PESTL Environment
GLOBALIZATION is characterized by networks of international linkages that bind countries, institutions, and people, in an interdependent economy (Deresky, 2021). INTERNATIONAL MANAGEMENT is the process of developing strategies, designing and operating systems, and working with people around the world to ensure sustained competitive advantage (Deresky, 2021).
The global Political, Economic, Sociocultural, Legal, and Technological, environment impacts leadership and management’s perspectives and decision-making. Risks must be carefully evaluated prior to decision-making for entry into markets or creation/revision of organizational strategies.
1. Define and explain the risks involved in the global political, economic, sociocultural, legal, and technological environments. There are several risks. List 3 risks for each of the 5 environments. In your discussion, provide EXAMPLES of risks linked to the chosen risks. CITE using in-text citations.
2. Specifically, what can managers/leaders do to manage/mitigate the risks you have chosen? CITE (in-text citations) or indicate that information is based on experiential knowledge.
Sample Solution
Risks in the Global Political, Economic, Sociocultural, Legal, and Technological Environments
Political Risks
- Political instability and unrest: This can lead to disruptions in business operations, supply chains, and distribution networks. It can also make it difficult to attract and retain qualified employees.
- Government corruption: This can lead to unfair business practices, increased costs, and legal problems.
- Changes in government policies and regulations: These changes can have a significant impact on business operations and profitability
Full Answer Section
Examples:- The war in Ukraine has caused political instability and unrest in the region, which has disrupted supply chains and made it difficult for businesses to operate.
- The Chinese government has been accused of corruption, which has made it difficult for foreign businesses to operate in China.
- The European Union has enacted a number of regulations that have impacted businesses, such as the General Data Protection Regulation (GDPR).
- Economic recession: This can lead to decreased demand for goods and services, which can hurt business revenue and profitability.
- Inflation: This can erode the value of profits and make it more difficult to budget for the future.
- Currency fluctuations: This can make it difficult to price goods and services and to hedge against risk.
- The global recession of 2008-2009 caused a significant decrease in demand for goods and services, which hurt businesses around the world.
- Inflation in the United States has reached a 40-year high, which is eroding the value of profits for businesses.
- The value of the British pound has fallen sharply since the UK voted to leave the European Union, which has made it more difficult for British businesses to export their goods and services.
- Cultural differences: These can lead to misunderstandings, communication problems, and cultural clashes.
- Changes in consumer preferences: These changes can make it difficult to market and sell products and services.
- Labor unrest: This can lead to strikes, protests, and other disruptions to business operations.
- The recent protests in China against the government's zero-COVID policy have disrupted business operations and supply chains.
- The changing demographics of the United States have made it more difficult for businesses to reach their target markets.
- The rise of social media has made it easier for consumers to organize protests and boycotts against businesses.
- Differences in legal systems: This can make it difficult to understand and comply with foreign laws and regulations.
- Intellectual property theft: This can lead to lost revenue and damage to a company's reputation.
- Product liability lawsuits: These lawsuits can be costly and time-consuming, and they can damage a company's reputation.
- The recent changes to China's data privacy laws have made it more difficult for foreign businesses to operate in China.
- The theft of trade secrets has cost American businesses billions of dollars in lost revenue.
- The recent product liability lawsuits against Johnson & Johnson over its talcum powder product have damaged the company's reputation.
- Cybersecurity attacks: These attacks can disrupt business operations, steal customer data, and damage a company's reputation.
- Technological obsolescence: This can make it difficult to compete with businesses that are using the latest technologies.
- Skills gaps: This can make it difficult to find and retain qualified employees with the necessary skills.
- The recent cybersecurity attack on Colonial Pipeline disrupted the supply of gasoline to the East Coast of the United States.
- The rapid pace of technological change is making it difficult for businesses to keep up with the latest technologies.
- The skills gap in the technology industry is making it difficult for businesses to find and retain qualified employees.
- Conduct thorough research and due diligence: Before entering a new market or launching a new product, it is important to conduct thorough research and due diligence to identify and assess the risks involved.
- Develop contingency plans: Contingency plans can help businesses to respond to unexpected events and minimize the impact of disruptions.
- Purchase insurance: Insurance can help businesses to mitigate the financial losses associated with risks such as product liability and cybersecurity attacks.
- Diversify operations: Diversifying operations can help businesses to reduce their exposure to any one risk.
- Build strong relationships: Building strong relationships with customers, suppliers, and government officials can help businesses to navigate the global marketplace and manage risks.