Globalization BM

8/18/2019 Globalization BM

1/13

Stategy for a global village


2/13

Globalisation can be defined

as the growing integration and

interdependence of the worldeconomies.


3/13

Trade liberalisation World Trade Organisation

Expansion and deepening of the European Union

Technological Progress

Cultural awareness and Recognition Language ( growth of English speaking nations)

Transition to market systems in eastern Europe

Rising real living standards

Rapid growth in the Asian Tigers and more recently inChina and India

Privatisation in and liberalisation of domestic markets

Deregulation of international capital markets

Fall in transport costs

Improvement in global communications


4/13

(1) Market drivers

Degree of homogeneity of customer needs

Existence global distribution networks Transferable marketing

(2) Cost drivers

Potential for economies of scale

Transportation cost

Product development costs Economies of scope

3) Government drivers

Favour trade policies e.g. market liberalisation

Compatible technical standards and common marketing

regulations Privatisation

(4) Competitive drivers

The greater the strength of the competitive drivers thegreater the tendency for an industry to globalise


5/13

Rapid expansion of international trade

Internationalisation of products and services by largefirms

Growing importance of multinational corporations

Increase in capital transfers across national borders Globalisation of technology

Shifts in production from country to country

Increased freedom and capacity and firms to

undertake economic transactions across nationalboundaries

Fusing of national markets

Economic integration

Global economic interdependence


6/13

Increases the Level of competition

Meeting Demands of Customer Expectations

and Needs

Economies of scaleChoice of location ( multinationals now look

for lower production costs)

Mergers and Acquisitions and Joint Ventures

Increased customer Base

E Commerce


7/13

A Multinational corporation ( MNC) is a

business corporation that operates in two ormore countries.

Examples :

Coca ColaDell

Exxon

HSBC

Nike

NOkia


8/13

Trade in goods and services

Investment

Labour force movement

Products

Production

Technology

Research and development Exchange of ideas and knowledge

Intellectual property


9/13

Forces driving the growth of MNCs:

The search for growth markets

Increase customer Base

Economies of scale

Spread the Risk Globalisation of markets

Desire to reduce production costs

Desire to shift production to countries with lowerunit labour costs

Desire to avoid transportation costs Desire to avoid tariff and non tariff barriers

Forward vertical integration

Extension of product life cycles

Deregulation of capital markets


10/13

Lack of Local Knowledge

Storage, Transportation and distribution costs

External Factors ex Legal restrictions

Language Barriers

Cultural Barriers

Political Factors

Economic conditions Infrastructure


11/13

A Host country is a nation

that allows a Multinational

Company ( MNC ) to set up intheir country


12/13

Create Jobs

Technology Transfer ( quality circles , Kaizen)

Creates More Competition

Increased GDP , Economic Growth Effect on Balance of Payments

Increased exports


13/13

Treatment of Poorer countries

Lack of Corporate Social Responsibility (CSR)

Exploiting scarce resources

Environmental concerns

Child labour

Sweat shops

competition ( capital intensive firms)

Competition forces local industries to decreaseprices

Treat to local businesses

Create unemployment

Globalization BM

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