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The political environment of the early 1990s in Europe was
shaped by the fall of the iron curtain as the symbol of two fundamentally
different systems of ruling states (Academicviews, 2018). With a new Europe
underway, questions about the Eastern bloc’s political future arose, implying
changing markets and the restructuring of politics. The resulting German (re-)unification
had several implications related to the GDR’s collapse and its integration into
the country’s western part demanding a vast amount of cost the Germans were
facing (Parkes, 1993). Internationally, trust in the German state and its
industry was scarce with regard to its stability and its role, yet its
integration into Europe was highly desired (Sinn, 1996). In 1993, the signing
of the Maastricht Treaty as one of the first results of European efforts of
political unification and the completion of the single market agreement, which
included the free movement of goods, services, people and money (European
Union, 2017), paved the way for a future that in spite of the EU’s promising
efforts was uncertain. This uncertainty was illustrated by analyses that
condemned European policies of categorizing products in its single market, deeming
those originating from the Eastern bloc “sensitive” with unfavourable effects
on the respective import policies regarding among others steel and chemicals,
which for the industry could have been promising but were now subject to
“tariff quotas, import ceilings, “voluntary” restraints and anti-dumping
procedures” (Brittan, 1993).

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During this time the new US president George H. W. Bush
addressed these indicators of protectionism with regard to the farming sector, the
negotiations on the GATT and the World Trade Organization (Williams &
Barber, 1992). The ongoing discrepancies between the EC and the US were a
danger that in the eyes of many could lead to another rise of protectionism
which would put recent years’ accomplishments in Eastern Europe into jeopardy,
implying not only the resurrection of political tensions but also mass
migration from Eastern to Western Europe (Parkes, 1992). Thus, the general
political climate on both sides of the world (and also with regard to Japan)
was tense and characterized by a threat of protectionism (FTe, 1993) among the
most powerful actors. Scepticism was mainly rooted the development in the newly
acquired members of the EC.

 

Economics

Adding to the complications of a newly shaped Europe and the
threat of protectionism was the early 1990s recession with its main causes
lying in in lost consumer confidence following the gulf crisis, a generally
slow growth due to restrictive FED policies and investment related factors that
caused a downturn in GDP development (Walsh, 1993). The USA recovered faster
than expected, seeing an increase of 2,7% in output per hour in 1992 and thus
gains in corporate profits (Prowes, 1993). Real GDP rose by 3,8%, and
investments were pushed due to low interest rates (ibid). In contrast to that,
Europe still struggled with low consumer confidence and concerns regarding
investments in especially Germany (FT, 1993d) which was still battling the
ramifications of its reunification (Prowes, 1993). In Asia, Japan was battling
a financial crisis (ibid) which resulted in the excessive spending on goods of
earlier years coming to an end, also affecting European corporations the boom’s
beneficiaries (Burton, 1992). The recession was felt in all industries, and the
European car industry was no exception: sales dropped sharply (FT, 1993e) while
production costs kept ascending and Japanese competition was on its way to the
continent (Done, 1993a). Especially in Germany, production cost and corporation
tax were high, yet working hours were shorter compared to other economies
(ibid). The downturn in Europe was contrasted by rising numbers in car sales in
the USA following the speedy recovery as the 9% rise of durable goods orders
shows (Prowse, 1993). Thus, the momentum was characterized by the promising USA
and an uncertain Europe. Apart from the aforementioned factors, the American
South region blossomed as car manufacturers such as BMW were already set to
build plants in South Carolina (Dickson, 1993b). Having produced mainly for the
domestic market and in the low-tech segment, the region was undergoing a
transition towards high-tech and motor industry (FT, 1993b). Lower labour and
land costs (Myerson, 1996), skilled industrial workers (Bennett, 1993),
financial incentives given by new Governor Jim Folsom (FT, 1993g) and the
absence of a union (ibid) were all factors that made Alabama an especially
suited location for investments activities.

 

Sociocultural

The sociocultural environment of the 1990s was – much like
its economy – shaped by the new possibilities and challenges brought about by
the radical changes in politics that had taken place. The opening of the
Eastern bloc spawned sentiments of freedom among a society that had been living
in the communist system of the Soviet Union, and western Europeans were
witnessing what seemed to be the victory of the western system of capitalism
and democracy (Halligan, 2014), which lead to Francis Fukuyama coining his “end
of history” hypothesis, claiming that through the western world’s triumph, history’s
final stage had been reached (HIER ENTWEDER HALLIGAN ODER FUKUYAMA SELBST).

Especially in the USA, the 1990s are nowadays considered an
era of prosperity and relief about the collapse of Communism and the thus
averted crisis that had been feared during the cold war (Andersen, 2015), and
US pop culture could be seen emulated everywhere (Vick, 1993). However, not all
the USA were considered “trending” with regard to the country’s southern states
such as Alabama, which was still battling the image of an underdeveloped
“Redneck” region with little to no education (FT, 1993g). Making the transition
to being perceived as a potent industrial reason was therefore a central
concern for the state as the aforementioned incentives for industrial
investment illustrate.

Moreover, the international appreciation of German
engineering has to be regarded: “German craftsmanship” (Bennett, 1993) has
always been a measure of quality (ibid), with German cars being depicted as
“wonders of technology” (The Economist, 19931).

 

Technological

A topic that surged in the early 1990s was the development
of electric cars. Having disappeared after a gain in popularity during the
1970s oil crisis, the issue of sustainable fuels was being brought up again in
the context of for example the California Air Resources Board (The Economist,
1992a2).

There were considerable advances in communication
technology, with the rise of the internet as a new form of data storage (The
Economist, 19903)
and, shortly after, the world wide web (The Economist, 19924)
as a communication facilitator.

Furthermore, advances in the development of navigation
systems were made, and car manufacturers in the USA (GM) and Japan were pushing
towards their integration. These navigation systems were not only investigated
by the abovementioned, but also by space and defence corporations in the such
as TRW in the USA or Robert Bosch in Germany (The Economist, 19935).
Having moved their main operations to the automotive industry, TRW played a
leading role in the development of passenger security technologies, developing
sophisticated airbag systems, which at first were only commonplace in the USA
(ibid).  

 

CHINA

Politics

The central political issues of 2014 in Europe were
characterized by the humanitarian crisis in the Middle East, the conflict
between Russia and the Ukraine and the lingering ramifications of a eurocrisis
that had weakened the continent and especially its southern parts. As one of
the less damaged countries in the Eurozone, Germany was broadly considered in
the leading role of helping the continent overcome these issues (Miller Llana,
20136).
This task proved to be rather complex as adding to the already existing
problems came tensions between EU members, mainly consisting of the southern
member countries seeing Germany as the cause of their problems (ibid).

The intraeuropean tensions were accompanied by the already
mentioned Russian-Ukrainian conflict, the Middle East issues and the NSA affair
which had found its starting point in the leaks of former agent Edward Snowden
and created an atmosphere of caution. The economic ramifications of past events
did their part in spawning protectionist measures (Donnan, 20147).
These were found to be at a record level, yet in different shapes. Investigations
regarding dumping (ibid) or debates about state subsidies in which China as a
state with a history of complex systems of state owned enterprises (SOEs)
played a key role (Beattie, 20128).
With his election to the country’s president in 2013, Xi Jinping introduced
various reforms aimed at China’s future competitiveness. The measures taken
were for example anti-corruption campaigns, the liberalisation of the hukou
system9,
improvements in social safety and the redesign of the market which was aimed at
creating more favourable conditions for private companies (Zoellick, 2014). These
measures represented a quite complicated aim: Transforming China’s
authoritarian system that had mostly relied on state regulated market tools
into a liberalized market (Morrison; DPA, 2014).

 

Economic

With the rest of the world shaken by the financial crisis of
2008 and the resulting economic downturn, the countries that are known as the
BRICS10
came out of the crisis less wounded than their counterparts in Europe and the
USA (Flanders, 201111).
They were redefined in 2013, when at the 5th BRICS summit the
conglomerate agreed upon an establishment of a bank of their own (Wagstyl, 201312).
It was stated that it was not planned as a counterweight to the World Bank, with
its priorities lying on sustainable development of their infrastructure and the
helping in projects (ibid). However, the consent sent a clear message to the
corporate world: after the crisis, the World Bank and IMF were battling
accusations of being outdated (England, 201313),
and the global economic omphalos was being shifted. Eventually, the New
Development Bank was created in 2014 with a contingent reserve arrangement of
$100bn (Pilling, 201414).
The lion’s share of this CRA was contributed by China as the by far most
powerful of the BRICSGRAFIK.

It seems redundant to mention China’s predominant role as
the single biggest economic potential in global business, which is why
considerations concerning its impressive development in the recent past shall
be substituted for the GRAFIK. Furthermore, the obvious arguments for China as
a manufacturing location due to the cheap labour available (Hamilton &
Webster) will not be explicitly explained. Nonetheless, it shall be posited
that the cheap labour argument has become weaker in the light of increasing
average wages in the years around 2014 (The Economist, 201215).

The country was not entirely unaffected of the crisis as its
economy’s growth had been based on an export-oriented model which in the years
before had caused the immense growth rates (Morrison). With the implications
regarding China’s spot as the number one consumer of oil, steel, copper and
aluminium (Hamilton & Webster), a spiral was created which pointed to the
unsustainability of the model (Morrison). Therefore, the Chinese industry’s
saviour would be a transformation which would manifest its rank as the prime
economic power with the ability of not only attracting manufacturing related FDI,
but also creating an attractive domestic market. This development was
illustrated by manufacturers being drawn to economies where wages were still at
low levels, yet the long-term FDIs manifested China at the top of global
business (Wagstyl, 201316).
Therefore, the pulling out of export manufacturers could be seen as an
indicator of a general shift away from export and towards long-term, domestic
market oriented endeavours.

 

Sociocultural

On a sociocultural level, the years after the crisis were
characterized by the changes in wealth distributions and the levels of
unemployment that skyrocketed immediately after the crash GRAFIK.

In China, however, unemployment rates stayed comparatively
low GRAFIK and the growth of the middle class continued, as especially in
Beijing and the coastal area “the well-to-do residents of those cities can now
afford to buy imported luxury goods, such as Mercedes” (Hamilton & Webster,
Jahr, p. 39). Ongoing industrialization and urbanization17
have caused the population to adapt western values and expectations with the
population’s increasing wealth leading to increasing consumerism as can be seen
in rising car sales (Morrison).

These tendencies clashed with another central concern of
society at the time, as the calls for sustainable energies became louder, also
relating to issues of air pollution which especially in China had led to social
tensions and fears of political instability (ibid). The level of pollution in
China had been reached during the time of its aggressive growth when
environmental restrictions were practically non-existant (The Guardian, 201418)
which had been one of the reasons manufacturers were choosing it as plant
location (Hamilton, Webster). This issue shall be revisited in the next
section, where developments in the technology sector shall be examined.

 

Technology

With the public calls for alternative energies and growing
sales numbers of electric vehicles, technological advances were mostly aimed at
the design of eco-friendly vehicles for the mass markets which by now had been
made easier due to changes in government policies concerning electric or hybrid
vehicles (Mitchell, 201419).
Their market was growing, with more and more manufacturers following the
examples of the Japanese and the Americans (Foy & Bryant, 201320).

Another revolutionary approach regarding information
technology integrated into cars were the initial ideas of self-driving vehicles
that validated once again how the importance of computers had grown over the
years (Bryant, 201321).
An interesting development in the ADAS market is the position in which car
manufacturers find themselves, being second to suppliers of the relevant
software who have made their entrance into the vehicle business (Bryant &
Sharman, 2013). Next to Google, corporations like TRW (who by the time had
become part of ZF Friedrichshafen) were on the rise to becoming serious
competition. Along the lines of rapid technology development, expenditures for
technological innovation shall not be forgotten, as especially China invested
heavily in its educational and R&D structure, breeding a highly skilled
workforce that could provide new solutions to question of sustainable energy
engineering and technological innovation (Morrison). This was followed by the
actual shift of FDI, as manufacturers discovered the pool of highly skilled
human resources in the BRICs (Hamilton & Webster) which would accelerate
China’s shift to a technology think tank. HIER GRAFIK? S. 318

 

How has the international business environment changed?

Within the course of 21 years, the global business
environment has fundamentally changed. Yet, the PEST analyses do show
similarities between the environments of the early 1990s and the late 2000s and
early 2010s.

On the political level, both moments in time were
characterized by uncertainties. With the fall of the iron curtain, an era
started in Europe that was both promising and ambiguous at the same time. With the
collapse of one of the two big systems in the world at the time, it was yet to
be seen how the newly formed states would be integrated into the EC. At the
centre of this question was Germany that had all of a sudden gained a
substantial land mass and faced the challenges of merging two societies that were
inherently different. The fall of the Soviet Union was accompanied by a
recession that was also taking its toll, and fears and accusations of
protectionism were circulating. The year 2014 and the ones leading up to it saw
the disputes between Russia and the Ukraine, both countries that in the Soviet
Era had been part of the communist system. The EU was again shaken by a crisis,
yet this time Germany’s role was very different: being the centre of
uncertainty and doubt in the early 1990s, it was now trusted with

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