18th November - 24th November, Globalisation and International Trade

Trading Internationally is nothing new, it is been happening since hundreds of years, just differently, people had to travel long distances on animals such as camels, and communication was very limited, never have been International trade has been to such level to it is today. International trade is possible through alot of ways, one way is outsourcing, it is taking part of your business to abroad, mainly it is in manufacturing for example Adidas, a German company has moved it production to different parts of Asia. Importing and exporting is another example of trading internationally, while giving out franchisees to other part of the world like Hardees just opened their franchise in Lahore,Pakistan, is also a part of international trading. A joint venture, that is a contract between two companies from different regions is also a way to do business internationally, moreover, one of the most ways to trade internationally is buying things online, from websites like Ebay, Amazon, Taobao, etc.

We can use PESTLE's tool to international trade to consider the aspects of trading internationally. Firstly, political factor of the country where we plan to trade is very important, it is always a threat to operate in a politically unstable country, which has high corruption level and alot of risk is involved. Economic factors are always a plus point according to the theory of absolute advantage, do what your country is good at, with other parts of the world like in Pakistan, there are lots of fishes, so selling in places where their is no assess to fishes would be a great target. Also, thinking about the culture you are planning to trade in, for instance, if you try to sell something which is off against hindu interest, you can never sell that in India as it is a Hindu majority populated country,so you must know that what you are willing to trade is accepted culturally. Technology is also very important, you can question yourself, does it have a port? good roads? port? do they have a good internet service?. Also, legally whether the laws support you, or they restrict you from trading, for instance, the European union, it is a trading bloc, where there is no tariff or taxes imposed for trading goods and also, like in Saudi Arabia, you cannot sell alcohol easily, you need lots of formality and procedures. Lastly, environmental, it is mainly about natural resources, do they have the needed resources available? 

So PESTLE helps us in finding the context, the external factors which might affect the organization.

Globalisation is the movement of domestics and national markets to international level, in simple words it is nothing but an increase in international integration making this world a global village. Some of the factors that leads the world to globalisation is advancement in communication, that is, it is easy to be in contact with the whole world, doesn't matter where you are. Internet, which has opened the boundaries, we can trade on it, communicate on it and advertise on it, in the whole world within seconds, Easy and quick travel methods and reduction in barriers to enter new places, a British passport holder can enter 173 countries in the world without a visa or a on arrival visa and also, Saturated markets forces business to move to different markets, where the cost of production is lower. 

There are alot of advantages of globalisation, for instance, Adidas opening their factory in Pakistan, would benefit by having all the raw material available, decreasing their production cost like cheaper labour would be available, while a huge capital would be invested for Pakistan, which will be good for their economy, employment would be created also too for example. Also, saturation is stopped, for example, China is overpopulated, so the people can move to less populated places, like Canada and Australia. Also, Trade barriers getting lesser means that lesser formalities to trade, imports and exports can be made easily and cheaper. Furthermore, it provides incentive for countries to specialize and gain advantages of it, like Hawaii in America has a very good tourist industry which attracts people internationally.

Globalisation just doesn't have advantages, it has alot of disadvantages too, most importantly, globalisation is a threat to small businesses, as bigger companies may benefit from economies of scale and lower cost, while the smaller businesses struggle with cost. Also, it is not always good for the country, maybe the host country may send all the profits to the parent country. Also one of the major disadvantages is, if one country goes into recession, the affect is faced by other countries too, like because of the recession which struck America in 2008, alot of asian countries also got into recession, like UAE and also, in alot of countries in Africa, using child labour is very common, so the bigger companies setup because they could benefit from the advantages of using child labour for their production which is very unethical. Also, because of globalisation, alot of people, whose interest conflicts with globalisation starts to protest, which causes instability. Moreover, the natural resources of other countries might be exploited by an International company and lastly globalisation leads to technological poverty, for example, even today, only 1/100 people have acess to the internet in Africa. Also,the diagram below shows how the rich becomes richer while the poor suffers.

11th November - 18th November, Organisational Strategies

One of the main focus of our week was Strategies. Different people have different opinion about this word strategy, for example Mintzberg think it is a pattern in stream of decisions while Chandler thinks it is the determination of the long run goals and objectives of an enterprise and the adaptation of courses of action and the allocation of resources necessary for carrying out these goals. There are three levels of strategies, one of them is on corporate level, in which the decisions are the most important and and those decisions which are taken by the head of the organization, usually directors, it is the overall scope of the organization. The second level is business level, where how will the individual business units will compete in the market is decided, these decisions are taken by the departmental managers, like marketing manager and the last level is the operational level, here the day to day decisions are decided, for example how will the organization deliver in terms of resources, people and process.

Moreover, there are two types of strategies, the one which are planned to achieve the future goals and aims of an organization are deliberate strategies, while some strategies are made automatically for instance by a certain consistent pattern, to tackle a problem or miss hap, they are not made intentionally, they are called emergent strategy, usually flexible organizations like Microsoft uses this kind of strategy alot.

Another important thing we came across was SWOT ANALYSIS, swot is an acronym for:

Strengths: These are the strengths of an organization, the uniqueness,the USP which differentiates one organization from another in other words, what is something that you have an advantage of over your competitors, like Brand loyalty for Apple is one of their major advantages, as their customers don't buy other products usually.

Weaknesses: The places where an organization needs to improve,the things they should avoid or what factors leads you to lose sales?

Opportunity: This is nothing but the potential opportunities a business might get, right decision making is required on the right time.

Threats: These are actually the disadvantages you can assume, for instance, developing in technology may change the market beyond an organization's ability to adapt.

The method of Swot analysis is simple, it is to take the information from the environmental analysis and separate it into internal (strengths and weakness) and external issues (opportunity and threats). Lets do a swot analysis on Samsung's mobile phone company on which we did our PESTLE too.

The Strength of Samsung could be its customer loyalty, innovation they bring with their technology, their unique design, low cost comparatively to other brands, like Apple, their share and ability to phenomenally market their product while the weaknesses could be its competitors, who have a big market share, again, like Apple, their profit margin is quite low, borrows their operating system(Android) and doesn't have their own system like Apple has and most importantly, Samsung has diversified into hundreds of products, so they can't focus only on smart phones. Samsung's main opportunity i believe is the growth in the Asian market, and the growth in the demand for smart phones, they can avail it by partner-shipping with one of the Indian smart phone company producers, as Indian market is going vast while the threats to Samsung is the price war between competitors, no matter how low they put their profit margin, the competitors follows the same rule, other organization coming up with innovative technology in the market and a huge technological market change. 

4th November - 11th November 2013, - PESTLE Analysis

Like Porter's Five forces, PESTLE is also a tool, the difference is that porter's tool help to look at the internal part of the organization, the micro-environment while PESTLE is used to look at the macro level, how the outside forces may effect an organization.

PESTLE STANDS FOR:

P: Political

E: Economic

S: Socio-Cultural

T: Technological

L: Legal
E: Environmental 

We cannot change the impact or influence of these factors on an organization, we can just evaluate or predict its effects and by doing that we can develop strategies that would counter the problems or the problems that could arise. Lets see how each of these factors would effect SAMSUNG (particularly smart phones).

Political factors are actually the government intervention in an economy, the tax rates, policies,trade restrictions, laws and also the political stability. An increase in taxes may want an organization to change its cost methods. Democratic Republic of Congo's political instability might affect Samsung as they are one of the major rare earth minerals provider as it is one of the important raw material for making smart phones. Also, a change in taxation policy for international businesses might affect Samsung too and Trade barriers too, such as you cannot trade from Saudi Arabia to Israel .

Economic factors are very important of a country, a country with high unemployment rate would buy lesser Samsung smart phones than a country who has a lesser unemployment rate, as more people are earning. Similar to this, is the inflation rate, if there is more inflation, the spending power of people would decrease, resulting in less spending on smart phones. 

Social factors include the cultural aspects, includes health conciousness, population growth, age distribution, career attitudes, etc. Strategies can be made and targets can be set, according to the culture, by questioning what is accepted and what is want or what is unaccepted and what is not? for example mini skirts would never sell in Saudi Arabia as their women are restricted to wear full clothes and not reveal skin. I believe more youngsters opt for smart phones than old aged people, so in a country where there is more old generation than young, might affect Samsung's sale.

Technological factors are very important for Samsung. Smart phones are all about technology, the latest innovation they come up and if they don't maintain their technological level, competitions might come up with better technology, such as APPLE and HTC, and take over their market share as they are offering something Samsung is not. so basically technological factors are innovations in technology that effects the industry. Check the pictures below to see the difference made in technological level in the last 20 years.

Legal in simple words mean law. The patents holded by Apples means, you cannot copyright their products, the technology they have come up with and how they have made their smart phone, so for samsung, they have to make their smartphone differently, also with different technology, else Apple can sue Samsung like they did in 2010 for copyright claims. So Legal in PESTLE means laws which might restrict a company or affect it, for instance, comsumer laws and health and safety laws.

Environmental factors means the influences and impacts of surroundings, such as weather or climate. These factors might impact alot on some industries, for example a frequently flooded area is always a disaster for farming industries. A natural disaster in one of the Samsung's producing hubs, might affect the whole of the Samsung smart phone industry.