Section C Globalisation

Question 1

What is globalization?

Answer 1

1. Process by which the world’s regional economies are becoming integrated/interconnected.
2. Although there were other historical examples of globalisation (Roman and other empires, silk road etc) , today it is on another level and mainly achieved through trade and economic policies
3. Today’s globalization is characterized small number of post-national of extremely large companies, who consider no country as their home or every country their home

Question 2

Impact of globalization on growth of domestic businesses

Answer 2

1. Increased competition forces to more efficiency
2. Forces to create greater brand awareness and USP (unique selling points) mainly focusing on local/national origins
3. skills transfer
4. New business opportunities/units:
   Joint ventures
   Strategic alliances
   Franchises
   Foreign direct investment with local co-owners
   Distribution /import business
5. New ideas

Question 3

Drivers of modern globalization?

Answer 3

1. Improved ICT (Information and communications technology)
2. Removed trade barriers (e.g removed or reduced customs tariffs, bans etc)
3. Deregulation of financial markets
4. Harmonization of accounting standards
5. Encouragement of foreign investment by the government
6. Increasing economic and political power of multinationals

Question 4

What is a multinational?

Answer 4

A company operating or registered in several countries

Question 5

Disadvantage of globalization for local communities

Answer 5

1. Profits are repatriated - foreign companies pay taxes and salaries, but the profits may be totally taken out from the host country
2. Local culture or products may suffer or change through the appeal of globally advertised values
3. Brain drain - to other countries
4. Loss of market share of local businesses

Question 6

International standards for quality assurance? The benefits?

Answer 6

There are international standards regarding quality, such as:

ISO 9000 (family of standards, including such as ISO 90001)

Benefits:
better marketing
improved trust
improved export opportunities

Question 7

Trading blocks as a factor for relocation/additional locations?

Answer 7

Trade is facilitated within trading blocks, such as EU, so this will influence the decision. Many companies outside these blocks may open productions there to avoid e.g. higher taxes, customs duties etc.

Question 8

Membership of WTO as a factor for location choice?

Answer 8

World Trade Organization has a commitment to reducing trade barriers, which makes it far easier for trade to take
place across borders. More than three-quarters of the world’s countries are signatories to the WTO

Question 9

Pull factors for relocation/additional locations?

Answer 9

These are external factors:
● Improved communications worldwide
● Dismantling of trade barriers
● Deregulation of the world’s financial markets
● Increasing size of multinational companies

Question 10

Push factors for relocation/additional locations?

Answer 10

These are internal factors:
● reduce costs
● increase market share
● use extension strategies
● use defensive strategies.

Question 11

Defensive strategy as a factor when opening branches abroad?

Answer 11

Relocating or opening branches not so much because they need to, but because they do not want their competitors to do it first.

Question 12

Disadvantages of outsourcing?

Answer 12

● The business becomes more dependent on the supplier
● Less control of the quality of the final product
● Brand reputation if the consumer realizes that product is not produced by the company it trusts?

Question 13

Disadvantages of offshoring?

Answer 13

● All the dis’ of outsourcing
● plus cultural and/or
● language barriers
● Ethical issues (reducing workplaces in the home state)

Question 14

Methods of entry to international markets?

Answer 14

Joint ventures
Strategic alliances
Franchises
Foreign direct investment with local co-owners
Direct or indirect export

Question 15

Limitation of direct export vs indirect export?

Answer 15

Lack of knowledge on the local market (legal constraints, segments etc)
Issues with distribution channels

Question 16

Commitment of Export vs direct investment?

Answer 16

Direct investment involves more commitment

Question 17

Disadvantage of direct investment (oversees)?

Answer 17

If capital intensive, it may be very hard to take out investments without huge losses

May result in loss of focus of top management - because of high commitment and heavy investment abroad, main and well established markets may have less attantion

Question 18

Advantages of entering international markets

Answer 18

Larger market
Diversification and lowering of risks
Enhanced brand image
Economies of scale

Question 19

Limitations of entering internaitonal markets

Answer 19

Poor STEEPLE analysis, involving
Economical challenges (low gdp per capita)
legal challenges
Social etc

Question 20

International marketing/globalisation vs strategy developments

Answer 20

Markets are dynamic and change all the time, even more on the international level.
So the strategies need to recognize and adapt to changes

note the authors - Hamel &Prahalad

Question 21

Changes in strategies vs globalization vs culture?

Answer 21

Globalisation means more stakeholders involved with differing cultures. Agreement on decisions about strategy changes becomes therefore harder.

Question 22

Doole’s 3 aspects of strategies if you want to succeed on international market?

Answer 22

1. Thorough knowledge of international market and strong positioning
2. Effective communication with customers and commitment to quality
3. Nurturing the culture of continuous learning

Question 23

Advantage of globalization and international marketing for local communities?

Answer 23

Less monopolies, bigger competition resulting in:
better prices
improved quality and customer service

Question 24

Advantage of direct investment (oversees)?

Answer 24

Lower input costs, particularly of property and labour in developing locations

Possibly more favourable tax treatment

Possibly other favourable regulations from the local government

Question 25

Disadvantage of globalization and international marketing for local communities?

Answer 25

Cultures become less diverse, this may not be acceptable for older generations in particular

International brands with economies of scale and stronger bargaining power (with suppliers, e.g.) may take the profits away from he local brands

Question 26

Globalisation

Answer 26

The process by which businesses or other organizations:

         Develop international influence or 
        Start operating on an international scale.