International Business - Yip's

25 May 09 Globalisation Drivers 1

Yip’s Globalisation
Drivers

Team 6
Sachin
Arun KA
Balaji
Swapnil
Arobinda
International Business Terms
 International companies : Importers and exporters ; have no investment
outside of their home country.

 Multinational companies : Have investment in other countries ; More

focused on adapting their products and service to each local market.

 Global companies : Have invested and are present in many countries ;

They market their products through the use of the same coordinated
image/brand in all markets.

 Transnational companies : More complex organizations. They have invested

in foreign operations ; have Decentralized decision-making, R&D and
marketing powers to each individual foreign market.

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Introduction

• George Yip (1992)

• To know the degree of Globalisation within an industry, analyse

• 4 Main Categories of Drivers
1. Market Globalisation Drivers
2. Cost Globalisation Drivers
3. Government Globalisation Drivers
4. Competitive Globalisation Drivers

Low High

(Domestic) (Global)

25 May 09 International Business - Yip's Globalisation Drivers 4

Yip’s Framework

Social &
Technological
Demographic
Factor
Factor

Economic &
Financial Political &
Factor Legal Factor

25 May 09 International Business - Yip's Globalisation Drivers 5

Market Drivers…

Market Globalisation Drivers Govt. Globalisation Drivers

• Customer needs
• Customers & channels
• Marketing
• Leading Countries

Cost Globalisation Drivers Competitive Globalisation

Drivers

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Market Globalisation Driver - Strength

Airlines
Computers
Automobile
Soft Drinks
FMCG
Retail Banking
Book Publishing
Baked Foods

Low High

(Domestic) (Global)

25 May 09 International Business - Yip's Globalisation Drivers 7

Government Drivers…
Market Globalisation Drivers
• Customer needs
• Customers & channels
• Marketing
• Leading Countries
Cost Globalisation Drivers
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Govt. Globalisation Drivers
• Trade Policies
• Technical Standards
• Marketing Regulations
• Govt. Owned Competitors
• Govt. Owned Customers
• Legal protection
Competitive Globalisation
Drivers
International Business - Yip's Globalisation Drivers 8
Govt. Globalisation Driver : Strength

FMCG
Baked Foods
Soft Drinks
Computers
Automobile
Pharma
Airlines
Retail Banking

Low High

(Domestic) (Global)

25 May 09 International Business - Yip's Globalisation Drivers 9

Cost Drivers…

Govt. Globalisation Drivers

Market Globalisation Drivers
• Customer needs
• Customers & channels
• Marketing
• Leading Countries
• Trade Policies
• Technical Standards
• Marketing Regulations
• Govt. Owned Competitors
• Govt. Owned Customers
• Host Govt. Concerns

Cost Globalisation Drivers

Competitive Globalisation
• Economies of Scale & slope Drivers
• Experience Curve
• Sourcing & Logistics
• Country Costs, Productivity
& Skills
• Product Life Cycle &
Product Development Costs

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Cost Globalisation Driver : Strength

Pharma
Airlines
Computers
Automobile
FMCG
Retail Banking
Baked Foods
Soft Drinks

Low High

(Domestic) (Global)

25 May 09 International Business - Yip's Globalisation Drivers 11

Competitive Drivers…
Market Globalisation Drivers
• Customer needs
• Customers & channels
• Marketing
• Leading Countries
Cost Globalisation Drivers
• Economies of Scale & slope
• Experience Curve
• Sourcing & Logistics
• Country Costs, Productivity
& Skills
• Product Life Cycle &
Product Development Costs
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Govt. Globalisation Drivers
• Trade Policies
• Technical Standards
• Marketing Regulations
• Govt. Owned Competitors
• Govt. Owned Customers
• Host Govt. Concerns
Competitive Globalisation
Drivers
• Exports & Imports
• Competitors
• Interdependence of
countries
International Business - Yip's Globalisation Drivers 12
Competitive Globalisation Driver - Strength

Airlines
Pharma
Computers
FMCG
Automobiles
Soft Drinks
Retail Banking
Baked Foods

Low High

(Domestic) (Global)

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Advantages

• Identifies the drivers that are global and those that are local

• Used to analyse both industry and market

• Can be mapped onto Porter's Five Forces

• Changes in drivers indicated by macro environmental analysis

• Assists in identifying critical success factors for industry and market

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Case Study – Europe 1992

Govt. Globalisation Drivers Market Globalisation Drivers

• Trade Policies
• Customer needs become
• Eliminate all tariff and non
more common
tariff barriers
• Birth of large ‘Euro mass’
• ‘Mutual Recognition’
Segment
• Subsidies outlawed
• Customers and channels
• Technical standards compatible
increase
for all industries
• Transferable marketing to
• Government owned Customers to
become the norm
lose their ability to favor national
suppliers

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Case Study – Europe 1992
Cost Globalisation Drivers
•Economic Scale of Europe to
increase
• Experience curve strategies
to be more viable
• ‘Favorable Logistics’
• Sourcing efficiency to
improve
• ‘Difference in country cost’
will become more significant
• More investment on high cost
Product Development
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Competitive Globalisation
Drivers
1. Exports and imports within
EC to increase
2. More competitors from
different continent
3. Interdependence of
countries to improve
4. ‘Pan European’ Strategy
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Case Study – Volkswagen
Market Globalisation Drivers
• Growing middle class in
developing countries
• Tie-up with Porsche
Cost Globalisation Drivers
• Relocation of production
facility
• Taking advantage of
difference in country costs
• Huge cost savings
Govt. Globalisation Drivers
• Exchange rate variations
• Interdependence of countries
to help in subsiding competitors
Competitive Globalisation
Drivers
• Threat of Entry to increase
• Increase Rivalry among
existing competitors
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Yip’s Framework & Porter’s Five Force Model
Five Forces Model Globalisation Drivers
Threat of Entry • Common Customers – Increase
• Global economies of scale – reduce
Government Drivers
Government Drivers • Global Marketing – Reduces
Market
Market Drivers
Drivers • High Production Cost – Reduces

Threat of Substitutes • Lead Nations – Increases

• R&D, Innovation – Increases
Government
Government
Drivers
Drivers
Market
Market Drivers
Drivers

Power of Buyers / Suppliers • Existence of global customers –

Weaken
Market
Market Drivers
Drivers • Existence of global suppliers –
Cost
Cost Drivers
Drivers Counteract

Competitive Rivalry • Global Customers – Increase

• Economies of Scale – Increase
Competitive
Competitive • Global Sourcing – Increase
Drivers
Drivers • Compatible TS & Favorable Policies -
Cost
Cost drivers
drivers Increase

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 Conclusion

Industries and markets differ vastly in the extent to which they are
globalized
- Paint industry is largely globalized;
- Advertising and brand names- localized for linguistic and cultural reasons

Countries with the most favorable combination of drivers are likely to be

chosen as markets and as base by global business

Baked Foods Automobile Pharma

Thank You 25 May 09 International Business - Yip's Globalisation Drivers 19