Business environment objectivesBefore we describe business environmentobjectives, it is desirable to be clear aboutvision, mission and objectives.� Vision-a vision is broad explanation of what

the firm exists and where it is trying to lead. the vision provides the point of reference on the horizon a beacon of light.

� Mission-a mission statement outlines thefundamental purpose of the organization.Objectives Of Global BusinessEnvironment

� Profit

� Growth

� Power

� Employee satisfaction and development

� Quality products and services

� World market leadership

� Joy of creation

� Service to society

Global Business StrategyFormulationWhy globalize?± causes the flow of ideas, services, and capitalacross the world± offers consumers new choices± permits the acquisition of a wider variety ofproducts± facilitates the mobility of labor,capital,and technology± provides challenging employmentopportunities± reallocates resources, makes preferential choices, and shifts activities to a global level

Global Strategy FormulationHow Do Organizations Globalize?� Stage one: Passive ResponseImporting: firm makes products and sells abroadExporting: to foreign countries� Stage Two: Initial EntryHiring foreign representationContracting with foreign manufacturers� Stage Three: Fully-established operationsLicensing/FranchisingForeign Direct Investment (FDI)- Joint Ventures-Foreign Subsidiary

GlobalEx pansion ofBusiness Importing Exporting Wholly- owned for. Subsidiary Low High Level of Foreign involvement and investment needed by a global organization Global business Strategy Formulation � Exporting: selling abroad, either directly to target customers or indirectly by retaining foreign sales agents and distributors � Importing: selling other countries products in the home country, either directly to target customers or indirectly Adv: quick and relatively inexpensive test the waters and learn about customers Disadvantages: high transportation costs tariffs and quotas danger of poor intermediary selection � Licensing: an arrangement where a firm (licensor) grants a foreign firm the right to use intangible ( intellectual ) property such as patents, copyrights, manufacturing processes, or trade names for specified period of time, usually in return for a percentage of the earnings, called royalty .Adv: small or insignificant investment Disadv: loss of control.� Franchising: an arrangement where a parent company (franchisor) grant s a foreign firm (Franchisee) the right to do business in a prescribed manner. Usually involves a longer time commitment by both parties than required under licensing agreements Adv: small or insignificant investment Disadv: loss of quality control

Foreign Direct Investment � Strategic Alliance: ± a cooperative agreement between potential or actual competitors ± an agreement between firms that is of strategic importance to one or both firms; competitive viability � Joint Venture: ± the participation of two or more companies jointly in an enterprise in which each party contributes assets, owns the entity to some degree, and shares risk � Wholly Owned Foreign Subsidiaries ± provide for tightest controls by foreign firms ± very costly but can yield high returns