Case: Wal-mart ’ s global expansion

1. Case: Wal-mart’s global expansion • Largest retailer in the world –Over 4500 stores • International expansion in 1991begins with Mexico in response to market saturation in the US • Localization strategy adopted after trial and error • Global buying power has allowed it to reap economies of scale • Wal-mart faces significant competition from other global retailers, but has the first mover advantage in some markets

2. Food retailers going global Wal-Mart of the United States : 1990 100%, 80% domestic, by 2001 1,045 stores outside U.S.A, Using acquisition, it entered Germany & Britain (Asda). Mexico (building) Carrefour of France : 26 countries, more than 50 percent of its sale outside France, soon to enter the States Ahold of Holland – multiple acquisition (Giant Food, 1063 supermarkets) more than 70% outside Holland Tesco from the United Kingdom – vivid these days in Southeast Asia & Eastern Europe (acquisitions & expansions) • Drivers fro going global • Barriers to cross-border investment fell • Domestic market saturation • Rush-in effect • Economies of scale (buying power) • Transfer effect of their core capabilities • National differences in tastes • & preferences affects firm’s strategy • for going global. Global retailing market

3. Globalization = The shift toward a more integrated and interdependent world economy • global product – car, mobile phone, every day life • globally interdependent economy • * local jobs depend upon open international markets • * From a company point of view – increased opportunities for a firm • to expand – the collapse of communism, Deregulation for buz. • privatizing state-owned enterprises, deregulating markets, increasing • competition, & welcoming investment by foreign businesses • global challenge • * different tastes and preferences, operating systems, brand • The Globalization of Markets = The merging of historically distinct and separate • national markets into one huge global marketplace. • Tastes and preferences converge onto a global norm • Firms offer standardized products worldwide creating a world market • Significant differences still exist between national markets on many relevant dimensions • These differences require that marketing and operating strategies and product features • be customized to best match conditions in a country. • Convergence vs. Differences (tastes & preferences), Firm size & global competition, • Homogeneity vs. Diversity (market) • Countries are different • Range of problems are wider and more complex • Government intervention in trade and investment creates problems • International investment is impacted by different currencies

4. The Globalization of Production = The sourcing of goods & services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, & capital). Quality increase & cost reduction, the 777 (132,500 component parts by 545 suppliers) – global products Impediments – barriers to trade bet/w countries, barriers to FDI, transportation costs, & issues associated with economic & political risk.

5. Global Production Swan Optical Manufacturing Example 1 Design 1-5

6. The emergence of global institutions • Globalization has created the need for institutions to help manage, regulate • and police the global marketplace • GATT (General Agreement on Tariffs and Trade) • WTO : Responsibility for policing the world trading systems and making sure nation- • states adhere to the rules laid down in trade treaties signed by WTO member states. • IMF : 1944, Brentwoods, NH. Maintaing order in the int’l monetary system. • World Bank : Promoting economic development • UN : 1945 Preserving peace through international cooperation and collective security. • Drivers of Globalization • Declining Trade & Investment Barriers • Trade barriers – the Great Depression of the 1930s • GATT (140 countries) & Uruguay Round (December, 1993, services & agricultural • goods) • removing restrictions to FDI • – the globalization of markets & production vs. intense competition • Globalization of markets and production has been facilitated by • Reduction in trade barriers • Removal of restrictions to foreign direct investment

7. Pattern of declining tariffs

8. Volume of world trade and production, 1950-2002 Fig: 1.1

9. The Role of Technological Change Microprocessors and Telecommunications – Moore’s Law – 18 months – capability doubled, cost half. The Internet & World Wide Web – B2B, Shopping Mall. Transportation Technology – commercial jet aircraft & containerization Implications for the Globalization of Production - GSCM Implications for the Globalization of Markets – customer tastes & preferences, global culture

10. The shrinking globe Fig: 1.2

11. The Changing Demographics of the Global Economy The Changing World Output and World Trade Picture – Relative decline in the share of of world output and world exports accounted for by the United States and other long-established developed nations (Table 1.2) The Changing Foreign Direct Investment Picture (Figure 1.4 & Figure 1.5) The Changing Nature of the Multinational enterprise Non-U.S. Multinationals – the emergence of Japanese, & other developing countries The Rise of Mini-Multinationals – Lubricating Systems, Inc. The Changing World Order –Communist countries fall, China & Latin America – democratic politics and free market economics- the opportunities & risks The Global Economy of the 21st Century – privatization, deregulation, market competition, removing barrier

12. The changing pattern of world output and trade

13. Percentage share of total FDI stock Fig: 1.3

14. Volume of FDI inflows, 1994-2002 ($ billions) Fig: 1.4

15. National origin of largest multinational corporations Fig: 1.5

16. The Globalization Debate Pro Lower prices for goods and services Economic growth stimulation Increase in consumer income Creates jobs Countries specialize in production of goods and services that are produced most efficiently Con Destroys manufacturing jobs in wealthy, advanced countries Wage rates of unskilled workers in advanced countries declines Companies move to countries with fewer labor and environment regulations Loss of sovereignty Antiglobalization Protests - Globalization, Jobs, & Income Globalization, Labor Policies, & the Environment Globalization & National Sovereignty Globalization & the World’s Poor Managing in the Global Marketplace

17. Environmental performance and income Fig 1.6

18. 1.3 The Shrinking Globe