Transcript 301LONU4K2x

The Strategic
Environment
International Environment,
Economies and Markets II
International Business
Strategy
301REN
Unit: 4 Knowledgecast: 2
Module Learning Outcomes
• Demonstrate a sound appreciation of current
strategic management concepts
• Assess current developments in the organisational
environment and alternative responses related to
strategy
The New Global Challengers
• Some 100 companies from emerging markets are poised to become
important 21st-century multinationals. Examples include:
Brazil: Embraer, Sadia & Perdiago, Natura
Mexico: America Movil, Grupo Modelo
India: Ranbaxy, Infosys, Tata Tea, WIPRO
China: Galanz, Haier, Chunlan Group Corp., Lenovo, Pearl
River Piano
 Turkey: Koc Holding, Vestel & Sisecam
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Key Drivers of Challenge are benefit from emerging markets:
• Rapidly growing markets, some of which are large
• Low-cost labor
• Training grounds for competing with global incumbents
• Complex operating environments, which produce some very capable
firms
Key Concepts
• Advanced economies: Post-industrial countries with
high per capita income, competitive industries, and
developed commercial infrastructure; typically the
richest countries, including Australia, Canada, Japan,
the United States, and nations of Western Europe
• Developing
economies:
Low-income
countries
characterized by limited industrialization and stagnant
economies; e.g., Bangladesh, Bolivia, and Zaire
• Emerging market economies: Former developing
economies that achieved substantial industrialization,
modernization, and remarkable economic growth; e.g.,
Indonesia, Mexico, Poland, and Turkey
What are the “BRIC” countries?
Advanced Economies, Developing Economies,
and Emerging Markets
The “BRIC” Countries
Advanced Economies, Developing Economies,
and Emerging Markets
Emerging Market Economies
• About 27 countries with rising economic
aspirations that enjoy rapidly growing
standards of living
• Evolving towards wealthy nation status
• Importance in the world economy is increasing
as attractive destinations for exports, FDI, and
sourcing
• Examples: Hong Kong, Israel, Saudi Arabia,
Singapore, South Korea, and Taiwan have
developed beyond the emerging market stage
Key Differences Among the Three
Major Country Groups
10-11
Emerging Markets as a Percent of World
Total
GDP Growth Rates in Advanced
Economies and Emerging Markets
What Makes Emerging Markets
Attractive?
Emerging markets as target markets
• Many have huge middle classes, with significant
income for buying electronics, cars, health care
services, and countless other products.
• Many exhibit high economic growth rates.
Emerging markets as manufacturing bases
• Many are home to low-wage, high-quality labor
for manufacturing and assembly operations.
• Many have large reserves of raw materials and
natural resources, e.g., South Africa, Brazil,
Russia.
What Makes Emerging Markets
Attractive? (cont.)
Emerging markets as sourcing destinations
• MNEs have established numerous call centers in
Eastern Europe, India, the Philippines, and elsewhere.
• Dell and IBM outsource certain technological functions
to knowledge workers in India.
• Intel and Microsoft have much of their programming
activity performed in Bangalore, India.
• Investments from abroad benefit emerging markets:
They lead to new jobs and production capacity,
transfer of technology, and linkages to the global
marketplace.
Assessing the Attractiveness of Emerging
Markets and Developing Economies
• Market size: The country’s population, especially the population of
urban areas
• Market growth rate: The country’s real GDP growth rate
• Market consumption capacity: Income of the middle class
• Commercial infrastructure: Density of telephone lines and paved
roads, number of personal computers, population per retail outlet,
and other such characteristics
• Economic freedom: The degree to which government intervenes in
business activities
• Country risk: The degree of political risk
Challenges of Doing Business
in Emerging Markets
• Political stability: Corruption, weak legal systems, and
unreliable government authorities increase business
risks and costs and hinder forecasting.
• Weak intellectual property protection: Discourages
producing or selling goods that entail valuable assets.
• Bureaucracy, red tape, and lack of transparency:
Burdensome rules, excessive requirements for licenses,
approvals, and paperwork; legal and political systems
without accountability. For example, it may take years,
or many bribes, to obtain permissions to do business.
China, India, and Russia are particularly problematic.
Challenges of Doing Business
in Emerging Markets (cont.)
• Poor physical infrastructure: Basic elements of
infrastructure, such as high-quality roads, drainage
systems, sewers, and electrical utilities, are often
sorely lacking in emerging markets.
• Partner availability and qualifications: Given
emerging market challenges, foreign firms might seek
local partners to provide access to markets, supplier
and distributor networks, and key government
contacts. However, qualified partners are often
difficult to find or require much assistance to upgrade
their abilities.
Challenges of Doing Business
in Emerging Markets (cont.)
• Dominance of family conglomerates: Economies are
often dominated by privately owned local companies
that are highly diversified and control supplies and
employment.
These are common in South Korea
(chaebols), India (business houses), Latin America
(grupos), and Turkey (holding companies).
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
10-19
Strategies for Doing Business
in Emerging Markets
• Customize offerings to unique emerging market
needs.
Successful
firms
develop
a
deep
understanding of the distinctive characteristics of
buyers, local suppliers, and distribution channels
in emerging markets, and customize offerings and
business models accordingly.
• Partner with a family conglomerate. FCs can
provide various advantages, including financing,
bank services, local suppliers, and distribution
channels. FCs can help reduce risk, time, and
capital requirements; develop relationships with
governments and other key players; and overcome
infrastructure hurdles.
Strategies for Emerging Markets
(cont.)
• Target
governments.
Governments
buy
enormous quantities of products, such as
computers, furniture, office supplies, and motor
vehicles, as well as services. State enterprises
operate in areas such as railways, airlines,
banking, oil, chemicals, and steel.
• Skillfully
challenge
emerging
market
competitors. New global challengers and other
emerging market firms possess various
advantages that require skillful strategies and
due diligence to overcome.
Strategies for Emerging Markets (cont.)
• Low-cost labor, skilled workforce, government
support, and family conglomerates give
emerging market firms various advantages.
Advanced economy firms must:
• Conduct research to understand target markets and
the indigenous challengers
• Acquire new capabilities that build competitive
advantage (e.g., develop new products, new ways of
doing business, and local alliances)
• Leverage the same advantages enjoyed by local firms
in emerging markets (e.g., low-cost labor, skilled
workforce, cheap capital, and key partnerships)
Knowledgecast Summary
• Demonstrate a sound appreciation of current
strategic management concepts
• Assess current developments in the organisational
environment and alternative responses related to
strategy
Seminar
Environmental Audit –
In this seminar, we will continue to explore environmental
analysis using the Mini case study (INSIDE DYSON: a distinctive
company?) found on page 115 of one of your recommended
reading text –Exploring corporate strategy by Johnson and
Scholes 9th edition
Be prepared to present your answers to the questions that
follow in a power point presentation as a group and be ready to
answer questions from your colleagues and Tutor . Each group
will have 7 minutes presentation time and 3 minutes Q&A.
Group Activity
Preparation for Regular Assignment
In this group activity, you will continue to work in your
consultancy groups to research and gather information on your
main case study in preparation for your regular assignment (group
presentation)
It will also serve as an opportunity to seek clarification and ask
for support from your tutor on all aspects of the assignment
including scope and rubric.