Section C Globalisation Flashcards
What is globalization?
- Process by which the world’s regional economies are becoming integrated/interconnected.
- 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
- 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
Impact of globalization on growth of domestic businesses
- Increased competition forces to more efficiency
- Forces to create greater brand awareness and USP (unique selling points) mainly focusing on local/national origins
- skills transfer
- New business opportunities/units:
Joint ventures
Strategic alliances
Franchises
Foreign direct investment with local co-owners
Distribution /import business - New ideas
Drivers of modern globalization?
- Improved ICT (Information and communications technology)
- Removed trade barriers (e.g removed or reduced customs tariffs, bans etc)
- Deregulation of financial markets
- Harmonization of accounting standards
- Encouragement of foreign investment by the government
- Increasing economic and political power of multinationals
What is a multinational?
A company operating or registered in several countries
Disadvantage of globalization for local communities
- Profits are repatriated - foreign companies pay taxes and salaries, but the profits may be totally taken out from the host country
- Local culture or products may suffer or change through the appeal of globally advertised values
- Brain drain - to other countries
- Loss of market share of local businesses
International standards for quality assurance? The benefits?
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
Trading blocks as a factor for relocation/additional locations?
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.
Membership of WTO as a factor for location choice?
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
Pull factors for relocation/additional locations?
These are external factors:
● Improved communications worldwide
● Dismantling of trade barriers
● Deregulation of the world’s financial markets
● Increasing size of multinational companies
Push factors for relocation/additional locations?
These are internal factors:
● reduce costs
● increase market share
● use extension strategies
● use defensive strategies.
Defensive strategy as a factor when opening branches abroad?
Relocating or opening branches not so much because they need to, but because they do not want their competitors to do it first.
Disadvantages of outsourcing?
● 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?
Disadvantages of offshoring?
● All the dis’ of outsourcing
● plus cultural and/or
● language barriers
● Ethical issues (reducing workplaces in the home state)
Methods of entry to international markets?
Joint ventures
Strategic alliances
Franchises
Foreign direct investment with local co-owners
Direct or indirect export
Limitation of direct export vs indirect export?
Lack of knowledge on the local market (legal constraints, segments etc)
Issues with distribution channels
Commitment of Export vs direct investment?
Direct investment involves more commitment
Disadvantage of direct investment (oversees)?
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
Advantages of entering international markets
Larger market
Diversification and lowering of risks
Enhanced brand image
Economies of scale
Limitations of entering internaitonal markets
Poor STEEPLE analysis, involving
Economical challenges (low gdp per capita)
legal challenges
Social etc
International marketing/globalisation vs strategy developments
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
Changes in strategies vs globalization vs culture?
Globalisation means more stakeholders involved with differing cultures. Agreement on decisions about strategy changes becomes therefore harder.
Doole’s 3 aspects of strategies if you want to succeed on international market?
- Thorough knowledge of international market and strong positioning
- Effective communication with customers and commitment to quality
- Nurturing the culture of continuous learning
Advantage of globalization and international marketing for local communities?
Less monopolies, bigger competition resulting in:
better prices
improved quality and customer service
Advantage of direct investment (oversees)?
Lower input costs, particularly of property and labour in developing locations
Possibly more favourable tax treatment
Possibly other favourable regulations from the local government
Disadvantage of globalization and international marketing for local communities?
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
Globalisation
The process by which businesses or other organizations:
Develop international influence or
Start operating on an international scale.
