2. What is Globalization?
Common understanding:
A world without walls.
Integrating the economy with the world
economy leading to the emergence of
global village.
Absence of borders and barriers to trade
between nations.
Process by which an activity becomes
worldwide in scope.
3. Levels of Globalization
Micro level:
Efforts to globalize the activities of the firm/
industry/ company.
Emergence of complementary set of
organizational structure to manage expanding
network of international economic activity and
transaction.
Managers must have a global vision.
Micro Level
(industry/ firm)
Macro Level
(economy)
4. How do we define Global
Industry?
A global industry enjoys competitive
advantage by integrating and leveraging
operations on a world-wide scale.
Competitive advantage:
Creating more value for its customers than
its competitors.
Requires managers to maintain a well-
defined strategic focus.
Focus: Concentration of attention on a core
business or competence.
5. Assessment of industry’s actual or
potential degree of globalization
(Indicators of Globalization)
Percentage of cross-border investment to
total capital investment.
Percentage of cross-border trade to total
world-wide production.
Percentage of cross-border revenue (sales)
to total revenue (sales) generated by
company in all key world regions.
6. 1/23/2024 6
Turning Global Presence into Global
Competitive Advantage
Global Presence
Potential
• Local Market Adaptation
• Economies of Global Scale
• Location Optimization
• Knowledge Transfer Across Location
Realization
Global Competitive Advantage
7. Macro level Globalization
Steps towards integrating the economy into
the world economy.
Simplifying procedures governing
movement of capital (investment).
Withdrawing all sorts barriers relating to
exportation and importation of goods and
services.
Adopting liberal procedures for transfer of
technology among the nation states.
Convertibility of Currency.
8. Environment of Cambodia
No restrictions of convertibility of currencies
for overseas transfer of funds related to
foreign investment.
No restrictions on foreign exchange
operations- purchase and sale of foreign
exchange and transfer of international
settlements.
Transactions must be made by authorized
intermediaries.
No restrictions on repatriation of profit or
capital derived from investments.
9. Investors can freely remit foreign
currencies abroad for:
1. Payment of imported goods and services.
2. Repayment of loans including interests and
principals.
3. Royalties and management fees.
4. Profits after discharge of obligations due
and payment of all taxes and royalties.
5. Repatriation of invested capital on
dissolution of investment projects.
11. Globalization involves creating an
environment in which:
Capital of one country can freely flow to
other countries of the world.
All sorts of trade barriers can be removed.
Technology can move freely among the
countries without any restrictions.
Unrestricted movement of labor takes place.
12. Key Indicators of Global Integration
Indicators Countries
China India Cambodia
Exports and imports
of goods & services
as a % of GDP, 2010
(WB)
30 (Ex)
26 (Im)
22 (Ex)
25 (Im)
54 (Ex)
60 (Im)
Inward FDI flows
as % of GFCF,
2008 (UNCTAD)
6.0 9.6 37.9
Inward FDI stocks
as % of GDP,
2008 (UNCTAD)
8.7 9.9 41.5
13. Globalizing through Marketing-
Important Tasks
To recognize the extent to which marketing
plans and programs can be extended
worldwide.
The extent to which these plans and
programs be adapted.
Balance between a standardized (extension)
approach to the marketing mix and a
localized (adaptation) approach to country
or regional differences.
14. Global Marketing
Does not mean entering every country in
the world.
Widening business horizons to encompass
the world in scanning for opportunity and
threat.
Entering outside home country decision-
1. Company’s resources.
2. Managerial mindset.
3. Nature of opportunities and threats.
15. Controversy
Develop standardized, high-quality world
products and market them around the
globe by using standardized advertising,
pricing and distribution- ( Prof. Theodore
Levitt, Harvard Business Review, 1983).
Levitt’s comment- world becoming
homogenized is bunk.
Success of global company may not be
based on total standardization of marketing
mix elements.
16. Global Localization
(Think globally and act locally)
1. World requires homogenous products- one
size fits all.
2. World requires endless customization-
special products for every region.
3. It is neither and it is both- global
localization.
Coke’s success in Japan (70% share of soft
drink) is its ability to achieve global
localization.
McDonald customizes its menu by region.
17. Global Marketing- Importance
Maximum growth potential:
US market represents around 25% of the
total world market for all products and
services.
Around 75% of world market potential is
outside US for American companies.
Around 85% of world market potential is
outside Japan for Japanese companies.
Around 94% of world market potential for
German companies is outside Germany.
18. About 70% of Coca-cola revenues is
generated outside US by its soft drink
business.
Dominance of global companies in
domestic market- Competition.
Fail to formulate responses to
globalization:
1. Companies will be absorbed by dynamic
enterprises.
2. Companies will be disappeared.
19. (Proactive reasons) (Reactive reasons)
Pull factors are forces of attraction which pull
the business to the foreign markets.
Push factors are forces of compulsion which
prompt companies to internationalize.
Pull factors Push Factors
Reasons for Globalization
21. Profit Advantage
International business helps to increase the
total profit of the business.
The AC per unit will be lowest if the plants
is operated at optimum capacity OQ1
Domestic demand constraint makes it to
produce OQ and hence AC is OC or QR
much higher than OC1 or Q1I. AC to the
extent of CC1 can be reduced by exporting
QQ1 amount and the profitability will
increase per unit by CC1 per unit.
23. Growth Opportunities
MNCS are increasingly interested in a
number of developing countries- rapid rise
of income and population in these countries.
1 billion people estimated to be added to
the world population between 1999 and
2014.
For going international is to take advantage
of the opportunities in other countries.
24. Domestic Market Constraints
Domestic demand constraints drive many
companies to expand the market beyond
the national border.
For Example:
Nestle derives only about 2% of its total
sales from its to home market,
Switzerland.
25. For Philips, only around 8 % of the total
sales coming from the home market,
Holland, but many different subsidiaries of
Philips have contributed much larger share
of the total revenues than the parent
company.
26. Competition
Protected market does not normally motivate
Companies to seek business outside the home market.
Economic liberalization brings competition from
foreign firms as well as from those within the country.
Companies take an offensive international competitive
strategy by way of counter competition.
To penetrate the home market of the potential foreign
competitor so as to diminish its competitive strength
and to protect domestic market share.
27. Effects of Globalization on the
World Economy
The global economy is becoming more
integrated day by day.
Has been a trend of lowering the barriers
to the free flow of goods, services and
capital among countries.
FDI has been playing a crucial role in the
global economy.
28. Imports are penetrating deeper into the
world’s largest economies as well.
Growth of world trade, FDI and imports lead
to more foreign competition in the domestic
markets.
Domestic firms are required to enhance the
production and distribution capabilities to
compete with foreign players.
Companies have started looking the world
as a market for their products.
Innovations have started spreading faster.
29. Opportunities have been increasing for the
firms.
Companies have started dispersing their
manufacturing, marketing and research
facilities around the globe where cost and
skill conditions are most favorable.
