Decision-Making in a Global Business

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  • 0:00 The Global Business…
  • 1:51 Proactive Decision-Making
  • 3:37 Reactive Decision-Making
  • 5:27 Lesson Summary
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Lesson Transcript
Instructor: Beth Loy

Dr. Loy has a Ph.D. in Resource Economics; master's degrees in economics, human resources, and safety; and has taught masters and doctorate level courses in statistics, research methods, economics, and management.

In this lesson, we explore decision-making in a global business environment, and look at executives as proactive or reactive. They can be aggressive with decision-making or stay passive with decision-making.

The Global Business Environment

A business that isn't global, isn't as competitive as it could be. With advances in technology, transportation, and communication, nearly every large business has the opportunity to be successful internationally. Working internationally means being available for different time zones, knowing other languages, understanding cultural norms, being familiar with offensive behavior, and acclimating to regional nuances.

A global environment is often uncertain, and to be successful internationally, decisions have to be made quickly, and each opportunity is a chance for success. Whether this opportunity is managed correctly is a different story. There are situations where proactive decision-making might work best and other times when a reactive strategy could be better.

It's important to understand that there are several additional variables that come into play when running an international business. Situations can change quickly because of a world crisis, political unrest, weather, technological and legislative changes, exchange rate fluctuations, and inflation. Keeping these possibilities in mind is important for choosing a decision-making strategy.

For example, say we are working for Whisker Bikes, a company that sells motorized bicycles. There's likely a large market available internationally. After all, motorized bicycles can be used in urban or rural environments, but would most likely be in great demand in geographical areas that have heavy traffic and parking problems. Before deciding how to proceed, either proactively or reactively, we need to figure out what level of international sales we want and where we can get them. This is an important step in our expansion process. We may want to start small and go with a reactive approach, or we can go big and dive right in with a proactive strategy. Let's explore both the proactive and reactive strategies for Whisker Bikes and analyze both paths.

Proactive Decision-Making

Proactive decision-making is a strategy where decisions are made before an event happens. Should a company choose to go this route, it will take a lot of time and investment to come up with different possible scenarios and solutions before they happen. But if there is a great deal of interest in your company globally, your decisions will already be made for you. You won't have to wait to make a decision. If a good opportunity arises quickly, you can take advantage of it.

Let's say Whisker Bikes chooses a proactive approach to going global. The company decides to brainstorm decisions ahead of time and discuss potential decisions should things arise. What happens if there is an excess demand for the newest model of powered bicycles? Whisker Bikes would have already worked through a proactive decision-making process. The steps of this process would look something like this:

  1. Foresee the problem. It's possible that there will be excess demand from Tokyo because of huge traffic and pollution problems there.
  2. Determine the alternatives. Options might include contingency contracts with suppliers that include a requirement to meet fluctuations in demand.
  3. Evaluate the options. The options are to meet the demand or not meet it.
  4. Choose situational resolutions. Whisker Bikes might decide that not meeting demand quickly would hinder the company's growth plans. The company could decide to provide suppliers with contingency contracts that require them to increase their production should demand for Whisker Bike's products increase.
  5. Prepare for a changing landscape. Reviewing marketing, electronic, and growth analytics in real-time can help Whisker Bikes prepare for changes in demand as they are happening. It's important that the company give key personnel the tools to make good decisions when the time comes.

Now, let's look at how Whisker Bikes would approach this if using reactive decision-making.

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