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Explore the impact of globalization on businesses, from decision-making strategies to global moves. Understand the dynamics of interdependence, international trade, and the potential benefits and drawbacks of globalization. Discover key players, stages of globalization, and reasons why firms choose to globalize, along with the conditions necessary for successful global expansion.
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Along with decisions about positioning, mergers, & acquisitions ,decisions about global moves are among the most important ones the strategists make. • A firm that is considering doing business abroad must have a rationale & logic for how it can compensate for & overcome the liabilities &disadvantages that arise from its foreignness.
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.
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.
Definitions • A typical - but restrictive - definition can be taken from the International Monetary Fund which stresses the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology.
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.
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.
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.
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.
Conditions for globalization • Business Freedom-No unnecessary Government restrictions like restriction, restrictions on sourcing of funds and other factors from abroad. Hence the liberalization is the 1st step towards facilitating globalization. • Facilitators-Infrastructure facilitation available at home country an help entrepreneurs go globally. • Government support –Government support available in the form of policy & procedure reform encourage globalization
Resources-Resources is an important factor which decides the ability of affirm to globalize. They include finance ,technology, brand image, company’s image, managerial expertise etc. • Competitors- This is an important factor which company’s success in global market bank on. The factors like low costs& price, product quality, product differentiation, technological superiority. After sales service, market strengths etc are few to name.
Reasons For Globalization Firm operate internationally for a number of reasons: • They may be seeking to secure better sources of raw materials & energy. • They may want to obtain access to low cost factors of production such as labour. • They may be attracted to certain countries because of subsidies those countries provide. • They may be seeking new markets for their products. • Domestic markets may no longer be able to absorb production at minimum efficient scale.
Contd… • They may be motivated by life style factors.Domestic markets become saturated .As they mature , firms look abroad for new opportunities. • They may be seeking opportunities for economies of scope & for learning.
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.
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.
There is a meaningful difference between the competitive scope of a company that operates in a few foreign countries & company that markets its products in 50-100 countries & expanding its operations into additional country markets annually. • Former is termed as International Competitor while the later qualifies as a Global Competitor.
Entering global markets: • There are a number of steps that need to be taken before you decide to enter international markets. • Analyze the international marketing environment. A PEST/STEP analysis needs to be conducted on the market you enter, to assess whether it is worthwhile or not.
Political factors Consider: • The political stability of the nation. Is it a democracy, communist, or dictatorial regime? • Monetary regulations. Will the seller be paid in a currency that they value or will payments only be accepted in the host nation currency?
Economical Factors Consider: • Consumer wealth and expenditure within the country. • National interests and inflation rate. • Are quotas imposed on your product. • Are there import tariffs imposed. • Does the government offer subsidies to national players that make it difficult for you to compete?
Social Factors Consider • Language. Will language be a barrier to communication for you? Does your host nation speak your national language? What is the meaning of your brand name in your host country’s language? • Customs: what customs do you have to be aware of within the country? This is important. You need to make sure you do not offend while communicating your message. • Social factors: What are the role of women and family within society? • Religion: How does religion affect behaviour? • Values: what are the values and attitudes of individuals within the market?
Technological Factors Consider: • The technological infrastructure of the market. • Do all homes have access to energy (electricity) • Is there an Internet infrastructure. Does this infrastructure support broadband or dial up? • Will your systems easily integrate with your host country’s?
Market entry methods After assessing the environment in your selected country, how do you decide which are the best countries to enter? Following factors to be considered before entering- • Speed – How quickly do you wish to enter your selected market? • Costs- What is the cost of entering that market? • Flexibility – How easy is it to enter/leave your chosen market? • Risk Factor – What is the political risk of entering the market? What are the competitive risk? How competitive is the market?
Payback period – When do you wish to obtain a return from entering the market? Are there pressures to break even and return a profit within a certain period? • Long- term objectives- What does the organization wish to achieve in the long term by operating in the foreign market? Will they establish a presence in that market and then move onto others?
Trading overseas • There are a number ways an organization can start to sell their products in international markets. 1. Direct export. • The organization produces their product in their home market and then sells them to customers overseas. 2. Indirect export • The organizations sell their product to a third party who then sells it on within the foreign market.
3. Licensing • Another less risky market entry method is licensing. Here the Licensor will grant an organization in the foreign market a license to produce the product, use the brand name etc in return that they will receive a royalty payment. 4. Franchising • Franchising is another form of licensing. Here the organization puts together a package of the ‘successful’ ingredients that made them a success in their home market and then franchise this package to oversea investors. The Franchise holder may help out by providing training and marketing the services or product. McDonalds is a popular example of a Franchising option for expanding in international markets.
5.Contracting • Another of form on market entry in an overseas market which involves the exchange of ideas is contracting. The manufacturer of the product will contract out the production of the product to another organization to produce the product on their behalf. Clearly contracting out saves the organization exporting to the foreign market. 6.Manufacturing abroad • The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the host country. The government of the host country may give the organization some form of tax advantage because they wish to attract inward investment to help create employment for their economy.
7.Joint Venture • To share the risk of market entry into a foreign market, two organizations may come together to form a company to operate in the host country. The two companies may share knowledge and expertise to assist them in the development of company; of course profits will have to be shared out also
The International Marketing Mix • When launching a product into foreign markets do you standardize or adapt your marketing mix to the foreign market? A company can adopt to use a standardized marketing mix around the world or an adapted marketing mix in each country.
International Product Strategies Standardization Vs Adaption • Basic marketing concepts tell us that we will sell more of a product if we aim to meet the needs of our target market. In international markets, we have to take into consideration consumer’s cultural background, buying habits, levels of personal disposable income etc in order to deliver a tailored marketing mix program to suit their needs.
In today’s global world, where consumers travel more, watch satellite television, communicate and shop internationally over the internet, the world now is becoming a lot smaller. Because of this there is no need to adapt products to local markets. • Brands such as Coca-Cola, MTV, Nike, Levis are all successful global brands where they have a standardized approach to their marketing mix, all these products are targeted at similar groups globally.
In many circumstances a company will have to adapt their product and marketing mix strategy to meet local needs and wants that cannot be changed. • McDonald is a global player however, their burgers are adapted to local needs. In India where a cow is a sacred animal their burgers are served with chicken or fish. • Coca-cola is some parts of the world taste sweeter then in others. Yes we can argue that standardization is better for the organization because it reduces cost, however many organizations will have to ‘think global, but act local’ if they are to successfully establish them selves in foreign markets.
Types of International strategy International strategy MultiCountry Global
Multicountry competition strategy varies somewhat across nations, since – • Buyers in different countries are attracted to different product attributes. • Sellers vary from country to country. • Industry conditions & competitive forces in each national market differ in important aspects.
Multi Country strategy • Product customized for each market. • Decentralized control—Local decision making. • Effective when large difference exists between the countries. • Advantageous product differentiation, local responsiveness, minimal political risk. With multicountry competition , rival firms battle for national leadership & winning in one country does not necessarily signals the ability to fare well in other countries.
Global strategy involves consistent strategy for each country which includes,- • Integrating & coordinating the company's strategic moves worldwide. • Selling in many if not all nations where there is significant buyer demand.
Global strategy • Product is same in countries. • Centralized control • Effective when the difference between the countries is small. • Advantage cost, coordinated activities, fast in product development.
International Promotion Strategy • As with international product decisions and organization can either adapt or standardize their promotional strategy and message. Advertising messages in countries may well have to be adapted because of language barriers or the current message used in the national market may be offensive to overseas residents. • The use of certain colours may also need to be thought about. In India red is the colour worn by the bride in weddings, white is the colour for mourning in Japan. • The level of media development has to also be taken into account. Is commercial television well established in your host country? What is the level of television penetration? How much control does the government have over advertising on TV and radio? Is print media more popular then TV? Many organization go for a strategy of adapting advertising messages to local markets to best meet consumer demand.
International Pricing Strategies Pricing on an international scale is difficult. As well as taking into account traditional price considerations • Fixed and variable costs, • Competition, • Company objectives , • Proposed positioning strategies, • Target group and willingness to pay,
The organization needs to consider the costs of transport, any tariffs or import duties that may be levied on their product's when they are sold on the international scale. Also what currency do you expect to be paid in? Will it be home or international currency? Exchange rate fluctuation will also impact profitability and influence pricing decisions. • Other factors to consider include local incomes, what are income. What is the general economic situation of the country and how will this influence pricing? • The internet is now making pricing more transparent for consumers. Goods can be purchased online from any overseas organizations at local currency prices.
