Globalisation
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Globalization refers to the increasing integration and interaction between people and corporations around the world due to advances in technology, communication, and transportation. This has led to a rapid rise in international trade and the global operations of multinational corporations. However, globalization is also associated with increasing inequality between rich and poor nations and a wider gap between the wealthy and impoverished within societies. While increased trade has benefits such as economic growth, critics argue it has failed to distribute prosperity evenly and has exploited some workers. Both opportunities and threats are associated with the rising tide of global business activities and economic integration on a worldwide scale.
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Globalisation
- 2. Globalization is the increasing interdependence, integration & interaction among people and corporation in various locations around the world. Interdependence is a dynamics of being mutually responsible to and sharing common ET of principles with others.
- 3. Globalization refers to rapid increase in the share of economic activity taking place across national borders. It goes beyond the international trade includes the way in which goods/ services are produced /created, delivered &sold & movement of capital.
- 4. This goes beyond the international trade in goods and includes the way those goods are produced, the delivery and sale of services, and the movement of capital.
- 6. Threat or opportunity... Globalization can be a force for good. It has the potential to generate wealth and improve living standards. But it isn't doing that well at the moment. The benefits from increased trade, investment, and technological innovation are not fairly distributed. The experience of the international trade union movement suggests that the reality for the majority of the world's population is that things are getting worse. Globalization as we know it is increasing the gap between rich and poor. This is because the policies that drive the globalization process are largely focused on the needs of business.
- 7. KEY PLAYERS They are- Multinational firms which carry out business across the national borders. The World Trade Organization (WTO) THROUGH WHICH INTERNATIONAL TRAD E AGREEMENTS ARE NEGOTIATED& ENFORCD The World Bank & International Monetary Fund (IMF) are means to assist Govt .in achieving development aims through the provision of loans, technical assistance.
- 8. STAGES IN GLOBALISATION- Domestic company links with dealer & distributor. Company does the activities on its own. Company begins to carryout its own manufacturing , marketing & sales in the foreign markets. Company starts fullfledged operations including business systems and R&D. At this stage the managers are expected to perform the tasks which they were doing in domestic markets to replicate them in foreign markets.
- 9. So why go ‘Global’? Competition within your national market is becoming too intense so you decide to push sales in overseas markets. Your products within your national markets are reaching the end of the lifecycle so you wish to push it into national markets. Sales and profit are generally declining in national markets. You wish to become a global player.
- 10. THE DIFFERENCE BETWEEN COMPETING INTERNATIONALLY & COMPETING GLOBALLY A company will start to compete internationally by entering just one or maybe a select few foreign markets. Competing on a truly global scale comes later , after a company has established operations on several continents & is racing against rivals for global market leadership.
- 11. INTEGRATION OF ECONOMIES Made possible by: Technology Communication networks Internet access Growth of economic cooperation – trading blocs (EU, NAFTA, etc.) Collapse of ‘communism’ Movement to free trade
- 12. TRADE VERSUS AID? Benefits of Trade: Increased choice Greater potential for growth Increase international economies of scale Greater employment opportunities Trade has led to massive increases in wealth for many countries. Copyright: budgetstock, stock.xchng
- 13. TRADE VERSUS AID? Disadvantages of trade: Increase in gap between the rich and the poor Dominance of global trade by the rich, northern hemisphere countries Lack of opportunities for the poor to be able to have access to markets Exploitation of workers and growers How far does trade help children like these? Copyright: clesio, stock.xchng
- 14. CORPORATE EXPANSION Multi-national or trans-national corporations (MNCs or TNCs) – businesses with a headquarters in one country but with business operations in a number of others. No matter where you go in the world, certain businesses will always have a presence. Copyright: mkeky, stock.xchng
- 15. OTHER ISSUES: Accountability of Global businesses? Increased gap between rich and poor fuels potential terrorist reaction Ethical responsibility of business? Efforts to remove trade barriers There are plenty of people who believe that globalisation is a negative development, protests at the G8 summits, pollution, poverty and concern over GM crops are just some of the issues. Copyright: stock.xchng
- 16. 1-16 STANDARIZATION VERSUS ADAPTATION Globalization (standardization) Developing standardized products marketed worldwide with a standardized marketing mix Essence of mass marketing Global localization (adaptation) Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction Essence of segmentation Think globally, act locally
- 17. 1-17 THE IMPORTANCE OF GOING GLOBAL For U.S. companies, 70% of total world market for goods and services is outside the country Coca-Cola earns 75% of operating income and two-thirds of profit outside of North America For Japanese companies, 90% of world market is outside the country 94% of market potential is outside of Germany for its companies
- 18. 1-18 MANAGEMENT ORIENTATIONS Ethnocentric orientation Home country is superior to others Sees only similarities in other countries Assumes products and practices that succeed at home will be successful everywhere Leads to a standardized or extension approach
- 19. 1-19 DRIVING FORCES AFFECTING GLOBAL INTEGRATION AND GLOBAL MARKETING Regional economic agreements Converging market needs and wants and the information revolution Transportation and communication improvements Product development costs
- 20. 1-20 DRIVING FORCES AFFECTING GLOBAL INTEGRATION AND GLOBAL MARKETING Quality World economic trends Leverage
- 21. 1-21 RESTRAINING FORCES AFFECTING GLOBAL INTEGRATION AND GLOBAL MARKETING Management myopia Organizational culture National controls Opposition to globalization
Editor's Notes
- Ethnocentric orientation leads to a standardized or extension approach. Foreign operations are typically viewed as being secondary or subordinate to the country in which the company is headquartered. Sometimes valuable managerial knowledge and experience in local markets may go unnoticed. Manufacturing firms may view foreign markets as dumping grounds with little or no marketing research conducted, manufacturing modifications made or attention paid to customer needs and wants. Example: In Nissan’s early days of exporting to the United States, the company shipped cars for the mild Japanese winters. Executives assumed that when the weather turned cold, Americans would put a blanket over their cars just like Japanese would. Nissan’s spokesperson said, “We tried for a long time to design cars in Japan and shove them down the American consumer’s throat. That didn’t work very well.” Michael Mondavi, former CEO of the wine company said, “Robert Mondavi was a local winery that thought locally, grew locally, produced locally, and sold globally. . . . To be a truly global company, I believe it’s imperative to grow and produce great wines in the world in the best wine-growing regions, regardless of the country or the borders.”
- DRIVING FORCES Regional agreements: NAFTA, EU expansion and single currency. WTO (1994) Market needs and wants and IT: There are cultural universals as well as differences. Common elements in human nature provide the opportunity to create and serve global markets. For example, soft drinks companies must recognize that product adaptation is not always necessary and that competitors may be serving global customers. The information revolution that Thomas Friedman calls the democratization of information is one reason for the trend to convergence. CNN and MTV allow people in remote areas to compare their lifestyles to others. Advertising overlapping national boundaries such as in Asia or Europe and the mobility of consumers in these markets has allowed for pan-regional positioning. The Internet is perhaps the strongest force that allows people everywhere to buy and sell. Transportation and communication: Jets allow around the world travel in less than 48 hours. 1970: 75 million international passengers. 2003: 540 million. Airlines sell one another’s seats thanks to modern technology. International phone calls are inexpensive and there are many other ways to communicate including fax, email, video conferencing, wi-fi, and broadband Internet. Transportation costs have fallen. Due to specially designed ships, the cost of shipping autos from Japan to the United States is less than the cost to ship from Detroit to either U.S. coast. Intermodal transportation uses 20- to 40-foot containers that may be transferred from trucks to railroad cars to ships. Product Development Costs: New pharmaceutical cost in 1976 = $ 76 million; today = $400 million and up to 14 years to get a drug approved. Pharmaceutical companies go global to spread the costs. However, only 7 countries account for 75 percent of sales.
- Quality: Global and domestic companies may each spend 5 percent of sales on R&D but the global company has much more revenue from its markets. Global companies “raise the bar” for all industry competitors. Nissan, Matsushita, and Caterpillar have achieved world-class quality. World economic trends: Economic growth in key developing countries equals major market opportunities. Slowing growth in developed countries has compelled managers to look abroad. Rapid economic growth, in a country such as China, has caused policymakers to open markets to outsiders. Competition can strengthen domestic companies. Domestic companies seek more governmental protection if markets are not growing. Worldwide movement to free markets, deregulation, and privatization is another driving force. As independent private managers take over running businesses (steel, railroads, telephones, airlines, utilities, restaurants, nightclubs) from governments, they are likely to seek the best deals, regardless of the nationality of the supplier. Leverage: A company enjoys some type of advantage by virtue of the fact that it has experience in more than one country. Experience transfers mean that a company can leverage its experience in any part of the world. It can use management practices, strategies, products, advertising appeals, or sales or promotional ideas that have been test-marketed in one country or region and apply them in comparable markets. Because Chevron has drilled for oil under all conditions and recorded them, managers with a problem know how it has been handled in the past. Scale economies can be gained in manufacturing and by centralizing functional activities. Resource utilization means that a global companies can scan the entire world to identify people, money and raw material that will enable it to compete most effectively in world markets. Rising and falling “home country” currency is not an issue as the world is full of currencies and a global company seeks financial resources on the best available terms. It uses them where there is the best opportunity to serve a need at a profit. Global strategy is a design to create a winning offering on a global scale. A global strategy is built on an information system that scans the world business environment to identify opportunities, trends, threats, and resources. When opportunities are identified, the global company leverages its skills and focuses it resources to create superior value for customers and achieve competitive advantage.
- Management myopia and organizational culture: Ethnocentric companies will not expand geographically. Managers tend to dictate when they should create strong local teams that they can rely upon for market information. Know-it-all local teams won’t listen to management and all-knowing managers won’t listen to local experts. Successful global companies have learned to integrate global vision and perspective with local market initiative and input. National controls: Every country tries to protect its home industries and services through tariff and non-tariff controls. Thanks to organizations like GATT, WTO, NAFTA, EU, and other economic agreements, tariffs have been largely removed in high-income countries. Non-tariff barriers to trade include “Buy Local” campaigns, food safety rules, and other bureaucratic obstacles. Opposition to Globalization: Globophobia is the term used to describe an attitude of hostility toward trade agreements, global brands, or company policies that appear to result in hardship for some individuals or countries while benefiting others. Opponents to globalization include college or university students, NGOs, and labor unions. Some Americans believe that globalization has sent American jobs—both blue- and white-collar—overseas and also depressed wages at home. In developing countries, many believe that free trade agreements benefit the world’s most advanced countries. An unemployed miner in Bolivia said, “Globalization is just another name for submission and domination. We’ve had to live with that here for 500 years and now we want to be our own masters.”