[SOUND] In most management business courses, we learn how to deal with market uncertainties. We've been told all the time that the market is uncertain, and that there are ways for us to adapt to it, or shape this market in order to deal with these uncertainties. Now, we know that the market is surrounded and determined by a larger political environment. There's somebody up there generating the rules, writing the laws, and having their own agendas regarding how they manage the political environment, how they compete with other political competitors, and so on. The political environment is as uncertain as the economic environment. And for firms operating globally, this is also something that needs to be analyzed, and for which firms need to develop strategies. What we're going to develop in this module is an understanding of what the uncertainties of the political environment are at the global level, and how firms can adapt or shape that environment. [MUSIC] What do firms operating globally require to develop a way to analyze a political environment? As I mentioned before, politics are uncertain, and during the last period of globalization, they have become even more uncertain. There are things like electoral surprises, in which countries like the United States, the United Kingdom, or certain places in Europe, in which political parties that are out of the mainstream, or candidates that are out of the mainstream, are winning in these elections. There's also some unintended consequences of globalization. For instance, we were to believe that the integration of cultures, closer contact between cultures, was going to create a more tolerant world. Now as we know, we've seen in the last decade and a half things like European born jihadists joining wars in the Middle East, that were recruited using these great technologies that were invented in these last couple of decades, that have been responsible for integrating the world economy, such as the Internet. So the development of the Internet actually has created channels for those who oppose globalization to get more strength. So there are unintended consequences of globalization, and the rise of movements that are not happy with the way the world has become more global. And there is another element, how we understand globalization. There are different interpretations of how we can become more global. Let's go back to the jihadists in several places of the world. They want to integrate countries, and they're a caliphate. So they want to actually destroy borders in between countries and integrate many countries. But this is not a way those proposing globalization in the 1990s were thinking about. So this is something that we also find in left wing movements in other parts of the world. The late president of Venezuela, Hugo Chavez, was proposing an integration of the southern economies to counterweigh the power of countries like the United States or the European Union. So, we find many new interpretations of globalization, and again, unintended consequences. So these are generating uncertainties that firms need to take into account. In our first lessons, we were talking about globalization as an integration of markets and integration of production. In the years of the second decade of the 21st century, there's been very strong political opposition to both types of integration, integration of markets and integration of production. Opposition to integration of markets is manifested with the rise of political parties that want to impose tariffs on goods imported from other countries into their own. And opposition to integration of production is manifested also politically speaking around ideas, that instead of locating production in a place in which it is more efficient or cheaper from your home country, you should locate production in your home country in order to generate jobs. So these ideas around what the integration of markets and production mean, of course, challenge some of the elements that we've been talking about before. We talked about the OLI Framework, or we talked about the Cage Analysis, or the Global Value Chain. All these were under the assumption that markets are integrated and tend to be more integrated. But whether they're integrated or more depends highly on political processes. Another consequence of globalization, besides the opposition to it, is that the rise of new economies, like India or China, have created a more multi-polar world. Until the 1970s and early 80s, the world was divided in two camps, countries allied to the United States, countries allied to the Soviet Union. With the collapse of Communism and the integration of economies, many new powers emerged. And they have their own agenda, and countries now have more choices when deciding who to ally with. I mean, should I go with the Russians? Should I go with the Chinese? Should I go with the Americans? These are now new choices that countries have, and these created more uncertainties in a way, because there are many different competing agendas between different countries of the world. So this is another unintended consequence of globalization. It's not just the US and the Soviet Union as it used to be before. Now the US, the winner of the Cold War, is facing many competitors at the regional levels. And these, of course, affect the way corporations operate, and their strategies. And some of these elements are the ones that we're going to study in this module. [MUSIC]
