SBL in Real Life: Navigating the Impact of Technological Advancements and Government Policies in China on Global Competition
Strategy plays a big part in the SBL syllabus, and two critical elements that students need to consider are environmental analysis and strategic options. As the SBL exam is practical and business-focused, it is essential to consider how these tools can be applied in the Global market.
This article focuses on the recent news that China has partially banned the iPhone and successfully created a new processor. Both events have an impact on Global companies. We examine these changes from a PESTEL analysis perspective and focus on strategic options to address the changes.
Government policy USA ( Political environment)
In the fast-paced world of global business, the intersection of technology development and government policies can create seismic shifts in the competitive landscape. A prime example occurred on October 7, 2022, when the U.S. government imposed restrictions on the export of chips incorporating U.S. technology to a range of Chinese companies, including those engaged in military and surveillance technology.
The sanctions are part of a broader effort by the United States to slow China’s technological development and as seen as a way to protect American jobs in the semiconductor industry.
Innovation in China ( Technology environment)
Huawei, a global smartphone giant, defied these restrictions by unveiling its groundbreaking Kirin 9000s chip, which promises to reshape the industry. Crafted by Huawei’s semiconductor subsidiary, HiSilicon, this chip marked a milestone as the first to employ the cutting-edge 7-nanometer manufacturing process.
The U.S. sanctions had initially placed Huawei in a precarious position as it struggled to source chips from American suppliers. However, the Kirin 9000s chip has breathed new life into Huawei’s prospects, potentially allowing it to circumvent this challenge.
Government policy (China) Political environment
Recent reports suggest that the Chinese government is instructing government officials and state-owned enterprise employees to refrain from using iPhones. While the rationale remains unclear, speculations centre on national security and data privacy concerns. The Chinese government has a history of restricting its officials’ use of foreign technology.
In 2020, it banned the use of Zoom by government agencies, citing security concerns. And in 2021, it ordered government officials to stop using Microsoft’s Teams platform This iPhone ban could reverberate negatively through Apple’s financial statements and impact U.S. companies that supply components to Apple.
These developments spotlight the escalating tensions between the U.S. and China, casting a shadow over global companies, with continued ramifications anticipated.
Impact of Environmental Threats on Global Companies in the Sector:
· Apple: Apple’s stock prices plummeted by over 6% following the news of the iPhone ban in China, translating to an estimated revenue loss of up to $10 billion.
· TSMC: Taiwan’s semiconductor juggernaut, a critical supplier to Apple and other tech giants, saw its shares dip by more than 5% in response to the iPhone ban.
· Qualcomm: A U.S. chip manufacturer serving Huawei and other Chinese companies saw its shares fall by over 3% in the wake of Huawei’s chip revelation.
· Corning: The U.S.-based glass manufacturer of iPhones witnessed a more than 2% drop in its stock prices post the iPhone ban news.
· Intel: As a significant chip supplier to various companies, including Huawei, Intel’s shares dipped by more than 1% after Huawei’s chip announcement.
While the full extent of these developments remains uncertain, it is evident that they will exert a detrimental influence on numerous global corporations.
Beyond the specific cases outlined above, there are additional ways in which Global companies grapple with the consequences of Huawei’s chip breakthrough and the iPhone ban. These include the disruption of investment decisions due to heightened uncertainty and difficulties in attracting and retaining talent amidst concerns about job security amid escalating U.S.-China trade tensions.
Strategies for Adapting to Environmental Changes:
Global companies facing this shifting landscape must adopt strategies tailored to the evolving environment. The SBL exam highlights several frameworks that provide potential solutions, one of which is Ansoff’s Growth Matrix:
1. Penetration stategy:
Apple and Corning should reduce their dependence on the Chinese market by exploring alternative buyers for components, materials, and products in their domestic market.
2. Product Development:
Invest in research and development to create innovative technologies that surpass Huawei’s Kirin 9000 chips, through new chip designs or cost-effective manufacturing methods. This could give the current player a significant cost and quality advantage over China products.
3. Market Development:
Forge partnerships with countries not subject to the same trade restrictions as China, potentially expanding into new markets or collaborating with foreign companies. Lobby the U.S. government to seek resolutions in the U.S.-China trade dispute, including the possibility of a trade agreement to alleviate tensions.
In a world where technology and geopolitics are increasingly intertwined, global companies must navigate these challenges with adaptability and foresight to remain competitive internationally. In the SBL exam, you may need to analyse the environment and generate new strategies for a company, so always consider the impact of business change and how it can affect organisations.