Project 3 Content External Factors Affecting Business EthnicCultural

Project 3 Content

External Factors Affecting Business Ethnic/Cultural Political Globalization Laws Cultural Intelligence Regulatory Agencies Industry Associations Consumer Groups Taxes

External Factors Affecting Business Social Economic Changing Values & Attitudes Changing Family Roles Lifestyle & Fashion Trends Demographic Shifts Customer Spending Business Costs

External Factors Affecting Business Technological Looking for Updated Technology Meeting Customer Needs Competitive Increased Due to Globalization Staying Ahead of Rivals

Factors Driving Change in Business Globalization Consumer Demands Spending Trends Industry Structure Changes Growth of Service Businesses Shrinking Product Life Cycles

How Businesses Adopt to Change Flexibility Cultural Intelligence Strong Leadership Open-Mindedness Agility Cohesiveness

Environmental Scanning *Four Step process in which businesses: Gather Information about their surroundings Analyze that information Determine the future impact of that information

Environmental Scanning • It is EXTREMELY important to be aware of threats and knowing their potential impact because it helps a business with: • Strategic planning • Management decision making

Environmental Scanning • A business cannot control its external environment. • But, it can control its internal environment to meet upcoming threats and opportunities.

Environmental Scanning Internal environment: Finances Personnel Research and development Production Marketing

Environmental Scanning Categories of information to scan 1. Demographics: age, income, marital status 2. Society and culture: convenience (24 hour gyms, drive thru, etc. ), changing family roles (single parent homes, working mom’s, idea of what a family is) 3. The Economy: inflation, unemployment 4. Competition: brand competition (Nike vs. Adidas), substitute products (movie vs. bowling) 5. Government: minimum wage laws, environmental protection laws 6. Technology

Steps to conduct an Environmental Scan • Step one: Identify participants and responsibilities. • Step two: Carry out scanning activities. • Step three: Identify and analyze important issues and trends. • Step four: Report results or select issues and trends to act on.

ENVIRONMENTAL SCANNING ACTIVITY 1

Government’s Original Intentions ▪ Protect business property ▪ Enforce business contracts ▪ Settle business disagreements ▪ Set and collect taxes

Purposes of Government Involvement ▪ To conserve the environment ▪ To protect consumers and investors ▪ To protect competition ▪ To regulate workplace conditions ▪ To protect business property

How Government Regulates Business ▪ Regulatory laws • To prohibit, to control, to require ® • Constantly being created and revised ▪ Regulatory agencies • “Watchdogs”—make sure businesses are following laws • May impose fines or punishments

More Regulations ▪ Licensing ▪ Price/Wage controls businesses to function • Ceilings on prices and wages • Government may deny • Used only in times of crisis • Issuing permits to allow or cancel if necessary

Effects of Regulation ▪ Positive: • Protection • Access to resources • Patents, trademarks, copyrights • Clear rules to follow ▪ Negative: • Expensive • Inefficient

Costs of Regulation g r ve o G Bo t en m rn in w ro ▪ Taxes ▪ Borrowing • From the private sector • By issuing bonds

Government and Business ACTIVITY 2

Types of Trade • Domestic ➢ Producers and buyers are in the same country • Global ➢ Product is purchased in one country and consumed in another

Global Trade • Imports ➢ Products bought from producers in other countries • Exports ➢ Products that businesses sell to other countries

Benefits of Global Trade • Better variety and quantity of products • Improved standard of living in both countries

Benefits of Global Trade • Access to and availability of scarce resources • Lower prices due to increased competition

Benefits of Global Trade • Exchange of ideas and technology among countries • Enhanced relationships • Increased income for shipping and airline industries

Factors Affecting Global Trade • Technology • A nation’s bank account • Competition • Strength of currency • Government control and support

Trade Barriers • Tariffs • Quotas • Subsidies • Licenses • Product standards

GLOBAL TRADE ACTIVITY TIME FOR ACTIVITY 3

Understanding Ethics ▪ Ethics—the basic principles that govern your behavior ▪ Your personal code of ethics—guides you to make the right decisions, even in tough situations ▪ Business ethics—the basic principles that govern a business’s actions

Understanding Ethics ▪ A business’s code of ethics: ▪ Determines whether or not a certain action is acceptable for that business ▪ Especially if the consequences of that action might have a negative impact on: • Employees • Customers • The community

Understanding Ethics ▪ Businesses must create their own codes of ethics. ▪ Most industries also have general ethical codes for all related businesses to follow.

Understanding Ethics ▪ Not always the easiest task ▪ Business ethics and personal ethics may not mesh perfectly. • Different people within an organization may have different personal ethics. • Ethics are not always clear-cut to begin with.

Ethics and Law ▪ Not the same thing ▪ Think of them as overlapping circles: Ethics Law

Ethics and Law ▪ Actions that are legal but may not be ethical ▪ Example: • • A doctor’s office is not required by law to go “above and beyond” for a patient by trying several different treatments or recommending a specialist. However, most doctors would consider it unethical not to care for their patients to the utmost of their abilities.

Ethics and Law ▪ Example: • A TV production crew filming a reality show • If one of its subjects does something dangerous, such as driving drunk, the crew is not legally obligated to do anything about it. • But, is keeping silent in such an instance the ethical thing to do?

Ethics and Law ▪ Actions can be illegal but still considered ethical ▪ May be more difficult to think of these actions ▪ Often actions that individuals and companies approach with an “everybody does it—so it must be OK” attitude ▪ Example—exceeding the speed limit by one mile per hour ▪ Example—copying software onto multiple computers, even with only one license

Ethics Activity 3

What Is Globalization? • Globalization is the rapid and unimpeded flow of capital, labor, and ideas across national borders. • Result = various regions across the globe now have integrated societies, cultures, and economies.

What Is Globalization? • It has changed everything: • The way we think • The way we communicate • The way we travel • The way we live

Causes of Globalization The introduction of new technologies The Internet ▪ Main technological factor affecting globalization ▪ Connects people and businesses across the globe—fast ▪ Has changed the way businesses think and operate

Causes of Globalization Faster and more accessible modes of transportation Contributes to the spread of culture and ideas throughout the world Makes it easier to conduct business on an international level

Causes of Globalization Lessened political barriers between countries ▪ In past decades, there was no free flow of ideas and trade between certain regions and the rest of the globe.

Causes of Globalization Lessen political barriers between countries ▪ After the fall of communism in many countries, the lines of communication and financial exchange became open. ▪ The world is much more politically and economically open than it used to be.

Globalization: Advantages ▪ When businesses can enter new markets, they have greater opportunities to succeed and to make money. ▪ Even a small business now has the ability to sell its products all over the world.

Globalization: Advantages ▪ Businesses can also cut costs when they: • Have access to a greater variety of resources • Can move their operations to more affordable locations ▪ Free exchange of ideas contributes to greater business innovation as well.

Globalization: Advantages ▪ Globalization has brought advantages to consumers as well as businesses. • A bigger and better variety of product choices • As the world has gotten “smaller, ” our choices have become almost limitless.

Globalization: Disadvantages Fierce competition Keeps prices down for consumers but can make it difficult for some businesses to succeed

Globalization: Disadvantages Brain drain • Refers to a country or region losing its talented employees to other jobs overseas • They might leave because of instability or a lack of opportunities. • Developing nations have little hope of establishing strong economies without capable work forces.

Hofstede’s Dimensions of National Cultures ✓Power distance ✓Uncertainty avoidance ✓Individualism v. collectivism ✓Masculinity v. femininity ✓Long-term v. short-term orientation

Culture and Communication Verbal communication issues: • Different languages • Different cultural meanings for words Example Manana means “tomorrow” in Spanish. Tomorrow literally means “the next day” in non-Latino culture. In the Latino culture, “manana” often means “sometime in the near future. ”

Culture and Communication Nonverbal communication issues: • Different meanings of body language Example “Thumbs-up” in the U. S. and Canada is a positive thing. In Australia, however, it’s highly offensive.

Culture and Communication Nonverbal communication issues: • High-context cultures • Low-context cultures In Australia, however, it’s highly offensive.

Religion ▪ Impacts work hours, delivery schedules, product offerings, etc. ▪ More important in some cultures than others

Corruption ▪ Most common form— bribery ▪ Definition varies among cultures

Government Involvement ▪ May create international-trade laws: • Quotas • Tariffs • Price controls ▪ Different levels of security/customs procedures

Negotiating ▪ Culture influences: • • Styles Goals Attitudes Schedules

Globalization Activity 4