Transcript Changes in the global market place

Level 3
Business Studies
3.2 - AS91380
Demonstrate understanding of strategic
response to external factors by a business
that operates in a global context
Changes in the global market place
caused by recession, trends, natural disasters, was,
political unrest, internet and social networking
Students will understand the impact of changes in the
global marketplace on businesses including economic,
trends, natural disasters, political unrest or technology.
 Identify social, technological and political trends which
build and improve links between countries
 Explain the connection of global trends and
competition for local business
Changes in the global market environment
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The new millennium has been characterised by
profound changes in global demography, economic
integration, and technological advances.
There is little doubt that there has been a dramatic
shift in consumer attitudes and behaviours in recent
years, and that these changes have been brought to
the fore by recent global events.
The ability to effectively monitor global
developments can give businesses a key
strategic advantage as they help to
anticipate the coming trends in customer’s
needs and wants.
How will global events affect your business?
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Today, all of us are in a global market.
A global market does not mean that our end target
market is global.
However, since our products or services require a
global element somewhere in the business process,
then we are in a global market and we are affected,
impacted and even driven by global events.
http://outsourcemagazine.co.uk/how-will-globalevents-affect-your-business/
How will global events affect your business?
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Even the most local or regional businesses are
impacted by a global element.
Challenges from all around the world affect every
individual and every business, whether you’re a
business manager or a consumer.
http://outsourcemagazine.co.uk/how-will-globalevents-affect-your-business/
How will global events affect your business?
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All products or services require
some element of a global
requirement.
The financial markets of the
world can and will affect all of
us, as will other global
industries.
http://outsourcemagazine.co.uk/how
-will-global-events-affect-yourbusiness/
The Future
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The future looks uncertain and unstable.
Hurricane Sandy was a deadly reminder of shifting
climate patterns, emphasising the need for new ways to
manage the world’s resources and environment.
There are growing levels of social unrest over rising
inequality, austerity, unemployment, political
ineptitude, institutional failure and more.
And companies will continue to fail because they
misread the future - like Kodak, which invented the
digital camera but filed for bankruptcy after focusing on
its core film business instead.
Changes in the Global Market Place
1.
Economic: eg 2008 financial meltdown/collapse
throughout the world leading to a general world wide
recession
2.
Trends: aging population in developed world, resource
depletion, i world, emerging markets such as India
3.
Natural Disasters:
Christchurch Earthquake,
Japan Tsunami, Queensland
Floods and NZ Drought
Changes in the Global Market Place
4.
5.
6.
War – eg Middle East, Syria, North Korean threats
Political Unrest – Greece, Spain
Internet and Social Networking – includes ultrafast broadband using media such as Internet and
mobile computing technologies which provide
organisations, groups and individuals a platform to
communicate in an interactive environment eg skype,
facebook, twitter
How will global events affect your business?
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At the simplest level, a prime example is the price of oil, which
affects us all in daily travel, home comfort (home energy), food
production and delivery, consumable production and delivery, etc.
As a business, it affects us in similar ways; affecting labour, overall
production or operations, utilities (power, heat and air, brick and
mortar, lights), equipment access and utilisation, transportation
(receiving and shipping), taxes, supply chain (material access and
others), production timing and much more.
http://outsourcemagazine.co.uk/how-will-global-events-affect-your-business/
Political - Governments
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Governments hold much sway over the free markets.
Fiscal and monetary policy have a profound effect on
the financial marketplace.
By increasing and decreasing interest rates the
government and Reserve Bank can effectively slow or
attempt to speed up growth within the country. This is
called monetary policy.
If government spending increases or contracts, this is
known as fiscal policy, and can be used to help ease
unemployment and/or stabilize prices.
By altering interest rates and the amount of dollars
available on the open market, governments can change
how much investment flows into and out of the
country.
http://www.investopedia.com/articles/trading/
09/what-factors-create-trends.asp
Example: Currency war a dangerous game
NZ Herald February 18th 2013
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Printing money creates inflation and damages economies.
Countries do it when feel they have no options left or, as we
saw in 2008, when they are on the brink of catastrophe. And
they should be doing it to stimulate their domestic economy
by freeing up capital. They shouldn't be doing it specifically to
drive down their currency. That is the path to trade war.
Japan is particularly desperate having been economically
stalled for far longer than the five post-GFC years that have
killed growth in the rest of the developed world.
It seems unfair to single them out given the vast scale of
quantitative easing in the US and Europe - and China's state
control of its currency.
http://www.nzherald.co.nz/business/news/a
rticle.cfm?c_id=3&objectid=10865983
Economic - example
Years 2007 - 2009:
The Global Recession and the Collapse of Wall Street
 In September of 2008, a seemingly perfect storm of
factors came together to precipice the deepest
economic downturn in not only the U.S., but across the
globe, since the Great Depression.
 The great investment banks that had stood on Wall
Street began to collapse due to the sub-prime mortgage
crisis and serious corporate fraud. During the last
months of the Bush Administration, the federal
government stepped in to bail out some of these
institutions in order to keep the U.S. financial system
afloat.
http://bizfinance.about.com/od/currentevents/tp/Top_Ten_Fin_Events_De
cade.htm
Economic Changes - example
Year 2002: Stock Market Crash of 2002
 After a brief slide post 9/11, the stock market rallied,
but began to slide again in March 2002.
 The market reached lows not seen since 1997 and
1998 by July and September of 2002.
 The corporate fraud scandals, such as Enron, along
with 9/11, were contributors to this loss of investor
confidence in the stock market.
http://bizfinance.about.com/od/curr
entevents/tp/Top_Ten_Fin_Events
_Decade.htm
Economic Changes - example
Year 2005 - The Growth of China and India as World
Financial Powers
 The rise of China and India as world financial powers
is nothing short of amazing.
 Economists estimate that both nations can grow at
the rate of 7-8% for decades to come.
 China, alone, has grow at
about 9.6% for the past two
decades. Together, the two
countries account for
one-third of the world's
population. http://bizfinance.about.com/od/curr
entevents/tp/Top_Ten_Fin_Events
_Decade.htm
.
Economic - Recession
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The European Commission has
predicted in its bleakest report
to date that the EU economy
as a whole shrank by 4% in
2009.
The International Labour
Organisation estimated that as
many as 51 million jobs
worldwide were lost in
2009/10 because of the global
economic crisis.
Impact of Natural Disasters
 Impacts
in terms of operational factors:
- Disrupts work
- Some infrastructure / systems may partially or fully
unavailable to access
- Delays may occur
 Public
Relations:
- Unhappy customers
- Company's reputation
may be affected
- Lack of trust
Impact of Natural Disasters
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Financial Impacts:
- Costly repairs
- Costly planning on prevention of similar future
problems/disasters
- Losses in revenue
- Loss of money through court costs
- Extra costs on marketing campaigns in order to
gain customer's trust
Christchurch Earthquake
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Christchurch's February earthquake
was the third most expensive in
history, says one of the world's
biggest reinsurers which has
calculated last year as the costliest in
history from natural disasters.
Swiss Re said economic losses due to
the Christchurch earthquakes in 2011
totalled US$18 billion (NZ$22b),
putting them third in cost behind
Japan's tsunami and the flooding in
Thailand.
http://www.stuff.co.nz/business/rebuildingchristchurch/6663626/February-quake-third-mostexpensive
Christchurch Earthquake
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Christchurch's February 22 and June 13 combined
were second largest behind the Japan tsunami for
insured losses of US$14b, ahead of Thailand's floods
where many fewer people are insured.
Insured losses do not include the full economic cost
of a catastrophic event as not everyone or every
business is insured
Read more: http://www.stuff.co.nz/business/rebuildingchristchurch/6663626/February-quake-third-most-expensive
Cost of earthquake strengthening
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After the September 2010 quake the council (CCC)
changed its policy on quake-prone buildings, lifting
the minimum seismic strength from 33 per cent of
the Building Act's new building standard (NBS) to a
target of 67 per cent.
Increasing the standard to 67 per cent of code was
estimated to cost $12 billion nationally over 15
years.
http://www.stuff.co.nz/national/christchurchearthquake/8267562/Tougher-earthquake-strengtheningoverruled
Natural Disasters – 2013 NZ Drought
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The big dry affecting large parts of the country could
cost the economy $1 billion dollars, the Government
has warned.
Read more….
http://www.stuff.co.nz/business/farming/8393529/Droughtcould-cost-economy-1b
Natural Disasters – 2013 NZ Drought
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Milk and meat prices are tipped to climb, and rural economies
are being hit hard, as the ripples of drought spread.
One bank economist expects milk prices to rise 20 per cent and
is not ruling out prices lifting to record highs. People could
soon be forking out $5.75 for a two-litre bottle of milk.
Federated Farmers president Bruce Wills said everyone would
feel the impact, and rural businesses, like fertiliser companies,
were reporting that the phones had gone dead.
"This will have a trickle-down effect on the entire economy, no
question. Everybody will wear this."
http://www.stuff.co.nz/national/8437392/Drought-tippedto-push-up-milk-and-red-meat-prices
Natural Disasters
Year 2005: Hurricanes Katrina and Rita
 On August 25, 2005, Hurricane Katrina hit the Gulf Coast of the
U.S. as a strong Category 3 or low Category 4 storm. It quickly
became the biggest natural disaster in U.S. history, almost
destroying New Orleans due to severe flooding.
 Hurricane Rita quickly followed Katrina only to make matters
worse.
 Between the two, more than $200 billion in damage was done.
400,000 jobs were lost and 275,000 homes were destroyed.
 Many of the jobs and homes were never to be recovered.
Hundreds of thousands of people were displaced and over 1,000
were killed and more are missing.
 The effect on oil and gasoline prices was long-lasting.
Case Study:
How Events Around the Globe Can Affect Your Business
Natural Events / Disasters
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Mary Schnack and Associates: below is a sample of Mary's second
blog post on It's Your Biz, powered by SBTV.com.
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I never expected the earthquake and tsunami in Japan
to affect my business. Too far away from my U.S. offices.
I never expected the tornado and its devastation in
Joplin, MO, to affect my business. Too far away from my
offices in Washington DC and Arizona.
I never expected a volcano going off in Iceland
to affect my business. Yes, I go to Iceland once
or twice a year to give seminars. But the
timing would have to be oh so precise....
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Case Study:
How Events Around the Globe Can Affect Your Business
Natural Events / Disasters
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Well, all three events DID affect my business. And in
vastly different ways.
1) My client, Acura of Glendale (CA), had to suspend
public relations (fortunately, only for two months) when
they weren't getting any new cars or financing deals to
promote. Why? Most Acuras that are sold in the U.S. are
actually made in the U.S. But there are some little parts
that are made in Japan. And without those
parts...there are no new cars.
Case Study:
How Events Around the Globe Can Affect Your Business
Natural Events / Disasters
2) Life Cube Inc. started talking to us about doing their
social media work about a month ago. Life Cube is a
quickly deployable, portable shelter that can be
enormously helpful in providing life-saving shelter and
supporting on-the-ground operations by aid workers.
But the day after the Joplin, MO, tornado, Life Cube called us and
said-start now! Here's the signed agreement and the check is in the
mail (and it really was). We dropped everything
and immediately set up their social media
accounts, started Tweeting and obtaining
significant "follows" for their accounts.
Case Study:
How Events Around the Globe Can Affect Your Business
Natural Events / Disasters
3) I was scheduled to go to Iceland to speak for the
European Women Inventors & Innovators Network
International Conference. But on May 21, three days
before my trip, the Grimsvotn volcano started erupting
and the Keflavik Airport outside of Reykjavik was closed.
The conference, expecting
more than 300 attendees from
throughout Europe, was
postponed until September.
Political Unrest - effects
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exports
production
transport
cost and availability of raw materials
energy
labour
duties and taxes
foreign investment
exchange rates
tourism
Political Unrest - example
Energy
 For example, 90 percent of the world’s oil
production is controlled by only seven sovereign
nations today.
 This monopolisation of control means that unrest in
these countries will likely drive up the price of gas
and other petroleum-related products
 This has the potential to affect all
businesses.
http://baltimoreguide.com/http:/baltimoreguide.com/4-ways-thatcurrent-world-events-affect-your-pocketbook/
http://viewswire.eiu.com/site_info.as
p?info_name=instability_map&page
=noads
New Technology
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The advent of new technologies (e.g. the internet and the
World Wide Web, mobile devices, digital TV) has opened
up business and marketing opportunities in the
development of innovative products and services, and the
creation of new values to consumers.
Innovations in communication
technologies have given birth to
social networking.
Real-time reviews of products and
services instantly affect businesses.
New Technology
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For instance, conventional marketing and targeting
techniques allow an organization to reach hundreds,
thousands, or even tens of thousands of potential
customers.
With a personal computer and a modem the organisation
can reach a community of millions at a fraction of the cost.
By 2012, eMarketer projects that
over 1.7 billion people worldwide
(24.5%) will access the internet
at least once per month.
Technology
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Technical knowledge today doubles about every two
years, and some predict that technical knowledge
may double every 72 hours in the next 3-5 years.
Internet
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The internet and new communications technologies
are revolutionising the way businesses are
conducted.
For instance, mobile technology is changing the way
businesses interface with customers, and the way
customers interface with one another.
In China, home to the world’s largest mobile
network, this is particularly true. ‘On New Year’s
Day, we had about 5 billion SMS New Year’s
greetings’, said the man who runs the network,
Wang Jianzhou, Chairman and Chief Executive,
China Mobile Communications Corporation
(www.chinamobile.com).
e-communication
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The phenomenon of the e-mail allows business partners from
all over the world to make huge decisions in no time.
Communication has become boundless.
Internet IS business. It is now marketed in such a way that
one thinks buying new products will improve his or her
efficiency.
For instance, the BlackBerry and iPhone Mobile Devices. The
Internet is no longer a privilege and advantage in the business
world but a necessity.
http://wiki.answers.com/Q/How_intern
et_affect_the_way_you_do_business
Smart mobility will change the way people
interact
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By 2014, more smart devices could be used to access the
internet than traditional computers. The move to an
increasingly mobile world will create new players and new
opportunities for a variety of industries.
We expect that new emerging market companies will be
significant competitors, growing rapidly in part because a lack
of legacy systems will enable them to profit more quickly
from new technology as it becomes available.
Emerging markets will create plenty of opportunities related
to smart technology, and they will not be limited to for-profit
enterprises
http://www.ey.com/GL/en/Issues/Businessenvironment/Six-global-trends-shaping-the-businessworld---Rapid-technology-innovation-creates-a-smart-mobile-world
Smart mobility: technology-enabled options
driving transformation
The power of the individual will spur innovation
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Google, Facebook, Twitter,
smartphones, tablets and e-readers
— technologies that originated in
the consumer space — are now
reshaping the way companies
communicate and collaborate with
employees, partners and customers.
Through the new possibilities for
"social listening," businesses are
able to better understand what their
customers and employees need and
want.
Advantages of using
Social Media in business
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Gives businesses the
ability to communicate
and gain feedback directly
with customers and
employees
Low cost marketing tool
to connect to customers
Can be used for recruiting
purposes
http://fds.oup.com/www.oup.com/pdf/13/97
80199609703_chapter1.pdf
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World business trends
Examples from New Zealand Trade and Enterprise:
 Benchmarking sustainability
 Benefiting from the clean technology revolution
 Understanding China’s business culture
 The economic impact of Eurozone debt
 China’s mobile and internet boom
 Getting social in the US market
 Fabrics of the future
 Doing business in the age of Twitter
 High-tech arrives at the farm gate
 Aquaculture floats to the top
Mega Trends
CSIRO (Commonwealth Science and Industrial Research Organisation )
The five interrelated megatrends identified in the report are:
1. More from less. This relates to the world’s depleting natural
resources and increasing demand for those resources through
economic and population growth. Coming decades will see a focus
on resource use efficiency.
2. A personal touch. Growth of the services sector of western
economies is being followed by a second wave of innovation
aimed at tailoring and targeting services.
http://www.csiro.au/Portals/Publications/
Research--Reports/Our-FutureWorld.aspx
Mega Trends
CSIRO (Commonwealth Science and Industrial Research Organisation )
Divergent demographics. The populations of OECD countries are
ageing and experiencing lifestyle and diet related health problems.
At the same time there are high fertility rates and problems of not
enough food for millions in poor countries.
4. On the move. People are changing jobs, careers and moving house
more often, commuting further to work and travelling around the
world more often.
5. i World. Computing power and memory storage
are improving rapidly. Many more devices are
getting connected to the internet.
3.
http://www.csiro.au/Portals/Publications/
Research--Reports/Our-FutureWorld.aspx
Change in Demographics
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With an increasing
percentage of the
population reaching
retirement the
spending patterns of
western countries is
changing.
Older people tend to
save more and spend
less.
Connection between global trends and
competition for business
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These global events and changes will impact all
businesses as well as demonstrate how a businesses
competitors are handling all of these changes.
These events and the impacts will change:
1. competitive ranking
2. company valuations
3. brand equity
4. overall company capabilities
5. as well as suddenly steer
companies in new or different
directions.
Connection between global trends and
competition for business
This can affect overall:
1. market trends,
2. buying patterns,
3. customer attrition and
retention and, ultimately,
4. overall company
performance and value.
http://outsourcemagazine.co.uk/how-willglobal-events-affect-your-business/