Covers the "4 C" risk framework, PESTEL analysis and cross-cultural analysis.

1. Lecture 3
External & International Analysis
Lecturer: Dr. Preston Teeter
MGTS7301
Tools and Techniques
for Business Analysis

2. Course admin
1. Form simulation groups next week in class, absent
students will be randomly assigned to a group
2. Week of Sept. 23 will be an additional simulation
practice week (in groups, no formal lecture), entire
graded simulation after break
3. Monday class: holiday on October 7, class moved to
Friday 11 October, 3pm-6pm, same room.

3. Outline
• Risks of internationalisation
• Cross-cultural risk
• PESTEL analysis

4. RISKS OF
INTERNATIONALISATION

5. Risks of
internationalisation
In the mid to late 1990s, foreign investment poured
into Southeast Asia, particularly the economies of
Thailand, South Korea, Indonesia and the
Philippines. By 1997, however, a financial crisis
gripped this region, a crisis that raised fears of a
worldwide economic meltdown due to financial
contagion.
Watch video
And see the following reports…

6. Source: http://www.frbsf.org/economic-research/publications/economic-
letter/1998/august/what-caused-east-asia-financial-crisis/

7. Source:
https://www.newyorkfed.org/medialibrary/media/research/economists/pesenti/whatjapwor.pdf

8. Based on this information, and anything else you’ve
read previously, answer the following:
1. What categories or types of risk were involved in
the Asian financial crisis of 1997? Be specific
and use examples.
2. For each risk that you identified, what are one or
two ways in which companies can mitigate such
risks in the future, in Asia and elsewhere?
Risks of
internationalisation

13. Mitigating risks
• Cross-cultural risks
– Hiring local managers
– Investing in similar cultures
– Localise product/service
• Country risks
– Joint ventures
– Invest in ‘safe’ countries
– Portfolio approach
• Currency risks
– Options contracts/etc.
– Move products/not cash
– Portfolio approach
• Commercial risks
– Use referrals
– Learn from best practice
– Hiring local managers

14. Source: http://www.heritage.org/index/heatmap

15. • Efic – Finance for Australian Exporters
– https://www.efic.gov.au/resources-news/news-
events/latest-news/2017/april/four-risks-for-
exporters-and-how-to-overcome-them/
• World Bank Country Profiles
• IMF Country Information
Risks of
internationalisation

16. CROSS-CULTURAL RISK

17. Cross-cultural
risk
Wal-Mart was one of the most successful
corporations of the 1980s and 1990s. Part of their
success in these decades can be traced to a strong
corporate culture that energized staff and gave
customers a unique shopping experience.
See video 1
See video 2

18. Cross-cultural
risk
However, despite their success in the U.S., Wal-
Mart has encountered several difficulties in foreign
markets.
One such difficulty was in Germany, where
employees and customers found Wal-Mart’s culture
to be a little ‘different’.
See the following articles…

19. Source: https://www.theguardian.com/business/2006/jul/28/retail.money

20. Source: http://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html

21. In small groups, discuss the following:
1) Why do you think Wal-Mart failed in Germany? Did
culture play a part? If so, how? Use Hall’s cultural
typology and Hofstede’s cultural dimensions to
explain your answer.
2) Wal-Mart also experienced difficulties in countries
such as South Korea, India and China. Why do you
think that’s the case?
We will reconvene in 10 minutes to discuss as a class.
Cross-cultural
risk

22. Culture: System of values and norms that are
shared among a group of people and that when
taken together constitute a design for living.
– Values: abstract ideas about what a group believes
to be good, right, and desirable
– Norms: social rules and guidelines that prescribe
appropriate behavior in particular situations
Cross-cultural
risk

23. The Determinants of Culture
Culture
Religion
Political
orientation
Economic
orientation
Education
Social
norms and
values
Language

26. Wal-Mart
Culture/strategy
• Warm and friendly
• Loud and energetic
• Unique experience
• Large suburban stores
• “Everyday low prices”
• Selective best prices
• Low wages
Germany’s culture
• Down-to-business
• Calm and serious
• Efficient
• Buy locally/daily
• Very competitive
• Strict regulations
• Strong unions

27. Source: http://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html

28. Wal-Mart
E-Mart

29. Source: https://www.bloomberg.com/news/articles/2013-10-10/where-wal-mart-isnt-four-
countries-the-retailer-cant-conquer

30. Source: http://fortune.com/2016/02/21/why-walmart-stumbled-on-road-to-china/

31. PESTELANALYSIS

32. PESTEL analysis
Consider the case of the ‘Big Three’ US auto companies:
Ford, GM (General Motors) and Chrysler (now Fiat
Chrysler). These three companies dominated US and
global auto sales and market share for several decades, but
a myriad of issues forced all three companies to seek an
emergency bailout from the US government in 2008.
Watch video
And see the following articles…

33. Source: http://money.cnn.com/2008/11/17/news/companies/gm_fixes/index.htm

34. Source: http://money.cnn.com/2008/11/17/news/companies/gm_fixes/index.htm

35. PESTEL analysis
So what happened to the US auto industry?
1) What is PESTEL analysis? Please be specific
and give examples of each category.
2) What would a PESTEL analysis of the US auto
industry have looked like in the years before the
bailout? What factors should have been
identified as the most influential?

37. PESTEL analysis
• Tool used to analyse and monitor macro-
environmental factors that have an impact on
an organisation
– Understand and predict market growth and decline
– Informs strategic positioning (next class)
• Often used in conjunction with SWOT analysis
• Can be used for industries, companies,
departments, products, etc.

38. Source: https://www.cbsnews.com/news/the-big-three-arent-so-big-anymore/

39. Source: https://www.thebalance.com/auto-industry-bailout-gm-ford-chrysler-3305670

40. Mon – Quiz #3
1. True or False: Cultural differences were at the root of
the SE Asian crisis in 1997 and 1998.
2. Which of the following dimensions caused the biggest
problem for Wal-Mart in Germany? (choose one)
A. Power Distance
B. Masculinity
C. Individualism
3. Which element of PESTEL (choose one) was most
influential in the fall of the Big 3? Please explain why
in one or two sentences.

41. Questions?