Competing in a Global World
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Competing in a Global World Competing in a Global World Presentation Transcript

  • COMPETING IN A GLOBAL WORLD Prof. Sameer Mathur, Ph.D.
  • Sameer Mathur BuddingMarkets.com Marketing Professor 2009 – 2013 Ph.D. and M.S. (Marketing) 2003 – 2009 Marketing Professor 2013 – Indian Institute of Management, Lucknow
  • Agenda Introduction How Global are we? The Changing Center of Gravity Globalization Pressures on Companies What is a Global Corporation? Global Strategy and Risk
  •  Companies must adapt to change politically, socially, economically, and technologically. Competing in a Global World
  • Three Theories: 1. The Globalization of Markets (Levitt, 1983) 2. The World is Flat (Friedman, 2005) 3. The World is Semi-Globalized (Ghemawat) How Global are we?
  •  The globalization of markets is at hand.  This is the end of the multinational corporation Source: “Theodore Levitt, 1983” “The Globalization of Markets” (Levitt 1983)
  •  Multinational  operates in a number of countries, and adjusts its products and processes in each, at high relative cost.  Global Corporation  sells the same things in the same way everywhere” Source: “Theodore Levitt, 1983” Globalization of Markets (Theodore Levitt, HBR 1983) http://hbr.org/1983/05/the-globalization-of-markets/ar/1 “The Globalization of Markets” (Levitt 1983)
  • Source: “Friedman, 2005” The World is Flat – The Ten Flatteners
  • Source: “Friedman, 2005”  Leveled the economic as well as business playing field in the world;  Broken down barriers between countries (for e.g. in terms of communication, technology) Ten Flatteners
  •  Walls Came Down, Windows Came Up  Before the collapse of this wall, the East and the West, that is, Communism and Capitalism respectively, were fundamentally separated.  The East began to embrace the fundamentals of capitalism, and free markets began to flourish.  This change was further fuelled by the introduction of Windows and its various components, such as dial-up modems. Source: “Friedman, 2005” 1. Fall of the Berlin Wall [11/9/1989]
  • Source: “Friedman, 2005”  Billions of dollars worth of fibre optic cable became extremely cheap, almost free.  Netscape offered dial-up Internet for $28.  Now, Netscape + Web had a greater audience from the world.  Words, files, films, music, and pictures were available to anyone with a computer screen. 2. Netscape Goes Public [8/9/1995]
  • Source: “Friedman, 2005”  Software, thanks to Technology, and Standards allowed work to be sent and received from different parts of the world  Establishment of global platform  Allowed various forms of collaboration to take place Wikipedia is one of the largest forms of collaboration 3. Work-Flow Software
  • Source: “Friedman, 2005”  Online communities begin to upload and collaborate  Free open source code becomes available, e.g. Linux  People develop, make, use, or modify code  Wikipedia  Information flows from various parts of the world  Information is available in multiple languages 4. Uploading
  • Source: “Friedman, 2005”  Companies begin to outsource in order to save costs, and remain competitive  Manufacturing activities sub-contracted in a cost-effective and efficient way. Example:  Call centers brought to India  Manual labor shifted to China, Mexico 5. Outsourcing
  • Source: “Friedman, 2005”  Entire company’s internal operations moved entirely to another country  Offshoring in China due to cheap labor costs 6. Offshoring
  • Source: “Friedman, 2005”  A supply-chain where both the supplier + buyer benefit and share information, increasing efficiency:  Wal-Mart buys its goods from various suppliers across the globe.  As something gets sold at Wal-Mart, a signal is sent to Beijing, where another unit is manufactured.  If the demand of certain goods increase, due to an event, (e.g. snow storm, hurricane, flood), Wal-Mart has the power to supply the affected stores with the products needed. 7. Supply-Chaining
  • Source: “Friedman, 2005”  Getting another company to do some of your work, in which it is good at. UPS:  TOSHIBA  Toshiba laptops are sent to the UPS logistic centre, where they are fixed, and then returned earlier to the customer through the UPS distribution channel.  NIKE  When something is bought at Nike’s website, UPS fulfills that order, by packaging and sending the respective merchandise.  EBAY  UPS allows you to track the good purchased on EBay. 8. In-Sourcing
  • Source: “Friedman, 2005”  The power to get any information, at any time, and from anywhere you want! 9. In-Forming
  • Source: “Friedman, 2005”  New technologies that keep on making virtual/wireless communication, file sharing, and collaboration better than ever. 10. The Steroids
  • 1. Fall of the Berlin Wall 2. Netscape goes public 3. Work-Flow 4. Uploading 5. Outsourcing 6. Offshoring 7. Supply Chaining 8. Insourcing 9. Informing 10.The Steroids Source: “Friedman, 2005” The Ten Flatteners
  •  Majority of communication, including phone calls, web traffic, investment are local.  90% of fixed investment is domestic.  Borders and distance between countries still matters.  These differences can be a source of value creation. Source: “Ghemawat” The World is Semi-Globalized
  •  Airlines still operate more on a local level Example: In 2010, U.S. had 629M domestic passenger trips vs. 88 million international departures and arrivals Source: “Industry Week ” The World is Semi-Globalized
  •  Foreign investors own 20% of world stocks  Less than 18% of internet traffic is international  Less than 2% of phone calls international  90% of people are not prepared to leave their home countries  30% of Americans have a valid passport  In China + India, less than 5% have a valid passport Source: “Industry Week ” The World is Semi-Globalized
  • 1991: Mexico * 50-50 Joint Venture * Gained operational expertise The Globalization of Wal-Mart
  • 1994: Brazil * 60-40 Joint Venture * Enabled Wal-Mart to have a better experience in the Latin America Market The Globalization of Wal-Mart
  • 1995: Argentina * Opened a Subsidiary * Gained operational expertise The Globalization of Wal-Mart
  • 1996: China To overcome cultural, linguistic, and geographical barriers, Wal-Mart chose to enter China in two phases. The Globalization of Wal-Mart
  • Phase 1: 1992-93 Wal-Mart sold to two Japanese Retailers that then sold to the Asian Market, i.e. Japan, Singapore, Hong Kong, Malaysia, and etc. The Globalization of Wal-Mart
  • Phase 2: 1994 Entered into a joint venture agreement with C. P. Pokphand, Thailand-based conglomerate. Consequently, Wal-Mart opened 3 Value Club membership discount stores in Hong Kong. The Globalization of Wal-Mart
  • The way Wal-Mart chose to enter the Latin American and Asian markets was very different than its entry into Canada. To penetrate the Canadian market, Wal-Mart chose the acquisition mode of entry, namely because the U.S. and Canadian markets are, among other things, homogeneous in nature. The Globalization of Wal-Mart: Synopsis
  • The BRIC Countries Global Competition – The Changing Center of Gravity
  •  Characteristics of BRIC Countries:  GDP is on the rise  Trade is growing  Disposable income is greater than ever  China/India consumer market size is immense The BRIC Countries
  •  Fortune 500 rankings now have over 60 representatives from BRIC countries. The BRIC Countries
  • “Imperatives” driving companies to become more global (Gupta, Govindrajan, Wang, 2008) 1. Pursue Growth 2. Pursue Efficiency 3. Pursue Knowledge 4. Meet Customer Needs and Preferences 5. Competition Global Pressures on Companies
  •  Developed country markets are maturing, i.e. limited by population growth and product replacement  There is room for opportunity in the developing markets Ex. Household appliances Pursue Growth
  •  Economies of scale (SUPPLY SIDE):  Spreading fixed costs  Reducing capital & operating costs  Pooling purchasing power  Creating critical mass Pursue Efficiency
  •  Economies of scope (DEMAND SIDE):  Increasing scope of marketing + distribution by entering new markets  Increasing the range of products + services offered Pursue Efficiency
  •  Leveraging local knowledge  Faster product and process innovation  Lower cost of innovation  Reduced risk of competitive preemption Pursue Knowledge
  • Examples:  Fiat developed a global car, i.e. Palio, in Brazil  Texas instruments used U.S. and Indian engineers to design more advanced chips  Procter & Gamble’s Liquid Tide  USA: Technology to suspend dirt in water  Japanese Subsidiary: Cleaning agents  Brussels operations: Agents that fight mineral salts found in hard water Pursue Knowledge
  •  Just as companies want everything to be consistent, so do the customers. Example: Global travelers want consistent airlines, hotel chains, credit card companies, television news, and etc. Meet Customer Needs & Preferences
  • Globalization of customers and / or Globalization of major competitor leads to Globalization of business models Competition
  • First Mover Advantage Economies of scale or scope Posing as a threat in home market Competition
  • “Imperatives” driving companies to become more global (Gupta, Govindrajan, Wang, 2008) 1. Pursue Growth 2. Pursue Efficiency 3. Pursue Knowledge 4. Meet Customer Needs and Preferences 5. Competition Global Pressures on Companies
  •  In the past five years,  China’s sales doubled: $813.1M  India’s sales increased to 64%: $393.8M Chocolatiers Look to Asia for Growth
  • Chocolatiers Look to Asia for Growth
  • Corporate Globalization occurs in four dimensions: 1. Globalization of Market Presence 2. Globalization of Supply Base 3. Globalization of Capital Base 4. Globalization of the Corporate Mind-Set (Gupta, Govindrajan, Wang, 2008) Source: “(Gupta, Govindrajan, Wang)” What is a Global Corporation?
  •  Degree to which a company has globalized its market presence (customer base) Example:  Oil + Car companies  Wal-Mart – 30% revenue outside U.S. Globalization of Market Presence
  •  The extent to which a company sources from different locations and has located key parts of the supply chain around the world  Caterpillar  Customers in 200 countries  24 countries possess manufacturing facilities, including R&D Globalization of Supply Base
  •  Degree to which a company has globalized its financial structures  What exchanges the company’s shares are listed?  Where it attracts most of its operating capital?  How a company finances its growth and acquisitions?  Where it pays taxes, and how it distributes its profits? Globalization of Capital Base
  •  Company’s ability to deal with diverse cultures Globalization of the Corporate Mind-set
  •  Characteristics of global companies:  Having a global mind-set  Running operations on a global-basis  Top management comes from across the world  New ideas are generated from the globe Globalization of the Corporate Mind-set
  • Corporate Globalization occurs in four dimensions: 1. Globalization of Market Presence 2. Globalization of Supply Base 3. Globalization of Capital Base 4. Globalization of the Corporate Mind-Set (Gupta, Govindrajan, Wang, 2008) Source: “(Gupta, Govindrajan, Wang)” What is a Global Corporation?
  • Globalization Carries Risks: 1. Political Risk 2. Legal Risk 3. Financial / Economic Risk 4. Societal / Cultural Risk Global Strategy and Risk
  •  Relates to politically induced actions + policies initiated by a foreign government. Political Risk
  • Examples Energy, Transportation, Tourism, Insurance costs Crises, Wars, Economic Meltdowns  9-11  Conflict in Iraq + Pakistan  Instability in Korean peninsula  Global financial crises Political Risk
  • More Examples  Government stability  International Relationships  Ownership of physical assets  Intellectual property  Personnel Security Political Risk
  •  Legal System  Enforcement of laws  Law enforcement agencies  Loss of intellectual property, technology, and trademarks Legal Risk
  •  Similar to financial risks at home  Currency fluctuations  Financial obligations Financial/Economic Risk
  •  Level of economic development  Technological innovation  Availability of natural resources  Availability of human capital Financial/Economic Risk
  •  Ideologies; Ethnic Values  Religious Morals; Nationalism Societal/Cultural Risk
  •  Standard of Living Societal/Cultural Risk
  • Globalization Carries Risks: 1. Political Risk 2. Legal Risk 3. Financial / Economic Risk 4. Societal / Cultural Risk Global Strategy and Risk
  • Summary Introduction How Global are we? The Changing Center of Gravity Globalization Pressures on Companies What is a Global Corporation? Global Strategy and Risk
  • Over 600,000 views from more than 100 countries http://www.BuddingMarkets.com/ Sameer Mathur BuddingMarkets .com http://www.facebook.com/BuddingMarkets/