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Chapter 2

A Systems View of Globalization

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Demands for Businesses are the Product of the Times

Postwar years (1945–55) Growth years (1955–70) Time of Trouble (1970–80) International Era (1980–90) Now in a global era (1990–now)

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Systems Theories

Rational Economic Theories—we can analyze components to understand our world

• SWOT analysis• Industry analysis—five forces

Biological theories—nature decides• In the case of businesses, markets decide

Chaos theories—there is no order• Events occur in dynamic, nonlinear systems

9/26/2013 4Copyright © 2001 Houghton Mifflin Company. All rights reserved.

1-4

Strengths and Weaknesses Opportunities and Threats

(SWOT Analysis)

Strategic ChoiceBusiness

FunctionalGlobal

Corporate

SWOT and Strategic Choice

9/26/2013 5Copyright © 2001 Houghton Mifflin Company. All rights reserved.

1-5

Three Levels of Strategy in Organizations

Corporate-Level Strategy: What business are we in?

Corporation

Business-Level Strategy: How do we compete?

Textiles Unit Chemicals Unit Auto Parts Unit

Functional-Level Strategy: How do we support the business-level strategy?

Finance R&D Manufacturing Marketing

9/26/2013 6Copyright © 2001 Houghton Mifflin Company. All rights reserved.

1-6

Four Basic Global Strategies

FIGURE 8.2

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Source: Adapted and reprinted by permission of Harvard Business Review. An exhibit from “How Competitive Forces Shape Strategy” by Michael E.. Porter (March-April 1979), Copyright © 1979 by the President and Fellows of Harvard College: all rights reserved.

The Five Forces Model

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Global Businesses and Industries

Global Culture

Global Politics

Global Economics

Globalization of the Natural Environment

Global Technologies

People

Processes

Structures

The organization

buyers

sellers

NGOs

IGOs

Figure 2.0

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Global Businesses and Industries

Global Culture

Global Politics

Global Economics

Globalization of the Natural Environment

Global Technologies

People

ProcessesStructures

The organizationThe organization buyers

sellers

NGOs

IGOs

Figure 2.1

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3. Global Businesses and Industries: leads to industry exits, entries, and new dynamics

2. Global Culture and habits alter; people download music for free

5. Global Politics—companies file suits

4. Global Economics; music sales plummet, suck $ out of the global economy

6. Globalization of the Natural Environment—packaging and material use alters

1. Global Technology: File sharing for music downloads People

Processes

Structures

The organizationThe organization

buyers

Sellers (Recording artists)

NGOs (RIAA)

IGOs

Napster

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Arthur Andersen, 1999 study of the global leader (Institute for Strategic Change)

Thinks globally Recognizes opportunities Creates a shared vision by developing

and empowering people Appreciates cultural diversity Builds teamwork and partnerships Embraces changes Shows technical savvy Lives the values espoused

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Indicators of Cultural Globalization

Cultural Groupings• national• subcultures• supracultures

Global Influences Entertainment and Electronic media Travel

• Business, tourism, education, virtual Language Demographic groups, e.g., global teens Business activities

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Global Politics

Becomes important because nations allow markets to balance self/collective interests

National policies conflict with global policies • WTO

Many more than government actors attempt to shape outcomes• Intergovernmental organizations (IGOs) • Nongovernmental organizations (NGOs)• Businesses• Gangs, pirates, terrorists, rebels

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Indicators of a GLOBAL ECONOMY

Trade:• VISIBLE AND INVISIBLE TRADE

Foreign Direct Investments• Inflows and outflows

Currency and capital movements GDP and Quality of Life Measures Openness to Markets

• FISCAL & MONETARY POLICIES; orientation toward capitalism Connections to Financial Institutions

• Central Banks• IGOs like the World Bank or the IMF• Private lenders

commercial and investment bankers Microlenders Money launderers

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Global Economy, Labor

Who works; where, why and for whom? Paid and unpaid sectors Hours of work Compensation Work conditions Labor and job migration Education and knowledge factors

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Global Industries and Businesses

Defining degree of industry globalization Industry shifts:

• converge, integrate, downsize, and dissolve• Rivalry among firms (within and across industries)

worldwide Creating industry advantage

• Industry analysis• Diagnosing Industry globalization • Diagnosing Industry futures• Reshaping the organization

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Global Technologies

Products and processes Information age changes

• Telecommunications• Computerization

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Natural Environment

Global commons • Air, water, and other resources we must share• Raw materials

minerals, oil, lumber and natural resources we can share

Biodiversity Globalization of disease and its effects Global impact of natural disasters

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These are Only Some Examples for Each Global Environment

But they are illustrative more than they are exhaustive—many more examples also can be found.

Your job—find them and explain why they are reflective of a chosen global environment.