The International Business Environment: Challenges and Changes

375 Pages·2010·7.577 MB·English

by  Jamie Weatherston

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CVR_WEAT5664_02_SE_CVR.indd 1 15/7/10 16:18:59
THE INTERNATIONAL
BUSINESS ENVIRONMENT
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Second edition
THE INTERNATIONAL
BUSINESS ENVIRONMENT
CHALLENGES AND CHANGES
Ian Brooks, Jamie Weatherston
and Graham Wilkinson
Pearson Education Limited
Edinburgh Gate
Harlow
Essex CM20 2JE
England
and Associated Companies throughout the world
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First published 2004
Second edition published 2011
© Pearson Education Limited 2004, 2011
The rights of Ian Brooks, Jamie Weatherston and Graham Wilkinson
to be identified as authors of this work have been asserted
by them in accordance with the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means, electronic, mechanical,
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Pearson Education is not responsible for the content of third party internet sites.
ISBN: 978-0-273-72566-4
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Brooks, Ian, 1956–
The international business environment : challenges and changes /
Ian Brooks, Jamie Weatherston and Graham Wilkinson. —2nd ed.
p. cm.
ISBN 978-0-273-72566-4 (pbk.)
1. International trade. 2. International finance. 3. International economic relations.
4. International business enterprises. I. Weatherston, Jamie. II. Wilkinson, Graham, MBA.
III. Title.
HF1379.B765 2010
658'.049—dc22 2010020300
10 9 8 7 6 5 4 3 2 1
15 14 13 12 11
Typeset in 10/12 pt and Minionby 75
Printed and bound by Graficas Estella, Navarra, Spain
Contents
Preface ix 2.5.2 Threat of entry 61
Gaided Tour xii 2.5.3 Threat of substitution 63
Maps xiv 2.5.4 Bargaining power of buyers and suppliers 64
Acknowledgement xxiv 2.6 Competitor analysis 65
2.7 Conclusion 66
1 The international business environment 1 Summary of main points 67
Learning outcomes 1 Discussion questions 68
Key concepts 1 Further reading/sources of information 68
1.1 Environmental forces 3 References 69
1.1.1 The international business environment: a
definition 3 3 The international economic environment 71
1.1.2 A classification of environmental forces 5 Learning outcomes 71
1.1.3 Environmental stakeholders 7 Key concepts 71
1.1.4 Geo-political scales 7 3.1 Introduction 72
1.1.5 The organisation–environment relationship 11 3.2 Measures of macroeconomic activity 73
1.2 A model of the business environment 13 3.3 The role of the state in the economy 75
1.2.1 Perceptual filters 14 3.3.1 Economic cycles 78
1.2.2 Dynamism and complexity 15 3.4 Macroeconomic goals 80
1.3 The organisation 16 3.4.1 Economic growth 81
1.3.1 Types of organisations 16 3.4.2 Inflation 86
1.4 Environmental forecasting 17 3.4.3 Employment 93
1.4.1 Forecasting in a dynamic and complex 3.4.4 International trade 95
environment 17 3.5 Exchange rate systems 105
1.4.2 An approach to forecasting 18 3.5.1 Fixed exchange rate 105
1.4.3 Forecasting techniques 19 3.5.2 Floating exchange rate 105
1.4.4 Impact analysis 22 3.5.3 The Bretton Woods System 106
1.5 Environmental analysis and strategic process 23 3.5.4 Current exchange rate systems 106
1.5.1 Strategy, structure and environmental 3.6 European integration 107
influence 23 3.6.1 The impact of the Single European Market 108
1.5.2 Strategic planning 25 3.6.2 Maastricht and beyond 109
1.6 Conclusion 27 3.6.3 The impact of EMU on government
Summary of main points 28 economic policy 109
Discussion questions 29 3.6.4 The impact of the European single currency
Further reading/sources of information 29 on business 110
References 30 3.6.5 Enlargement of the EU 111
3.7 Commodity prices 112
2 The competitive environment 32 3.8 Corporate social responsibility 114
Learning outcomes 32 3.9 Conclusion 115
Key concepts 32 Summary of main points 115
2.1 Introduction 34 Discussion questions 117
2.2 The traditional economic view 35 Further reading/sources of information 117
2.2.1 The command economy 35 References 118
2.2.2 The market economy and the price
mechanism 35 4 The technological environment 120
2.3 The market for goods and services 46 Learning outcomes 120
2.3.1 Monopoly 47 Key concepts 120
2.3.2 Oligopoly 50 4.1 Introduction 121
2.3.3 Monopolistic competition 54 4.2 Why is technology important? 122
2.3.4 Summary 55 4.2.1 What is technology? 122
2.4 Contestable markets 56 4.2.2 Technology and modern organisations 123
2.5 Structural analysis of competitive forces 56 4.3 Funding of research and development 124
2.5.1 Rivalry among competitors 59 4.3.1 National differences 124
vi Contents
4.3.2 Indicators of scientific and technological 5.5.6 Terrorism 184
progress 127 5.5.7 Education 184
4.3.3 Other indicators 128 5.5.8 Work trends 185
4.3.4 Sectoral differences 129 5.6 Conclusion 187
4.4 Some general technologies 131 Summary of main points 187
4.4.1 Information and communication technologies 131 Discussion questions 188
4.4.2 Advanced manufacturing technology 132 Further reading/sources of information 188
4.4.3 Supply chain management and just-in-time 134 References 189
4.4.4 Business use of the World Wide Web 135
4.4.5 Future technologies 136 6 The ecological environment 190
4.5 Technology and organisations 136 Learning outcomes 190
4.5.1 Technology and organisation structure 137 Key concepts 190
4.5.2 Technology and industry structure 140 6.1 Introduction 191
4.5.3 Technology, jobs and skills 140 6.2 The impact of the marketplace on the ecological
4.5.4 Technology and productivity 142 environment: an economic perspective 193
4.5.5 Technological change and job stress 143 6.2.1 The theory of demand 194
4.5.6 Teleworking and working from home 143 6.2.2 The theory of supply 197
4.6 Managing technology 145 6.2.3 Price determination 200
4.6.1 Technology development 145 6.3 Market forces and the environment 201
4.6.2 The organisation of research 6.3.1 Externalities 202
and development 146 6.3.2 Actions by companies which
4.7 Technological change and society 146 affect other companies 202
4.7.1 Ethical aspects of technological change 146 6.3.3 Actions by companies which
4.7.2 Workplace surveillance 148 affect individuals 203
4.7.3 Technology and safety 149 6.3.4 Actions by individuals which
4.7.4 Technological change and vulnerability 149 affect companies 203
4.7.5 Technology and waste 150 6.3.5 Actions by individuals which affect
4.8 Conclusion 151 other individuals 205
Summary of main points 151 6.3.6 Summary 205
Discussion questions 151 6.4 Measures available to limit externalities 206
Further reading/sources of information 152 6.4.1 Property rights 206
References 152 6.4.2 Market solutions 207
6.4.3 Tradeable permits 207
5 The international cultural, demographic 6.4.4 Regulation and legislation 208
and social environment 156 6.5 Government regulation at different
Learning outcomes 156 geo-political scales 209
Key concepts 156 6.5.1 Regulation at global level 209
5.1 Introduction 157 6.5.2 Regulation at regional level 212
5.2 The national cultural environment 158 6.5.3 Regulation at national level 213
5.2.1 Definitions of national culture 158 6.5.4 Regulation at local level 215
5.2.2 National culture and globalisation 159 6.6 Organisational agendas 215
5.2.3 Identifying differences in national culture 160 6.6.1 Corporate social responsibility 215
5.2.4 The impact of national culture on business 6.6.2 The environment and stakeholders 217
practices 164 6.6.3 The influence of stakeholder power 218
5.3 The demographic environment 167 6.6.4 Environmental options 220
5.3.1 Key drivers of population change 167 6.6.5 The importance of the organisation’s
5.3.2 Birth rate factors 168 environmental context 223
5.3.3 Death rate factors 169 6.6.6 Self-regulation 224
5.3.4 Migration factors 171 6.7 The position of the consumer 225
5.4 Patterns of population change 172 6.8 Conclusion 227
5.4.1 The impact of population growth 172 Summary of main points 228
5.4.2 The distribution of population 173 Discussion questions 228
5.4.3 Wider implications of population change 176 Further reading/sources of information 229
5.5 Social dynamics 178 References 229
5.5.1 The changing family 178
5.5.2 Changing lifestyles 180 7 The international political environment 232
5.5.3 Health 181 Learning outcomes 232
5.5.4 Smoking and alcohol 182 Key concepts 232
5.5.5 Crime 183 7.1 Introduction 234
Contents vii
7.2 The different geo-political levels 234 8.9 Employer relationships 286
7.2.1 Global scale 235 8.9.1 Health and safety 287
7.2.2 Regional scale 241 8.10 International law 288
7.2.3 National scale 245 8.10.1 Nationally legislated laws affecting
7.2.4 Local scale 247 international business 288
7.3 The nation state 247 8.10.2 Sanctions 289
7.3.1 Systems of government 247 8.10.3 Embargos 290
7.3.2 Functions of government 249 8.10.4 Extraterritoriality 290
7.4 The changing attitudes of governments 8.10.5 Nationalisation 292
and institutions 250 8.10.6 Expropriation 292
7.4.1 The role of government 250 8.11 International laws and treaties 293
7.4.2 Changing attitudes in the UK 251 8.11.1 International conventions 293
7.4.3 Regulation, deregulation, markets 8.12 Terrorism and security 297
and planning 254 8.12.1 Legal risks 298
7.5 The impact of governments and institutions 255 8.12.2 International dispute resolution 298
7.5.1 Political risk, stability and the attitudes 8.13 Conclusion 299
of policy-makers 256 Summary of main points 300
7.5.2 Global challenges – corruption, terrorism Discussion questions 301
and climate change 258 Further reading/sources of information 301
7.6 Conclusion 260 References 302
7.6.1 Change and stability, liberalisation and
privatisation 260 9 Globalisation, challenges and changes 306
Summary of main points 261 Learning outcomes 306
Discussion questions 263 Key concepts 306
Further reading/sources of information 263 9.1 Introduction 307
References 264 9.2 Globalisation 308
9.3 The consequences of globalisation 312
8 The legal environment 265 9.4 Changes in the international business
Learning outcomes 265 environment 314
Key concepts 265 9.5 The nature of the international business
8.1 Introduction 267 environment 315
8.2 The law 267 9.5.1 Implications for individuals and groups 316
8.2.1 The law and morality 268 9.5.2 Implications for organisations 319
8.2.2 The law and national boundaries 268 9.5.3 Implications for governments 320
8.2.3 National law 268 9.6 Flexible working 322
8.3 The English system of law 271 9.6.1 Forms of flexible of working 324
8.3.1 Courts in England and Wales 272 9.7 The public sector 328
8.4 European Union law 272 9.7.1 The changing scope of the
8.5 Business law 273 public sector 329
8.5.1 Forming a business entity 273 9.8 Future trends? 331
8.5.2 Contract law 276 9.9 Conclusion 333
8.5.3 Tort – Negligence and liability 276 Summary of main points 333
8.5.4 International business law 278 Discussion questions 334
8.6 Criminal law 278 Further reading/sources of information 334
8.7 Consumer protection 278 References 335
8.7.1 Competition law 281
8.8 Intellectual property rights (IPR) 283 Index 337

Preface
The first version ofthis book was published in 1997 under the title The Business Environment:
Challenges and Changes;a second edition followed in 2000.In 2004 the increasingly intercon-
nected, global nature of both business and the environment in which it operates was
recognised by many changes in the emphasis of the text; these were encapsulated in the
change of title to The International Business Environment.This new edition continues that
approach,but has been extensively rewritten and updated to reflect the increasingly turbulent
and internationalised setting in which modern businesses,of all sizes,now operate.Given
theimportance of the subject,a clear understanding of the theories and models outlined in
the text is valuable in itselffor a clearer understanding ofmodern business in undergraduate
and professional educational programmes.It also provides a fundamental building block for
the study of corporate strategy,a subject which is included at more advanced levels of the
business curriculum.
The overall structure of this edition remains the same as before,including both theory
and practical examples.This allows students to use theory as a framework,a tool,to better
analyse and understand the nature of the international business environment.However,
some changes have been made in response to requests and observations by readers.We have
broadened the international aspects of the book to give more examples from around the
world,rather than concentrating quite so heavily on European matters.Much attention has
been given to the development ofmaterial to do with global challenges and changes,partic-
ularly areas of recent concern such as global warming,terrorism,the financial crisis and
recession.The long cases at the end ofthe first edition were not widely liked.We have,there-
fore,deleted these in favour of including half a dozen minicases within each of the nine
chapters.These cases have been carefully selected to illustrate an array of organisational
types,operating environments and geographic locations from around the world.The struc-
ture ofthe book is explained and explored in Chapter 1,but we provide a briefoutline here.
Chapter 1sets the scene and delineates the scope of the book.In it we recognise that a
number of interrelated international environmental forces act upon a variety of types of
organisation.These forces are grouped under the acronym PESTLE C (for political,eco-
nomic,social,technological,legal,ecological and competitive),but form an interrelated and
complex whole.These environmental forces influence different types oforganisation in dif-
ferent ways and act at a number of geo-political scales. Additionally, the impact of
individual perception and organisational filters and the influence they have on the business
environment and forecasting is explored.The chapter concludes with a brief consideration
ofthe links between environmental analysis and business strategy.
Chapter 2seeks to identify the nature and complexity of the competitive environment.
We then try to determine how its dynamic nature and structure affects both the level of
competition that organisations may face and their future profitability.The increasingly
global nature ofcompetition in many industries is one key issue that is identified and exam-
ined,as we introduce some ofthe tools and models that organisations can use to understand
their own position and that of their competitors.As markets left to their own devices may
become anti-competitive,we examine the circumstances in which government intervention
may be necessary.We also examine the role that governments can play in providing support
for new,fledgling industries to allow them to grow and become competitive in the inter-
national arena.
In Chapter 3 we consider the changes in government priorities within the macroeco-
nomic environment in recent decades. The four main macroeconomic policy areas –
economic growth,inflation,employment and the balance of trade – are explored in some