Global factors influencing business

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Global Factors Influencing Business Strategy



Strategy



Strategy• Key strategic decisions relate to:

– Access to international markets• Spotting new markets• Building exports

– The extent to which the business will be competitive in international markets

– The effect on decision making of the existence of trade blocs

– Consideration on the necessity and importance of acquisitions



Trade Blocs• Trade Blocs influence the ease of access to

new markets and affect the relative costs of trading in different regions of the world:– EU– NAFTA

• Locating within a trading bloc could help to reduce long term trading costs (e.g. Japanese companies building plants in the UK to help overcome exposure to the Common External Tariff)



International Growth• Growth not just through expansion of the size of the

firm but also through external growth:• Acquisitions – mergers, takeovers• Multi-National Corporations – global presence• Brings with it a range of issues for the business to

consider - PEST



Factors



Factors• Key factors influencing global

business strategy can be summarised under the PEST heading:

• Political• Economic• Social• Technological



Political• Political Change – regime change through coup,

violence, etc. Change in government through democratic election can influence future business strategy.– e.g. the opportunities that are now available in Russia and

Eastern Europe following the collapse of communism• Political Uncertainty – in countries like Zimbabwe,

Sudan, Venezuela. Political uncertainty can lead to a fall in investment by businesses and influence decisions on expansion and business ventures

• War/Terrorism – create uncertainty• Political Doctrine – can affect the ease with which

business is conducted



Economic• All these factors need to be considered in any

global business venture:– Tax Systems– Investment Considerations and Allowances– Sophistication of Financial Markets – ease with which

capital can be moved and raised– Commodity Prices – oil, energy, metals– Monetary and Fiscal Policies – interest rates, tax

regimes, government aid– Internal Regulation and Bureaucracy – can be stifling!– Exchange Rates



Social• Religious Considerations –

appropriateness of some business ventures – e.g. selling condoms in staunchly Catholic countries

• Impact on local communities of business development – availability of jobs, training, environmental impact for these communities

• Impact on the environment – can impact on the businesses image

• Ethical considerations• Cultural issues

The impact on the local environment not only affects human communities but can also inflict widespread ecological damage. This imposes social costs on the environment but also can cost the business large sums in legal costs and compensation.Copyright: Photolibrary Group



Technological• Availability and developments in technology

can have a powerful influence on global business strategy:

• e.g.– Access to bandwidth– PC ownership– Technology and sales – processing payments and

sales– Compatibility of technologies in Business

Management – accounting systems, language differences, etc.

Global factors influencing business

Business

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