Understanding Global and Local Pressures Flashcards
What are the two sets of conflicting external pressures?
Forces of global integration (including worldwide innovation and learning forces)
Forces for national responsiveness
What are the forces for global integration?
- Exploitation of EOS and EOscope
- Exploiting cost differentials of FOPs across nations
- Liberalised trade environment
- Technological advances: communications and transport costs
- Forces of global learning and innovation
- Competitive positioning (global chess)
What are the forces for national responsiveness?
- National cultural differences; in ways of doing business, in consumer behaviour
- Host gov demands (policy)
- Growing pressures for localisation
What is the definition of economies of scale?
They exist wherever proportionate increases in the amounts of inputs employed in a production process result in lower unit costs
What is the definition of economies of scope?
The cost of joint production (development/distribution) of two or more products can be less than the cost of producing separately
E.g telecommunications; do cable TV as they already have the network, labour and expertise
What it the industry effect for macro industries like tourism and education?
Relative strength forces for globalisation vs forces for local responsiveness that vary by industry
Transnational industry growth from 1990s
How does the strength of globalisation vs local forces differ throughout different industries according to the industry effect?
Global industries - don’t cater to markets e.g Apple iPhone the same everywhere
- Global integration forces dominate
Multinational/multi-domestic industries - product changed based on preferences e.g soft drink sugar content
- National responsiveness dominates
Transnational industries - trying to optimise costs by keeping a global volume but with local flavours
- Both forces are strong
- Pharmaceuticals
Why do firms go abroad?
- Increase sales and profits
- Enter new markets
- Compensate for slow home growth
- Increase customer base
- Economies of scale
- Risk diversification
- Follow demand
- Arbitrage
How do firms research whether or not to go abroad?
- Reliable data: global reports, embassies, gov websites, national centres for statistics, local market research reports
- SWOT
- PESTLE
What factors need to be considered in a business report?
- Starting: labour market regulation, other regulation
- Location: construction permits, electricity, property registration
- Access of finance: credit, investors
- Day-to-day operations; tax, trading across boarders
- Security; contracts, resolving insolvency
What considerations would need to be taken for an Oman business report?
- Absolute monarchy
- Sharia law; common law
- Local shareholding
- Omanisation quote (nationalisation of employment)
- Limited internal market (4.9m)
- Rank 3 in safety and security
- Traditional and conservative country
- Hofstede cultural dimensions: power distance high, low individualism
How have factor costs driven globalisation?
Petrol companies explored the Middle East due to little domestic crude oil, less capital intensive industries like textiles sought cheap labour
How did the industrial revolution drive globalisation?
Pressure to capture EOS offered by technology, cheap and abundant energy, goof transport and new production technologies
How has P&G and Unilever transformed national businesses like soap and detergent?
By standardising product formulation, rationalising packaging sizes, multilingual labels = restructuring and specialisation of nationally dominant plants to achieve scale economies
What is global chess?
Played by companies that manage their worldwide operations as interdependent units that implemented a coordinated global strategy
Involves building and defending profit sanctuaries in order to cross subsidise weaker market positions and products
Make high risk investment and force out rivals through alliances
Centralised systems
Flexibility to change product designs, sourcing patterns and pricing policies
