We live in a highly interconnected global community. Two of the dominant features of this context are that many of the best opportunities for profits lie beyond the boundaries of a firm's home country and that there are increased pressures for firms to act in ways that outsiders view as ethical. In essence, globalization and business ethics provide a context within which the strategic management process takes place.
The first section of the chapter addressed the factors that determine a nation's competitiveness in a particular industry. The framework was developed by Professor Michael Porter. He identified four dimensions—factor conditions, demand characteristics, related and supporting industries, and firm strategy, structure, and rivalry—that collectively shape the competitive process in the international arena.
Next, we discussed the potential benefits and risks associated with a firm's overseas expansion efforts. The benefits include increasing the size of a firm's customer base, achieving economies of scale, extending a product's life cycle, and optimizing the location of activities within a firm's value chain. Key potential pitfalls include political and economic risks, currency risks, and management risks. We also addressed some of the challenges and opportunities associated with offshoring and outsourcing.
We then turned our attention to business ethics. We began this section by introducing the concepts of corporate governance and stakeholder management. Governance refers to efforts by a firm's owners to ensure that executives act appropriately in their role as leaders of the firm. Stakeholders are groups such as owners, customers, suppliers, employees, and society at large for whom the firm is important. Successful firms go beyond an overriding focus on just satisfying owners. Instead, they recognize the inherent conflicts among stakeholders' interests and work to develop "symbiosis"—that is, interdependence and mutual benefit—among them.
In the final section, we noted that executives must also recognize the need to act in a socially responsible manner. They also should address issues related to environmental sustainability in their strategic actions. Overall, globalization and business ethics must be taken into account throughout the strategic management process.
