Topic 2 – Global Markets, Global Products, Global Firms

1. Topic 2 – Global Markets, Global Products, Global Firms A – Mass Consumption in a Globalized WorldB – The Multinational Enterprise C – Global Manufacturing

2. A – Mass Consumption in a Globalized World What consumerism implies in a global economy? Watch this video

3. The Three Pillars of Consumerism Read this content

4. Consumerism • Global Consumer Culture • The setting of global common preferences: • Food. • Fashion. • Media (movies, music). • Electronics. • Automotive. • Many global goods originated from the western world: • Many key technologies (e.g. the automobile, the personal computer). • The United States has been a powerful influence on various other cultures. • Multinational corporations have become key agents.

5. Global Gross Domestic Product and Human Development Index, 2010 Read this content What is the HDI and how it reflects market potential?

6. Share of Consumption by Sector and Income, Developing Countries, 2010

7. Advertising and Psychology Which basic human emotions these ads relate to?

8. Global Consumption: Product versus Brand

9. The World’s Most Valuable Brands, 2017 (in millions)

10. Products and Brands: Main Elements of Corporate Portfolios Using a portfolio as an example, explain the difference between products and brands.

11. Global Product Strategies

12. National Food Preferences Adaptation: The Case of Campbell

13. Adaptation: Number of McDonald’s per Country, 2013 1,427 14,267 3,164 35,000 McDonalds restaurants worldwide (2013), employing 1.5 million people.

14. The Illusion of Diversity, Ownership of the Soft Drink Industry, United States 42.8% 31.1% 15%

15. Consumption of Coca-Cola Beverages per Capita (Liters)

16. Short Assignment: Global Product Strategies Find examples of global products that have emerged through diffusion, adaptation and creation.

17. B - The Multinational Enterprise Watch the video What are multinationals? What is their role and importance?

18. The Corporation as a Decision, Management and Planning Unit Read this content

19. Conflicting Elements of a Corporation: Reconciling the Needs of Shareholders, Employees, the Society and Customers What are the main conflicting elements a corporation is reconciling?

20. Cost and Production of Ford Vehicles, 1908-1924 Read this content and watch the video

21. Treasury Department Gross Tax Collection, 1960-2015

22. Fordist and Post-Fordist Corporate Structure Read this content and watch the video

23. Corporations in the Global Economy • Multinational corporation (MNC) • Provides goods and/or services. • A corporation that takes a global approach for: • Its inputs (raw materials, parts). • Its outputs (customers). • Different parts of the industrial system are located in places where they are the most productive. MNC Inputs Outputs

24. What Multinational Corporations are Trying to Achieve to Compete?

25. Types of Multinational Corporations by Strategy

26. Globally Integrated and Multidomestic Corporation What is the difference between a globally integrated and multidomestic corporation?

27. Types of Internationalization Trading Industries Global Industries HIGH Automotive Petroleum Semiconductors Consumer electronics Aerospace Military hardware Diamond mining Agriculture International Trade Domestic Industries Multidomestic Industries Railways Hospitals Personal care Retail banking Hotels Consulting LOW LOW Foreign Direct Investment HIGH

28. The Impacts of Multinationals "(A corporation has) neither body to jail nor soul to damn." - Lord Edward Thurlow (1731-1806)

29. The Growth of Large Multinationals: Three Main Options

30. The World’s 20 Largest Corporations by Revenue, 2017 ($US millions) Read this content How can the size of a corporation be measured?

31. C – Global Manufacturing What is the difference between outsourcing and offshoring? Why and how it is used?

32. The Four Industrial Revolutions Read this content Production Structure Driver Late 18th – early 19th Century 1.0 Mechanization Substitution Industrial cities Steam engine and mechanical production Late 19th - mid 20th Century 2.0 Mass Production Economies of scale Industrial regions Electricity and division of labor Second half of 20th Century 3.0 Global production networks Automation Input costs Electronics and information technologies Early 21st Century 4.0 Robotization Added value Global value chains Cyber-physical systems

33. GDP Share of Manufacturing, Selected Countries, 1970-2012 Read this content

34. Typical Cost Structure of a Shirt

35. The Corporation and its Expansion Read this content Coal Extraction Activity Iron Ore Corporation C Corporation B Corporation A Corporation Steel Making Metallic Products Mechanical Products

36. Outsourcing • Definition • Moving some of a firm’s internal activities to outside providers: • Administrative, engineering, research, development, or technical support processes. • Substitution; the replacement of internal capacity and production by the supplier. • Binding agreement (supplier/client) defining the transferred services and terms. • Supplier acquires the means of production: • Transfer of people, assets and other resources from the client. • Client procures the services from the supplier for the term of the contract.

37. Outsourcing • Reasons to outsource • “Labor arbitrage”; find lower cost labor. • Reduce or control costs. • Free up internal resources. • Gain access to world-class capabilities. • Increase revenue potential. • Increase process efficiencies. • Focus on core activities. • Compensate for a lack of specific capabilities or skills.

38. Outsourcing • Main outsourcing sectors • Fabrication (parts). • IT and telecommunications. • Logistics and supply chain management. • Business processing (data entry). • Finance and accounting. • Facilities management. • Call centers. • HR (including payroll and benefits administration, recruitment and training).

39. Offshoring, Nearshoring and Farshoring Explain the differences between outsourcing and offshoring and the different types of offshoring

40. Disconnection of Global Production and Distribution Core Base R&D Distribution Marketing/Retail Manufacturing Base Read this content

41. Global Sourcing: European Assembly of a Ford Escort

42. Global Sourcing: The Boeing 787 Dreamliner Forward fuselage: Kawasaki Heavy Industries (Japan) Spirit Aerosystems (USA) Wing box: Mitsubishi Heavy Industries (Japan) Wing ice protection: GKN Aerospace (UK) Centre fuselage: Alenia Aeronautica (Italy) Escape slides: Air Cruisers (USA) Rear fuselage: Boeing South Carolina (USA) Vertical Stabiliser: Boeing Commercial Airplanes (USA) Doors & windows: Zodiac Aerospace (USA) PPG Aerospace (USA) Lavatories: Jamco (Japan) Flight deck seats: Ipeco (UK) Raked wing tips: Korean Airlines Aerospace division (Korea) Flight deck controls: Esterline (USA), Moog (USA) Horizontal Stabiliser: Alenia Aeronautica (Italy) Engines: GE Engines (USA), Rolls Royce (UK) Centre wing box: Fuji Heavy Industries (Japan) Aux. power unit: Hamilton Sundstrand (USA) Engine nacelles: Goodrich (USA) Tools/Software: Dassault Systemes (France) Navigation: Honeywell (USA) Pilot control system: Rockwell Colins (USA) Wiring: Safran (France) Passenger doors: Latécoère Aéroservices (France) Landing gear: Messier-Dowti (France) Electric brakes: Messier-Bugatti (France) Tires: Bridgestone Tires (Japan) Cargo doors: Saab (Sweden) Final assembly: Boeing Commercial Airplanes (USA) Prepreg composites: Toray (Japan) Source: www.newairplane.com

43. Value Creation and Capture, iPhone 4 (in USD) Korea Inputs ($80.05) Germany Distribution ($90.00) Inputs ($16.08) Inputs ($24.63) Retail ($600) USA China France Inputs ($3.25) ($329.95) Misc. ($45.95) Japan Factory Gate Price ($194.04) Inputs ($0.70) VA ($6.54) Other Inputs ($62.79) Apple ($269.05) Read this content

44. Main Reasons Provided by Manufacturers for Reshoring

45. Cost to Manufacture a Cotton Vest, Asia and United States, 2013

46. Short Assignment: Outsourcing and Offshoring in the Toy Industry Topper the Trick Terrier Voice Recognition Requirements: (San Francisco) Voice Recognition Programming: (Taiwan) Plastic Eyes: (Shenzhen, China) Plastic Body: (Malaysia) Microfiber for Coat: (Korea) Speaker for voice: (Dongguan, China) Transistors: (Shenzhen, China) Motors for legs: (Shaoguan, China) IC chips: (Taiwan) Plastic legs: (Taiwan) Wiring: (Dongguan, China) Packaging: (Hong Kong) Review the world’s leading toy designers and see how they outsource and offshore the manufacturing of toys.