Globalization Drivers

1. Globalization Drivers Mahesh P. Joshi Director of Research & Practice Center for Innovation and Entrepreneurship and Associate Professor of Global Strategy and Entrepreneurship School of Business – George Mason University President - Joshi International, Inc. mpjoshi@gmu.edu Mahesh Joshi - Globalization Drivers

2. Some Thoughts • Globalization is very difficult • All firms are born global • US was created as a result of globalization • To be successful a firm must be active in global arena Mahesh Joshi - Globalization Drivers

3. Why Firms Internationalize • Demand • New Markets • Follow the customer • Follow the competition • Fend off new competition • Supply • Raw materials • Land • Labor • capital Mahesh Joshi - Globalization Drivers 3

4. Benefits of Globalization • Cost reduction • Economies of scale, lower factor cost, focused production (rationalized production), flexibility, enhancing bargaining power • Quality enhancements • Exposure to demanding customers, focused offerings • Enhanced customer preferences • Global availability, global serviceability, global recognition • Increased competitive leverage • Cross subsidization of competitive moves, entering the backyard of your competitor 4 Mahesh Joshi - Globalization Drivers

5. Costs of Globalization • Main cost • Coordination of resources and people • Levers used to globalize pose their own costs • Market participation may have unique reasons • Standardized products/service created by committee • Location may be not suitable for global activities • Centralized marketing message may miss the local flavor • Cross competition may not be feasible 5 Mahesh Joshi - Globalization Drivers

6. Core Strategy • Several dimensions to • What is offered • Who is the customer • What geographic markets • What functional strategy • What is the competitive advantage • Key focus • Board versus narrow strategic choices 6 Mahesh Joshi - Globalization Drivers

7. International Strategy • International Market Selection leads to • A need for geographic market selection • Appreciation of barriers to trade (tariffs and quotas) • Foreign ownership and repatriation rules • Knowledge of local laws • Knowledge of Local preferences in customer behavior • Cross-Cultural interaction • Results: Weakening of the core strategy 7 Mahesh Joshi - Globalization Drivers

8. Core Strategy and Globalization 8 Mahesh Joshi - Globalization Drivers

9. Creating a Global Strategy • To overcome weakening of the core strategy • Need to find a fit between external and internal environment • Competitive position of the firm • Resource base and businesses of the firm • Industry globalization drivers • Organization’s ability to implement global strategy 9 Mahesh Joshi - Globalization Drivers

10. Industry Globalization Potential 10 Mahesh Joshi - Globalization Drivers

11. External: Industry Globalization Drivers • Market Drivers: Consists of but not limited to • Common customer needs and tastes • Global customer: Lifestyle and taste plus global travel • Global distributors and global brands • Global Marketing and advertisement message • Emergence of lead countries in specific industries • Growth of ICT • Cost Drivers: Consists of but not limited to • Economies of scale plus learning curve effect • Sourcing efficiencies and favorable logistics • Differences in country costs (including exchange rates) • Accelerating technological innovation at a higher cost • Changing product life cycles 11 Mahesh Joshi - Globalization Drivers

12. External: Industry Globalization Drivers: 2 • Government drivers: Consists of but not limited to • Reduction in tariffs and other protective actions • Growth of compatible technical standards • Uniform or common marketing regulations • Government owned customers and competitors (Denationalization, deregulation, open economies) • Host government concerns (if managed well leads to reduction in isolated economies) • Competitive drivers: Consists of but not limited to • Rising world trade levels (high export and import) • New competitors are not restricted to developed economies because of born global firms -variety of countries • Global networks in many industries allow for global focus (interdependence of counties) • Globalized competitors (increased foreign ownership among corporations) • Transferable competitive advantage 12 Mahesh Joshi - Globalization Drivers

13. Global Strategy Levers • Market participation • Choice of countries or regions to exploit competitive advantage • Choice of Products/services • Product modification versus standardization • Activity location • Understanding the value added and hence location to exploit competitive advantage • Marketing • Choice of message that would be uniform or modified • Competitive Moves • Integration of competitive moves across the world 13 Mahesh Joshi - Globalization Drivers

14. The Globalization Triangle 14 Mahesh Joshi - Globalization Drivers

15. National responsiveness Low High High Global integration Low Integration or Responsiveness Global strategy Transnational strategy International strategy Multi-domestic strategy Mahesh Joshi - Globalization Drivers

16. References • Based on: • The Multinational Mission: Balancing Local Demands and Global Vision by C.K. Prahalad, Yves L. Doz, 1999. • Global Strategy... In A World Of Nations? By George S. Yip., Sloan Management Review; Fall 1989; pages 29-43. Mahesh Joshi - Globalization Drivers

17. Contact Mahesh P. Joshi Director of Research & Practice Center for Innovation and Entrepreneurship and Associate Professor of Global Strategy and Entrepreneurship School of Business – George Mason University President - Joshi International, Inc. mpjoshi@gmu.edu Mahesh Joshi - Globalization Drivers