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Strategy: A View From the TopKaty Lovett, CJ Baker, and Matt

Snowden

Chapter 3 Analyzing the External Strategic Environment

Understanding GlobalizationEconomist: trade and free flow of capital as

defining issue

Also, flow of technology and real time information

Numerous other characterizations depending on perspective

RegionalismRegional trade blocks account for almost

60% of world trade

EU- 25 %, NAFTA- 8%

ASEAN, EUROMED, APEC all promote free trade in their respective regions

New Powerhouses: India and ChinaOutsourcing to India for technology (Ex

Dell, according to Forbes.com)

China has low cost labor

Western civilizations have to work within the government regulations overseas which can pose a problem

Global TectonicsEnvironmental tectonics- interactions

between people and their environments (ex. Population and urbanization) and affect quality of life

Technological tectonics-advances in technologies, power global growth and development

Societal tectonics- shifts in international governance

12 Global Trends

What do companies need to be ready for?

Corporate strategy should depend heavily on these factors

Population TrendsPredicted to be 9 billion by 2050

Aging population in Europe, the U.S., and Japan will be a problem

Better suited job opportunities?

UrbanizationBy 2030 60% of the world’s population will

live in cities.

Are governments and companies ready for the new demands presented by this challenge?

Spread of Infectious DiseaseHealth care will need to be improved to

service more people

Biological terrorism could be a weapon

Resource ManagementFresh water resources?

Enough food?

Energy?

Environmental DegradationPollution, global warming, and

deforestation all need attention before they become a threat

World’s living ecosystems will be the hardest hit

Economic integrationEconomies have become interdependent,

and will continue to mesh together

Governments will need to work together as we all become more intertwined with other countries

Knowledge Dissemination/ Information TechnologyKnowledge is changing business models

and information that is spread throughout the world

“Smart” products are here, such as PDAs and cell phones

Companies need to be prepared to change almost overnight to keep up

Attainable to get instant results and answers to questions

Biotechnology/NanotechnologyMedicine, agriculture, and the environment

will all be highly affected by greater knowledge

DNA based computers?

Reduce waste, cost of transportation

Conflict/ GovernanceCompanies must develop security

standards and work with the Government to comply to current regulations

Rules must be obeyed on local/national level, and also within the market

Unpredictability should be a factor in corporate strategy

Global Knowledge Economy- Strategic Implications

Economy is now governed by the laws of abundance

The effect of location is diminished

Knowledge and information “leak” to where demand is high and barriers are low

Knowledgeable products can have price premiums over comparable products depending on the context

Global Knowledge Economy- Strategic Implications cont….

Knowledge security

Human capital is key component of value

Faster technology on a global scale

Reduced appeal of mass marketing

Risk and Uncertainty

Success of a new product introduction depends on how competitors will act, the quality of components from outsiders, and state of the economy

Uncertainty presents unique problems

Collapses

Scenario Analysis

One of the most widely used techniques for constructing possible futures of a business’ external environment

Divided into two categoriesThings we know aboutElements we consider unknown

Scenario Analysis

4 steps1. Deciding what possible future

developments to look in to2. What forces are likely to have the greatest

ability to shape the future3. Constructing a comprehensive set of

future scenarios based on different combinations of possible outcomes

4. Generating forecasts that allow an assessment of alternative futures

Global Futures: The Global Scenario Group

Convened by the Stockholm Environment Institute

Created a number of scenarios based on three different social visionsConventional WorldsBarbarization Great Transitions

Conventional Worlds

Scenario 1: Market ForcesIncorporates mid-range population and development projections and typical technological change assumptions

Scenario 2: Policy ReformGoal is to achieve greater social equity and

environmental protection

Barbarization

Scenario 3: BreakdownCrises combine and spin out of control

Scenario 4: Fortress WorldResponse to a breakdown

Great Transitions

Scenario 5: Eco-CommunalismIncorporates the green vision of localism, face-to-face democracy, and small technology

Scenario 6: New Sustainability ParadigmShares some goals of Eco-Communalism, but would seek to change the character of the urban, industrial situation

New Compact Between Business and Society?

Size means scrutiny

Cutting costs raises compliance risk

Strategy mush involve society

Reducing risks means building trust

Satisfying shareholders means satisfying stakeholders

New Compact Between Business and Society?

Global growth requires global gains

Productivity requires sustainability

Differentiation relies on reputation

Good governance needs good representation

Summary

Globalization

Scenario Analysis

Business Society Concept

“There are forces at work which no company can control”