Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services).[1][2][3][4] It is also "any activity or enterprise entered into for profit."[5] Having a business name does not separate the business entity from the owner, which means that the owner of the business is responsible and liable for debts incurred by the business. If the business acquires debts, the creditors can go after the owner's personal possessions. A business structure does not allow for corporate tax rates. The proprietor is personally taxed on all income from the business. The term is also often used colloquially (but not by lawyers or by public officials) to refer to a company, such as a corporation or cooperative. Corporations, in contrast with sole proprietors and partnerships, are a separate legal entity and provide limited liability for their owners/members, as well as being subject to corporate tax rates. A corporation is more complicated and expensive to set up, but offers more protection and benefits for the owners/members.Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services).[1][2][3][4] It is also "any activity or enterprise entered into for profit."[5] Having a business name does not separate the business entity from the owner, which means that the owner of the business is responsible and liable for debts incurred by the business. If the business acquires debts, the creditors can go after the owner's personal possessions. A business structure does not allow for corporate tax rates. The proprietor is personally taxed on all income from the business. The term is also often used colloquially (but not by lawyers or by public officials) to refer to a company, such as a corporation or cooperative. Corporations, in contrast with sole proprietors and partnerships, are a separate legal entity and provide limited liability for their owners/members, as well as being subject to corporate tax rates. A corporation is more complicated and expensive to set up, but offers more protection and benefits for the owners/members.Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services).[1][2][3][4] It is also "any activity or enterprise entered into for profit."[5] Having a business name does not separate the business entity from the owner, which means that the owner of the business is responsible and liable for debts incurred by the business. If the business acquires debts, the creditors can go after the owner's personal possessions. A business structure does not allow for corporate tax rates. The proprietor is personally taxed on all income from the business. The term is also often used colloquially (but not by lawyers or by public officials) to refer to a company, such as a corporation or cooperative. Corporations, in contrast wbbbbbbbbbbbbbbbhbb

1. Globalization &
Outsourcing
Lecture 3
Course Instructor: Arslan Haider
Email: arslan.haider@lbs.uol.edu.pk

2. Global Market Drivers
• global trade;
• manufacturing moving to low-cost economies;
• global brands and retailers;
• information and communication technology (ICT);
• focus on inventory reduction;
• consolidation across all industry sectors;
• new logistics and supply-chain services.

3. Global Market Drivers
The market globalization drivers are a function of:
• Worldwide Consumer Behavior
• Global distribution channels,
• Nature of Global Marketing in the industry in which the firm
operates.
Issues such as the degree to which customers have relatively
common needs, wants, interests, and tastes are critically
important for a better understanding of market globalization
drivers.

4. • In addition, the use of global marketing and the degree to which
transferable marketing practices can be used are key determinants of the
market drivers.
• The use of lead countries, how they change based upon industries and
products, and how they are predicted to change based on the dynamics in
the global marketplace affect the market drivers.

5. Market Globalization Drivers’
Implications for Supply Chains
• The market globalization drivers influence global supply chains in various ways. Each
industry has certain market forces that facilitate globalization and certain market forces
that hinder globalization.
• Regarding the supply chain functions of logistics, purchasing, operations, and market
channels, it is logical to assume that market channels functions are most directly
influenced by market globalization drivers. There is a unique and important overlap
between the market drivers and market channels, such as satisfying customer needs
and tastes, engaging customers, evaluating the availability of global channels, and
using a program of transferable marketing.
• Logistics and purchasing have the least connection to the market globalization drivers,
while operations will be moderately affected by these market drivers.

6. When striving for strategic alignment across entities in global supply chains and coordination of supply
chain functions within a firm, there are some universal implications that can be drawn for market
globalization drivers.
A set of 10 factors—a top 10, —that are leading to or predicted to experience changes in the market
drivers. These changes are likely to have a significant effect on global supply chains. The factors are:
• lifestyles,
• knowledge intensity,
• rising population,
• global e-commerce,
• global firms,
• infrastructure,
• world brands,
• global advertising,
• social networking,
• and sustainability.

7. Lifestyles
• Younger adult consumers around the world are growing more alike. Worldwide brands, mass
communications, increased travel, and multinational corporations are part of the “global village”
that creates a convergence of lifestyles and tastes. This convergence is far more prominent
among young customers, those up to roughly 40 years of age, than among older customers at this
time.
• However, it is predicted that over the years, this convergence of lifestyles and tastes will become
applicable to older people as well. This is a function of people staying with their “worldwide
lifestyles” as they get older and their home areas becoming more global themselves.
• These lifestyle and taste changes are particularly important for market channels: consumers
expect to have most, if not all, of the products that are available in other parts of the world
available to them as well.
• this pressure can been seen in the developed world and, to some degree, in emerging markets.
The expectation is that all emerging markets, most newly industrialized countries, and all middle-
to upper-income individuals in the less developed countries will have markedly increased
expectations that market channels will be able to deliver on these converging lifestyles and tastes.

8. Knowledge Intensity
• Consumers today have access to knowledge about products—such as quality, price, and most key
features—almost everywhere and all the time. The most significant knowledge that they have today,
and did not necessarily have yesterday, is that certain new products exist and are available. This
knowledge was previously more locally based.
• Now, any product that comes into being is soon known throughout the world. Based on this
knowledge, consumers expect products to be available to them wherever they are in the world. This
increased “knowledge intensity” creates pressures on global supply chains, since 90 percent of what
we buy locally is not made locally. The days when movies were introduced and launched in the United
States months before their international launch are over. A week’s delay, or even a few days, is often
enough to create unhappy consumers, who then often look elsewhere for solutions.
• The same goes for product feature profiles. If a feature is available anywhere—whether as part of the
base product or as an option—consumers expect that same feature to be available to them worldwide.
New smartphone applications and computer software releases are examples. This increased
knowledge intensity creates pressure on all aspects of the global supply chain system, but purchasing
will face the most. Purchasing and sourcing operations have to ensure that enough raw material and
component parts exist to satisfy a worldwide customers.

9. Rising Population
• Developing countries are growing at a faster rate than developed countries because
diminishing returns are not as strong as in capital rich countries.
• For example, developing (and poorer) countries can replicate the production
methods, technologies, and supply chain infrastructures used in developed
countries. These potential efficiencies will be coupled with the rising population in
developing countries and the expected increase in prosperity.
• For example, the purchasing power of the middle class worldwide is estimated to
double in the next two decades, with Asia accounting for about 20 million people
whom we can now classify as middle class by developed country standards. It will
have approximately 200 million middle-class individuals.
• Overall, this means that rising population and prosperity predictions have supply
chain implications ranging from demand planning to inventory management to
competitive priorities.

10. Global E-commerce
• The world of e-commerce is booming. China’s primary online marketplace, Taobao, sells
more today than the top five brick-and-mortar retailers in the country combined. The
marketplace now offers some 800 million different products online.
• Significant increases in online sales are expected in most parts of the world, but
especially in developed countries and emerging markets. Forecasts have South America
growing its e-commerce at more than 200 percent, Russia at more than 180 percent,
North America and Oceania at about 100 percent, and Europe, Africa, and Asia at some
85 percent within the next two years, reaching a worldwide e-commerce total exceeding
$500 billion annually.
• At the same time, the global infrastructure needed to deliver these products to meet
customers’ expectations is not yet ready in many countries, especially in emerging
markets. Global supply chains will feel the pressure to be part of the value-added
solution to these market channel needs.

11. Global Firms
• Issues such as global sourcing, including sourcing from foreign markets for foreign markets,
are becoming much more important. However, this is not global sourcing solely based on
cheaper costs, as it frequently was in the past. Firms now source globally to achieve the best
combination of quality, cost, and ultimately value.
• In this spirit, we also see increased tendencies among global firms to stress “glocalization”—
meaning that they carry on business around the world based on both local and global
considerations. It used to be that global firms largely standardized their operations for the
worldwide marketplace. However, today’s measures of effectiveness and efficiency allow global
firms to integrate their worldwide operations while also allowing for operative customization in
cases where that type of localization provides significant advantages.
• Glocalization means that global supply chains have to be flexible enough to incorporate both
local and global raw materials, component parts, and products into the process while still
strategically and operationally conducting business using a total global strategy. This creates
increased pressure on global supply chains to conduct total cost analysis as a means of
addressing the infusion of value-added elements at each step.

12. Infrastructure
• Interestingly, the infrastructure for global supply chains is becoming much better, with
numerous options for global and regional channels in most parts of the world. Shipping
routes are being reconfigured, leverage points in the world are being reformulated, and value
is being added to global supply chains.
• This means that global supply chains will have to be staffed more with current people,
retrained employees, or local resources than with new global employees.
• Goods and services come from places and entities that many people did not even consider a
few years ago. The forecast is that the infrastructure for global supply chains will improve by
11 percent in the next five year.

13. World Brands
• Companies around the world are spending incredible amounts of money—in any currency—to
establish “world brands,” sometimes also called “global brands,” to achieve global sales
productivity in targeting customers worldwide.
• Such world branding requires a sophisticated supply chain infrastructure and global networks, both
inbound and outbound, to meet the demands of customers everywhere. World brands, in essence,
will also require global supply chains that have relatively standardized leverage points throughout
the chain to infuse value at almost the same stages of the chain, regardless of the countries
involved.
• It used to be that if a product needed to be customized for the needs, regulations, or laws of a
particular country, the customization often happened at a late stage in the supply chain. Such
customization efforts may now happen at the middle or the beginning of the chain on a more
standardized basis. This takes into account the connection between global supply chains and the
requirements of world brands. Such brands have the potential to proactively create a want on the
part of customers, but they also create a need on the part of global supply chains.

14. Global Advertising
• Global advertising is a way to build valued connections with customers. A common platform and
parallel campaigns that resonate with customers worldwide have spillover effects in terms of
publicity, lifestyles, and tastes. We often act and behave the way our peers and neighbors do,
and purchase what they purchase. Global advertising is a mechanism that allows global
companies to build the world marketplace into a neighborhood.
• This new “global village” has wants and needs that are similar, based on peer behaviors and
interests. At the same time, the more global an advertising campaign is, the greater the
expectations on the outbound portion of the supply chain to meet customers’ demands.
• Thankfully, due to developed mechanisms over the years to implement effective global
advertising campaigns. The key for the future, though, is that more advertising campaigns will be
global in scope. Fewer advertising campaigns will have detailed and unique customization for
particular country markets, some because they are proactively building on the notion of a global
village, and some because of the idea that cost efficiencies can be gained by global advertising.

15. Social Media
• With the spread of global and regional media, an increased assortment of international
retailing options, and the movement of people, products, and corporations across national
borders, markets worldwide are becoming much more integrated.
• Most hotel rooms have CNN, BBC, and the mainstay channels from key countries. And
there are thousands of online newspapers in English (and many other common languages)
covering all parts of the world through a relatively common infrastructure.
• All of these global information sources are encapsulated more in the social media frenzy
than through traditional media channels. We already know some of the impact of
Facebook, LinkedIn, and Twitter (to name a few), but what about China’s Renren and other
similar non-U.S.-based systems? Also important in this context is the need to provide
engaging, interactive, and entertaining websites and social media platforms.
• Global customers worldwide prefer to be engaged, and typically not at the brand name’s
website, but instead at websites like Amazon and eBay, where they can find all brand-
name products that interest them.

16. Sustainability at Customer Levels
• An increasing number of customers are demanding that firms throughout the global supply
chain engage in efforts to sustain the environment and offer “greener” products. Firms have
felt these pressures for years, but the escalation in this area is likely to become a global
supply chain phenomenon.
• In the past, consumers mostly held producers and/or retailers accountable for making sure
that their products were “green.” However, as consumers are becoming more knowledgeable,
they are also becoming more engaged.
• This means that all entities and elements of global supply chains will be under increased
pressure to offer green solutions at each stage of the process. This includes all steps in the
forward portion of the supply chain as well as all steps in the reverse logistics portion of the
chain. Customers and market forces are increasingly demanding this.