ticsThe political environment of the early 1990s in Europe wasshaped by the fall of the iron curtain as the symbol of two fundamentallydifferent systems of ruling states (Academicviews, 2018). With a new Europeunderway, questions about the Eastern bloc’s political future arose, implyingchanging markets and the restructuring of politics. The resulting German (re-)unificationhad several implications related to the GDR’s collapse and its integration intothe country’s western part demanding a vast amount of cost the Germans werefacing (Parkes, 1993). Internationally, trust in the German state and itsindustry was scarce with regard to its stability and its role, yet itsintegration into Europe was highly desired (Sinn, 1996). In 1993, the signingof the Maastricht Treaty as one of the first results of European efforts ofpolitical unification and the completion of the single market agreement, whichincluded the free movement of goods, services, people and money (EuropeanUnion, 2017), paved the way for a future that in spite of the EU’s promisingefforts was uncertain.
This uncertainty was illustrated by analyses thatcondemned European policies of categorizing products in its single market, deemingthose originating from the Eastern bloc “sensitive” with unfavourable effectson 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-dumpingprocedures” (Brittan, 1993).During this time the new US president George H. W. Bushaddressed these indicators of protectionism with regard to the farming sector, thenegotiations on the GATT and the World Trade Organization (Williams &Barber, 1992).
The ongoing discrepancies between the EC and the US were adanger that in the eyes of many could lead to another rise of protectionismwhich would put recent years’ accomplishments in Eastern Europe into jeopardy,implying not only the resurrection of political tensions but also massmigration from Eastern to Western Europe (Parkes, 1992). Thus, the generalpolitical 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 themost powerful actors. Scepticism was mainly rooted the development in the newlyacquired members of the EC. Economics Adding to the complications of a newly shaped Europe and thethreat of protectionism was the early 1990s recession with its main causeslying in in lost consumer confidence following the gulf crisis, a generallyslow growth due to restrictive FED policies and investment related factors thatcaused a downturn in GDP development (Walsh, 1993). The USA recovered fasterthan expected, seeing an increase of 2,7% in output per hour in 1992 and thusgains in corporate profits (Prowes, 1993).
Real GDP rose by 3,8%, andinvestments were pushed due to low interest rates (ibid). In contrast to that,Europe still struggled with low consumer confidence and concerns regardinginvestments in especially Germany (FT, 1993d) which was still battling theramifications of its reunification (Prowes, 1993). In Asia, Japan was battlinga financial crisis (ibid) which resulted in the excessive spending on goods ofearlier years coming to an end, also affecting European corporations the boom’sbeneficiaries (Burton, 1992). The recession was felt in all industries, and theEuropean car industry was no exception: sales dropped sharply (FT, 1993e) whileproduction costs kept ascending and Japanese competition was on its way to thecontinent (Done, 1993a). Especially in Germany, production cost and corporationtax were high, yet working hours were shorter compared to other economies(ibid).
The downturn in Europe was contrasted by rising numbers in car sales inthe USA following the speedy recovery as the 9% rise of durable goods ordersshows (Prowse, 1993). Thus, the momentum was characterized by the promising USAand an uncertain Europe. Apart from the aforementioned factors, the AmericanSouth region blossomed as car manufacturers such as BMW were already set tobuild plants in South Carolina (Dickson, 1993b). Having produced mainly for thedomestic market and in the low-tech segment, the region was undergoing atransition towards high-tech and motor industry (FT, 1993b). Lower labour andland costs (Myerson, 1996), skilled industrial workers (Bennett, 1993),financial incentives given by new Governor Jim Folsom (FT, 1993g) and theabsence of a union (ibid) were all factors that made Alabama an especiallysuited location for investments activities. SocioculturalThe sociocultural environment of the 1990s was – much likeits economy – shaped by the new possibilities and challenges brought about bythe radical changes in politics that had taken place.
The opening of theEastern bloc spawned sentiments of freedom among a society that had been livingin the communist system of the Soviet Union, and western Europeans werewitnessing what seemed to be the victory of the western system of capitalismand democracy (Halligan, 2014), which lead to Francis Fukuyama coining his “endof history” hypothesis, claiming that through the western world’s triumph, history’sfinal stage had been reached (HIER ENTWEDER HALLIGAN ODER FUKUYAMA SELBST). Especially in the USA, the 1990s are nowadays considered anera of prosperity and relief about the collapse of Communism and the thusaverted crisis that had been feared during the cold war (Andersen, 2015), andUS pop culture could be seen emulated everywhere (Vick, 1993). However, not allthe USA were considered “trending” with regard to the country’s southern statessuch as Alabama, which was still battling the image of an underdeveloped”Redneck” region with little to no education (FT, 1993g).
Making the transitionto being perceived as a potent industrial reason was therefore a centralconcern for the state as the aforementioned incentives for industrialinvestment illustrate. Moreover, the international appreciation of Germanengineering has to be regarded: “German craftsmanship” (Bennett, 1993) hasalways been a measure of quality (ibid), with German cars being depicted as”wonders of technology” (The Economist, 19931). TechnologicalA topic that surged in the early 1990s was the developmentof electric cars. Having disappeared after a gain in popularity during the1970s oil crisis, the issue of sustainable fuels was being brought up again inthe context of for example the California Air Resources Board (The Economist,1992a2).There were considerable advances in communicationtechnology, with the rise of the internet as a new form of data storage (TheEconomist, 19903)and, shortly after, the world wide web (The Economist, 19924)as a communication facilitator.Furthermore, advances in the development of navigationsystems were made, and car manufacturers in the USA (GM) and Japan were pushingtowards their integration.
These navigation systems were not only investigatedby the abovementioned, but also by space and defence corporations in the suchas TRW in the USA or Robert Bosch in Germany (The Economist, 19935).Having moved their main operations to the automotive industry, TRW played aleading role in the development of passenger security technologies, developingsophisticated airbag systems, which at first were only commonplace in the USA(ibid). CHINAPoliticsThe central political issues of 2014 in Europe werecharacterized by the humanitarian crisis in the Middle East, the conflictbetween Russia and the Ukraine and the lingering ramifications of a eurocrisisthat had weakened the continent and especially its southern parts. As one ofthe less damaged countries in the Eurozone, Germany was broadly considered inthe leading role of helping the continent overcome these issues (Miller Llana,20136).
This task proved to be rather complex as adding to the already existingproblems came tensions between EU members, mainly consisting of the southernmember countries seeing Germany as the cause of their problems (ibid).The intraeuropean tensions were accompanied by the alreadymentioned Russian-Ukrainian conflict, the Middle East issues and the NSA affairwhich had found its starting point in the leaks of former agent Edward Snowdenand created an atmosphere of caution. The economic ramifications of past eventsdid their part in spawning protectionist measures (Donnan, 20147).These were found to be at a record level, yet in different shapes.
Investigationsregarding dumping (ibid) or debates about state subsidies in which China as astate 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 introducedvarious reforms aimed at China’s future competitiveness. The measures takenwere for example anti-corruption campaigns, the liberalisation of the hukousystem9,improvements in social safety and the redesign of the market which was aimed atcreating more favourable conditions for private companies (Zoellick, 2014). Thesemeasures represented a quite complicated aim: Transforming China’sauthoritarian system that had mostly relied on state regulated market toolsinto a liberalized market (Morrison; DPA, 2014). EconomicWith the rest of the world shaken by the financial crisis of2008 and the resulting economic downturn, the countries that are known as theBRICS10came out of the crisis less wounded than their counterparts in Europe and theUSA (Flanders, 201111).They were redefined in 2013, when at the 5th BRICS summit theconglomerate 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, withits priorities lying on sustainable development of their infrastructure and thehelping in projects (ibid).
However, the consent sent a clear message to thecorporate world: after the crisis, the World Bank and IMF were battlingaccusations of being outdated (England, 201313),and the global economic omphalos was being shifted. Eventually, the NewDevelopment 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 mostpowerful of the BRICSGRAFIK. It seems redundant to mention China’s predominant role asthe single biggest economic potential in global business, which is whyconsiderations concerning its impressive development in the recent past shallbe substituted for the GRAFIK. Furthermore, the obvious arguments for China asa manufacturing location due to the cheap labour available (Hamilton &Webster) will not be explicitly explained. Nonetheless, it shall be positedthat the cheap labour argument has become weaker in the light of increasingaverage wages in the years around 2014 (The Economist, 201215).The country was not entirely unaffected of the crisis as itseconomy’s growth had been based on an export-oriented model which in the yearsbefore had caused the immense growth rates (Morrison). With the implicationsregarding China’s spot as the number one consumer of oil, steel, copper andaluminium (Hamilton & Webster), a spiral was created which pointed to theunsustainability of the model (Morrison).
Therefore, the Chinese industry’ssaviour would be a transformation which would manifest its rank as the primeeconomic power with the ability of not only attracting manufacturing related FDI,but also creating an attractive domestic market. This development wasillustrated by manufacturers being drawn to economies where wages were still atlow levels, yet the long-term FDIs manifested China at the top of globalbusiness (Wagstyl, 201316).Therefore, the pulling out of export manufacturers could be seen as anindicator of a general shift away from export and towards long-term, domesticmarket oriented endeavours.
SocioculturalOn a sociocultural level, the years after the crisis werecharacterized by the changes in wealth distributions and the levels ofunemployment that skyrocketed immediately after the crash GRAFIK. In China, however, unemployment rates stayed comparativelylow GRAFIK and the growth of the middle class continued, as especially inBeijing and the coastal area “the well-to-do residents of those cities can nowafford to buy imported luxury goods, such as Mercedes” (Hamilton & Webster,Jahr, p. 39). Ongoing industrialization and urbanization17have caused the population to adapt western values and expectations with thepopulation’s increasing wealth leading to increasing consumerism as can be seenin rising car sales (Morrison). These tendencies clashed with another central concern ofsociety at the time, as the calls for sustainable energies became louder, alsorelating to issues of air pollution which especially in China had led to socialtensions and fears of political instability (ibid).
The level of pollution inChina had been reached during the time of its aggressive growth whenenvironmental restrictions were practically non-existant (The Guardian, 201418)which had been one of the reasons manufacturers were choosing it as plantlocation (Hamilton, Webster). This issue shall be revisited in the nextsection, where developments in the technology sector shall be examined. TechnologyWith the public calls for alternative energies and growingsales numbers of electric vehicles, technological advances were mostly aimed atthe design of eco-friendly vehicles for the mass markets which by now had beenmade easier due to changes in government policies concerning electric or hybridvehicles (Mitchell, 201419).Their market was growing, with more and more manufacturers following theexamples of the Japanese and the Americans (Foy & Bryant, 201320).Another revolutionary approach regarding informationtechnology integrated into cars were the initial ideas of self-driving vehiclesthat validated once again how the importance of computers had grown over theyears (Bryant, 201321).An interesting development in the ADAS market is the position in which carmanufacturers find themselves, being second to suppliers of the relevantsoftware who have made their entrance into the vehicle business (Bryant &Sharman, 2013).
Next to Google, corporations like TRW (who by the time hadbecome part of ZF Friedrichshafen) were on the rise to becoming seriouscompetition. Along the lines of rapid technology development, expenditures fortechnological innovation shall not be forgotten, as especially China investedheavily in its educational and R&D structure, breeding a highly skilledworkforce that could provide new solutions to question of sustainable energyengineering and technological innovation (Morrison). This was followed by theactual shift of FDI, as manufacturers discovered the pool of highly skilledhuman resources in the BRICs (Hamilton & Webster) which would accelerateChina’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 businessenvironment has fundamentally changed. Yet, the PEST analyses do showsimilarities between the environments of the early 1990s and the late 2000s andearly 2010s. On the political level, both moments in time werecharacterized by uncertainties.
With the fall of the iron curtain, an erastarted in Europe that was both promising and ambiguous at the same time. With thecollapse of one of the two big systems in the world at the time, it was yet tobe seen how the newly formed states would be integrated into the EC. At thecentre of this question was Germany that had all of a sudden gained asubstantial land mass and faced the challenges of merging two societies that wereinherently different. The fall of the Soviet Union was accompanied by arecession that was also taking its toll, and fears and accusations ofprotectionism were circulating. The year 2014 and the ones leading up to it sawthe disputes between Russia and the Ukraine, both countries that in the SovietEra 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 ofuncertainty and doubt in the early 1990s, it was now trusted with 1The economics of european disintegration2Wattever next3The 75-cent solution4The fruitful, tangled trees of knowledge5From stars to cars6Merkel’s back for Germany what does that mean for europe7Protectionism rising as growth slows8 Globaleconomy: tricks of the trade law9HIER ERKLAEREN10Brazil, Russia, India, China and South Africa11The global financial crisis and the bricshttp://www.bbc.co.uk/news/business-1581766012Brics bank still on the cards13Brics agree to create development bank14The brics bank is a glimpse of the future15The end of cheap china16China fdi levels off, at record levels17Helped by the loosening of the hukou18China strengthens environmental laws19Chinas byd develops new electric car with daimler20German carmakers embrace green revolution21Race is on to develop self-driving cars