ORGANIZATION AND ENVIRONMENT

Trouble at Amana

In 1967, Amana introduced the first microwave, and gained 60% of the market. A decade later, its market share declined to 6%. WHY?

Mis-forecast: microwave will SUBSTITUTE for traditional ways of cooking

Misunderstood the market: assumed that the market DOESN’T care about the price

Unprepared for new entrants: Low priced Japanese competitors

The Increase of Gas Price

Tesla Motors’s plan: Produce battery in Thái Lan, transport

to England to assembly, and sell the cars in US. But now, they produce battery in California.

GM: Past several years, SVU and mini-truck

were well sold in China. Now, people are looking for more economy cars.

How Gaz Price Affect Strategies

Reconsidering global strategy Global strategy suggests that firms can

make different components in different countries.

High gaz price means that transportation would be very expensive

Reconsiderting values of the product Gaz consumption becomes a crital factor

How Current Recession Affect Business

Falling stock and slumping dividends Credit impairment and bankruptcy Employee lay-offs and benefit cut Cut to quality Reduce consumer access

Small firms would be more vulnerable to the recession

Environment Factors

… are those that have impacts on the organizational performance but are not directly controlled by the organization

ENVIRONMENT AND STRATEGY

Economic

Political

Technological

Social

ORGANIZATIONAL PERFORMANCE

Global Demographic

Macroenvironment – PEST

Political• Government stability• Taxation policy• Foreign trade

regulations• Social welfare

policies• Legal framework

Economic• Business cycles• GNP trends• Interest rates• Money supply• Inflation• Unemployment• Disposable income

Political Factors: Example

Ranking On “Easy To Do Business”

Rank 155 countries Based on various indicators Surveys law firms/ organizations

Which indicators make up the ranking?

Starting a business• Procedures, time, cost and minimum capital to open a new

businessDealing with licenses• Procedures, time and cost of business inspections and

licensing (construction industry)Hiring and firing workers• Difficulty of hiring index, rigidity of hours of index, difficulty of

firing index, hiring cost and firing costRegistering property• Procedures, time and cost to register commercial real estateGetting credit• Strength of legal rights index, depth of credit information

index

Which indicators make up the ranking? (con.)

Protecting investors

• Indices on the extent of disclosure, extent of director liability and ease of shareholder suits

Paying taxes

• Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit

Trading across borders

• Number of documents, number of signatures and time necessary to export and import

Enforcing contracts

• Procedures, time and cost to enforce a debt contract

Closing a business

• Time and cost to close down a business, and recovery rate

IFC Rank Countries on “Easy to do Business”, 2005

20101. Singapore2. New Zeala3. Hong Kong4. U.S.A.12. Thailand15. Japan19. Korea23. Malaysia46. Taiwan89. China93. Vietnam122. Indonesia144. Philippines 145. Cambodia167. Laos

20141. Singapore 2. New Zealand3. Hong Kong5. Korea7. USA18. Malaysia19. Taiwan26. Thailand29. Japan78. Vietnam90. China95. Philippines 114. India135. Cambodia148. Laos

TI’s Ranking on Corruption 2014

2. New Zealand 100. China

7. Singapore 90. India

15. Japan 85. Philippines

17. Hong Kong 119. Vietnam

35. Taiwan 133. Indonesia

50. Malaysia 156. Cambodia

43. South Korea

85. Thailand

The Political Environment Map

Low corruption

High corruption

Easy

Difficult

NZSingapore

HKJapan

TaiwanMalaysia

SK

Thailand

China

India

Vietnam

IndonesiaPhilippines

Macroenvironment – PEST

Socio-cultural• Population demographics• Income distribution• Social mobility• Lifestyle changes• Attitudes to work and

leisure• Consumerism• Levels of education

Technological• Government spending on

research• Government and industry

focus on technological effort• New discoveries

/developments• Speed of technology

transfer• Rates of obsolescence

Figure 22. Forms of corruption, in terms of enterprises’ viewpoints, in last twelve months

17

2.2. Firms’ experiences

In HCM City and Can Tho, a big % of firms paid informal fees each year, and also many firms paid more than 2% of revenue

Some sign of decrease in corruption in HCMC and Dong Thap.

(Source: PCI)

3.2. Transparency: Negotiation with tax was still an important business practice

30 – 40% of firms in Can Tho and HCMC admitted negotiation with tax.

The number fluctuated greatly in Dong Thap

Some sign of improvement in Can Tho 2008 – 2011

Video: Fake Products in China What impacts do counterfeiting products

have on: a) Chinese economy (short and long term)? b) Real products (Chinese and other countries”)? Consumers?

Why is it so hard to stop counterfeiting in China (using PEST model)?

What should managers (Chinese and foreign) do to protect their real products under this situation?