CBP Unit 1 PDF

UNIT I: Business in a Global Environment Nature and Dynamics of Business Environment - Business trends in the modern world. Business as Blending of People Technology and Ethical Behaviour, Achieving Business Success through Social Responsibilities. Economic Challenges Facing Global/Domestic Business...

UNIT I: Business in a Global Environment Nature and Dynamics of Business Environment - Business trends in the modern world. Business as Blending of People Technology and Ethical Behaviour, Achieving Business Success through Social Responsibilities. Economic Challenges Facing Global/Domestic Business/Management of Change. Competing in Turbulence, Cost-Effective Lean Business Models.  History of Global Capitalism Business Environment is rapidly changing. Why Capitalism has become so important? By the end of 20th C, all nations adopted the basic frame work of “Modern Capitalism” The 21st century opened with the International System Global Capitalism refers to” Rise of market capitalism around the world and it is interconnected and networked across national borders” Drivers of “Global Capitalism” are Technology through the revolution in computing & information & Communication. Introduction of policies of de-regulation, Privatization and Liberalization.  Scenario after the WWII 1980s most of the alternative models failed and there was macroeconomic instability across the globe. Like the collapse of the USSR, Latin American Issues, in India severe BOP difficulties, survival issues in SSA and the interference of IMF and world Bank and SAP programmes emerged. By the end of 1991, the Market Economy Emerged characterized by Private ownership at the core of the economy A currency convertible for International Trading transactions Standards for Commercial Transactions (WTO) Market-based transaction for the bulk of the productive sectors of the economy.  Globalization Meaning & scope What is Globalization: Globalization is the process by which an activity or undertaking becomes worldwide in scope- Sundaram and Black Associated with the term economic globalization; the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, the spread of technology, and military presence.  However, globalization is recognized as being driven by a combination of Economic, Technological, Socio-cultural, Political, and Biological factors. The term can also refer to the transnational circulation of ideas, languages, or popular cultures etc.  Why do firms go global ❖It is a Business Strategy to be in Business ❖ Rapid shrinking of time and distance across the globe ❖ Domestic markets are inadequate. (Access to more markets and customers) ❖Product Life cycle theory(Raymond Vernon) 1960s till today ❖In four stages he explained: SI,SII,SIII and SIV, ARK food services in 1984. Frozen Food Products which can cook in a short time. Expanded Domestically followed by an American Company started a joint venture with an array of new but related products. The offer was too successful. ❖In Stage IV the company expanded its operations in to several Nations. ❖H.Levy and M.Sarrat “Foreign Investment Theory” means construct a portfolio which has more Optimal Risk /Return Characteristics than the income stream from one nation only. ❖To create a brand name ❖Increased Internal Trade ❖Results in the growth of MNCs ❖To global is to secure a reliable and cheaper source of raw materials.  Four stages of Globalization Stage I = Only passive dealings with foreign individuals/ organizations Stage II = Companies deal directly with their overseas interest Stage III= Companies international Interest Shape its overall make up in an important way. Stage IV = Companies sees its activities as essentially MNCs as opposed to domestic.  Growth of globalization in the recent past Increased International Trade Growth of MNCs Internalization of finance Application of new technologies in all types of activities  Free Movement of Products Movement of products without borders No Trade barriers and control regime Trade Tariffs non-tariff restrictions are removed. Products are traded based on quality & Price  Free flow of factors of production Free flow of capital, labour, technology, and management internationally The liberalized flow of FDI The global investment climate is created Portfolio investment increases in the form of investment in shares and bond  Standardized Technology Product quality is maintained Technology throughout the world Technologies are locally environmentally friendly Extensive use of information communication Well requirements of technology and networks Cyber economies emerge Transportation and communication are key agents  Market Turbulence Market Turbulence is the rate of change in the composition of customers and their preferences. The Cause of Market Turbulence: An unstable economic climate. Ever-changing customer needs. Ever changing technology All these factors continually stir up market turbulence. The driving force is the consumer: The consumers are more demanding. The driving factor is technology  Advantages and Dis – Advantages of Globalization Benefits to Host countries: Transfer of Technology, Capital and entrepreneurship to the host country Improvement of the Host country’s BOP Creation of Jobs Improved competition in the domestic economy Greater access to high-quality managerial skills Encouragement to World Economic Unity.  Benefits to Home countries: Acquisition of Raw materials from abroad. Technology and management expertise acquired from compting in global markets Exports of components and finished goods for assembly or distribution in foreign markets. Job and carrier opportunities at home and abroad  Problems brought by MNCs A major fallout of MNCs is that the host country lost its economic sovereignty. In many developing countries the infrastructure has gone into those lines in which the country has not benefitted. Unable to cope with the hostile domestic public opinion several companies quit Social & Cultural differences among nations have created formidable challenges for MNCs. The most serious threat faced by the host country’s citizens is the loss of their cultural moorings.( Food habits are copied) Whatever MNCS benefits over weigh the problems they create.  MNCs need to respond on these lines Provide employment to host countries Train Managers in host countries Introduce & Develop new technical skills Introduce new managerial and organizational practices Provide greater access to international markets Encourage the development and spin-off of new industries.  Major Challenges of International Business Globalization is a fact of life. Increasing globalization poses New Challenges to trading countries. 1. Maintaining Competitiveness 2. Government & Trade Regulators 3. Developing an international perspective 4. Managing diversity  Competing in Turbulence Crisis for turbulence (Air France 2015) Market Turbulence is the rate of change in the composition of customers and their preferences. The Cause of Market Turbulence 1. An unstable economic climate 2.Ever changing customer needs 3. Ever changing technology. Who is the driving force behind the turbulence (External or Internal) Internal (Changing company Strategy) 1. Consumer. 2. Technology How to overcome: Through “Supply Chain Management”  Supply Chain Management Mobile Phones Travel Industry Lack of market analysis Lack of resources Difficulties in logistics  Leadership Role Self Awareness: Key element of good leadership Relating: A good leader relates to others Sense Making: During a crisis, a leader is faced with a range of options and perspectives. Then take the information -- Make sense – Create direction – Share it with others in a way to understand and follow. Action: Once the leader establish their presence others follow and make sense of the situation. Service: The role of the leader is not only to serve the organization, they are responsible for others to act in a way ultimately serves all the stakeholders in that situation.  What is a Lean Business A Lean business is characterised by: Maximizing value while minimising waste. Focusing on improving processes across the value stream. Eliminating non-value-adding activities and waste. A relentless pursuit of improvement and a focus on value creation.  Types of lean strategies 1. Total Quality Management (TQM):TQM focuses on achieving long-term success through customer satisfaction. It emphasises building quality in every process and encourages employee involvement in maintaining and improving standards. 2. Just-in-Time (JIT) JIT aims to improve efficiency by producing goods only as needed, reducing inventory costs, and minimising waste. For example, businesses using JIT maintain smaller inventories and ensure materials arrive just in time for production. 3. Throughput Management Throughput management optimizes production flow by identifying and addressing bottlenecks in operations. This strategy ensures smoother processes, better resource utilization, and faster value delivery to customers.  Benefits of implementing a lean business model 1. Increased efficiency: 2. Cost reduction: 3. Enhanced customer satisfaction: 4. Adaptability: Examples ofbusinessess are Health care, Construction, Software development models and Educational Institutions  Lean Business Principles Whole Optimization Waste elimination Quality Building Rapid delivery Knowledge creation People respect  Advantages of a Lean Business Strategy Facilitates On ongoing growth Enhances Customer satisfaction Reduces Costs Enhances Quality