International Business Environment & Strategy

Drivers of GlobalisationApril 2014

Slides based on Yip, G. (1995):- Johnson, Scholes & Whittington (2011)

“Exploring Corporate Strategy”, 9th edition

robert.jones@anglia.ac.ukhttp://cambridgemba.wordpress.com/strategy

Robert Jones © 2010-2013

What is globalisation?

Causes?

Effects?

Pros & cons?

Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice HallBased on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

Drivers of globalisation

Government influence

Cost advantages

Global market convergence

Global competition

Globalstrategies

• Similar customer needs• Global customers• Transferable marketing

Drivers of globalisation

Other examples of global market convergence?

1.

2.

3.

4.

5.

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

Drivers of globalisation

Global market convergence

Cost advantagesScale economies

Larger, more efficient factoriesSmaller factories closing

Country-specific costsOff-shoring to lower cost nationsLow or High salary costsBUT … Low or high productivity & quality?

Sourcing efficienciesJust-in-time (Toyota production system)Large, local suppliersTime & distance & cost of 12,000 km logisticOn-shoring – we make things in the UK !

High product development costs Constant innovation Research & DevelopmentConstant improvementNew product every 3 years or every 3 months?

What are the implications of these Cost drivers?

1.

2.

3.

4.

5.

Employees at a call centre in the southernIndian city of Bangalore.

Is my Toyota Corolla a Japanese car or………?

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

Drivers of globalisation

Cost advantages

Global market convergence

Global competition

InterdependenceGlobal alliances – car industry

- airlines- electronics / digital

Competitors globalTop firms have #1 / #2 market shares in many nationsGlobal car makers

High exports / importsMany electronic products are made in ChinaShoes are made in Vietnam“Home” markets are disappearing

Airbus A-380How many nations are in the Airbus (EADS) group?How many suppliers to Airbus? How many nations supply? How many in USA?The A-380 costs $280 million. What % of that price ticket is made in UK?

A global airline alliance:-

Why do competitor firms come together in alliances / collaborations?

1.

2.

3.

4.

5.

Global brands – where next?

Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice HallBased on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

Drivers of globalisation

Cost advantages

Global market convergence

Global competition

Government influence Trade policies

Falling barriers to tradeLiberalisation & deregulationWTO / EU and trading bloc policies

Technical standards

ISO replaces national standards (BS, DIN, ASA) Computer software is internationalSafety & quality standards:-Pharmaceutical, aviation, automobile sectors

Host government policiesSensitivity is neededNational differences still exist

European Union

How many member nations?

What are the otherTrading Blocs ?

€ Euro pros and cons

How many member nations?

http://wto.http.internapcdn.net/WTO/wmv/2013_09_11_pf_teaser.wmv

ArgentinaAustraliaBrazilCanadaChinaFranceGermanyIndiaIndonesiaItalyJapanMexicoRussiaSaudi ArabiaSouth AfricaRepublic of KoreaTurkeyUnited KingdomUnited States of America

Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice HallBased on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

Drivers of globalisation

Government influence

Cost advantages

Global market convergence

Global competition

How do these Drivers of Globalisation affect us?

Think of the 4 Cs:-

Competition is increasing

Costs must be reduced constantly

Customers are ever more demanding

Country differences are still important

R Jones (2006) - Based on Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice Hall

Based on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

The 4 Cs of globalisation

Government influence

Cost advantages

Global market convergence

Global competition

Country

Customer

Cost

Competition

But is this the full picture of globalisation ?

What else is important in business ?

Sources of Culture

Language/sNationalityEducationProfessionEthnic groupReligionFamilySexSocial classCorporate or organisational culture

Culture

Based on Usunier (2000) Marketing Across Cultures, Pearson Education Ltd

Sources of Culture

A famous (infamous) Benetton advertisement

A famous (infamous) Benetton advertisement

Benetton Images

A famous (infamous) Benetton advertisement

A famous (infamous) Benetton advertisement

R Jones (2006) - Based on Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice Hall

Based on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

The 5 Cs of globalisation

Government influence

Cost advantages

Global market convergence

Global competition

Country

Customer

Cost

Competition

Culture

What factors are we seeing here?

R Jones (2006) - Based on Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice Hall

Based on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

The 6 Cs of globalisation

Government influence

Cost advantages

Global market convergence

Global competition

Country

Customer

Cost

Competition

Culture Converging technologies,E-business

R Jones (2006) - Based on Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice Hall

Based on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

The 6 Cs of globalisation

Government influence

Cost advantages

Global market convergence

Global competition

Country

Customer

Cost

Competition

Culture Converging technologies,E-business

Other factors

http://www.bankofengland.co.uk/monetarypolicy/assetpurchases.htm

The Credit Crunch

Quantitative easing

Where are we now with the financial crisis?

How is the economy doing?

How are conditions for business?

It depends on the nation and the region

It depends on the industry

Currency exchange rate fluctuations

http://uk.reuters.com/business/currencies

© R Jones (2009) - Based on Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice Hall

Based on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

More Cs of globalisation

Government influence

Cost advantages

Global market convergence

Global competition

Country

Customer

Cost

Competition

Culture Converging technologies,E-business

Creditcrunch Currency

Is competition between companies “pure” or ………..

Common platform(Collaboration)Where is this car built ?

Competition or collaboration or collusion ?

British Airways fined £58.5m for fuel price-fixingBritish Airways is to pay a reduced £58.5m fine for colluding with rival Virgin Atlantic on fuel surcharges, finally putting to bed an investigation that has lasted more than five years.

(c) Robert Jones 2013

The Competition Commission takes action against anti-competitive behaviour

http://www.competition-commission.org.uk/(c) Robert Jones 2013

http://ec.europa.eu/competition/index_en.html(c) Robert Jones 2013

Agreements between two or more independent market operators which restrict competition are prohibited by Article 101 of the European Treaty. The most flagrant example of illegal conduct infringing Article 101 is the creation of a cartel between competitors (which may involve price-fixing and/or market sharing).

Article 102 of the Treaty prohibits firms holding a dominant position on a determined market to abuse that position, for example by charging unfair prices, by limiting production, or by refusing to innovate to the prejudice of consumers.

http://ec.europa.eu/competition/antitrust/overview_en.html(c) Robert Jones 2013

United States Antitrust Division

http://www.justice.gov/atr/about/index.html(c) Robert Jones 2013

© R Jones (2009) - Based on Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice Hall

Based on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

More Cs of globalisation

Government influence

Cost advantages

Global market convergence

Global competition

Country

Customer

Cost

Competition

Culture Converging technologies,E-business

Creditcrunch Currency

Collaborationor collusion?

Commonplatform

http://unfccc.int/essential_background/feeling_the_heat/items/3157.php

© R Jones (2009) - Based on Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice Hall

Based on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

More Cs of globalisation

Government influence

Cost advantages

Global market convergence

Global competition

Country

Customer

Cost

Competition

Culture Converging technologies,E-business

Creditcrunch Currency

Climate change CO2

Collaboration

Commonplatform

© R Jones (2009) - Based on Johnson, Scholes & Whittington (2006) Exploring Corporate Strategy, FT Prentice Hall

Based on G. Yip, Total Global Strategy, Prentice Hall, 1995, chapter 2

• Trade policies• Technical standards• Host government

policies

Globalstrategies

• Scale economies• Sourcing efficiencies• Country-specific costs• High product

development costs

• Similar customer needs• Global customers• Transferable marketing

• Interdependence• Competitors global• High exports /

imports

More Cs of globalisation

Government influence

Cost advantages

Global market convergence

Global competition

Country

Customer

Cost

Competition

Culture Converging technologies,E-business

Creditcrunch Currency

Climate change CO2

Collaboration

Commonplatform

ConferenceUNCCC

More Cs:

Consolidation e.g. pharmaceuticals

Connectedness

Communication / Crowd

Corruption – is it a gift? Is it ever right to pay a bribe? Lobbying?

Capital – FDI foreign direct investment

Control (and Governance) / Coordination

Complexity

Centralization <-> decentralization e.g. Unilever, MacDonalds

Copying (and IP protection)

Cluster – regional or global ?

More Cs

Is this the full picture?

How do these factors affect your company?

How will you adapt your strategies to survive / succeed?

Any questions?