are also significant trends.
• Regional trading alliances are significant global influences, including the enlarged European Union, the North American Free Trade Agreement (NAFTA), Mercosur, and the Association of Southeast Asian Nations (ASEAN). Other trading groups, such as CARICOM and the African Continental Free Trade Agreement (AfCFTA) exist across the world.
• BRIC/BRICS economies (Brazil, Russia, India, China, & South Africa) are emerging large economies with significant demographic and economic potential. They are collectively impactful, comprising significant populations (over 40% of the world's population), considerable land area across three continents, and account for a substantial part of global GDP (over 25%).
• Culture, a system of shared values and norms, is vital in the global business environment, greatly shaping how things are done and viewed across the world.
• Understanding cultural differences is essential for successful international expansion. Methods of classifying cultural differences are important.
• The decisions to enter the global business environment, when, and how are often impacted by a careful consideration of the different aspects of the macro and competitive environments. This includes deciding where to expand, when to expand, and the specific entry mode to be used.
• The competitive environment includes forces such as the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitutes, and the intensity of rivalry among competing firms, these can be analyzed using Porter's Five Forces.
• Companies often strive to achieve competitive advantage through cost leadership, differentiation, or a focus strategy.
• Understanding legal systems (common law, civil law, theocratic law) and economic conditions is important for global business success. Technological advancements, and social and ethical considerations must also be accounted for.