Globalization

 Globalization refers to the strategy of approaching

worldwide markets with standardized products

 Threats & Opp …----Managers should know

 Understanding the nuances of competing in

global markets—VV IMP
Development of a Global Corporation
Four Levels
1. Export/import--Minimal effect on the existing
management orientation or on existing product lines
2. Foreign licencing & technology tranfer-Requires
little change in management or operation
3. Overseas operations--Direct investment in
manufacturing plants (requires global mgmt skill-
MNC)
4. The most involved level is characterized by a
substantial increase in foreign investment, with
foreign assets comprising a significant portion of
total assets (also global approach to sales, finance)
Reasons for Going Global
PROACTIVE REACTIVE
 Additional resources  Trade barriers
 Lowered costs  International customers
 Incentives
 New, expanded markets
 International
competition
 Exploitation of firm-specific
advantages  Regulations
 Taxes  Chance
 Economies of scale
 Synergy
 Power and prestige
 Protect home market
4 Strategic Orientations of Global Firms

1. An ethnocentric orientation believes that the values and

priorities of the parent organization should guide the strategic
decision making of all its operations.
2. A polycentric orientation means the culture of the country in
which a strategy is to be implemented is allowed to dominate the
decision-making process.
3. A regiocentric orientation exists when the parent attempts to
blend its own predispositions with those of the region under
consideration, thereby arriving at a region-sensitive compromise.
4. A corporation with a geocentric orientation adopts a global
systems approach to strategic decision making, thereby
emphasizing global integration.
4 Strategic Orientations of Global Firms
Ethnocentric Polycentric Regiocentric Geocentric
Mission Profitability Public Both Both
acceptance
Governance Top down Bottom up Mutually Mutually
negotiated negotiated at all
between region levels of
and subsidiaries corporation
Strategy Global National Regional Integ Global
integration responsivenes & National Resp integration and
n.r.
Marketing Home country Local Regional needs Global product
needs(country)
Finance Taking back to Retention in Redist. In region Redistribute
home host country globally
Culture Home country Host country Regional Global
At the Start of Globalization

 External and internal assessments are

conducted before a firm enters global
markets
 External assessment involves careful
examination of critical features of the
global environment
 Internal assessment involves identification
of the basic strengths of a firm’s operations
Complexity of the Global
Environment
 Five factors affecting the increasing complexity of global
strategic planning: ( Coke in india)
 Multiple political, economic, legal, social, and cultural
environments as well as various rates of change-
interactions are complex

 Geographic separation, cultural and national differences,

and variations in business practices---(HQ vs branch)
 Global face extreme competition(diff in indu strucutre)

 Global trade restriction (EEC,FTA etc)

Control Problems of the Global Firm
 Financial policies typically are designed to further
the goals of the parent company and pay minimal
attention to the goals of the host countries

 DIFFERENT FINANCIAL ENVIRONMENTS

 DIFFERENCE IN MEASUREMENT &

CONTROL
How to avoid all the above (Ans– by Strategic
Planning)
Global Strategic Planning
 1ST STEP---

PLEASE SEE WHAT ENVIRONMENT WILL

YOUR FOREIGN BRANCH OPERATE IN ?

MULTIDOMESTI (insurance) OR GLOBAL(TV)

Multidomestic Industry facets
( insurance)…
 The need for customized products to meet the tastes or
preferences of local customers
 Fragmentation of the industry, with many competitors
in each national market
 A lack of economies of scale in the functional
activities of firms in the industry
 Distribution channels unique to each country
 A low technological dependence of subsidiaries on
R&D provided by the global firm
GLOBAL INDUSTRY IS CREATED BY
FACTORS BELOW
 Economies of scale in the functional activities of
firms in the industry
 A high level of R&D expenditures on products that
require more than one market to recover
development costs
 The presence in the industry of predominantly
global firms that expect consistency of products and
services across markets
 The presence of homogeneous product needs across
markets,
 The presence of a small group of global competitors
WHY SHOULD THE STRATEGY
BE GLOBAL FOR GLOBAL
INDUSTRY?
 The increased scope of the global management task
(impossible without who does what)
 The increased globalization of firms
 The information explosion (formal plan is needed)
 The increase in global competition
 The rapid development of technology
 Strategic management planning breeds managerial
confidence
Global Strategic PlanningWHAT TO
DO NOW AFTER KNOWING
 For MULTIDOMESTIC INDUSTRY, make
each subsiditary autonomous, having authority
to make independent decisions in the response
to local mkt.
 For GLOBAL INDUSTRY, make global
straegy ( not local)
Factors That Drive Global Companies
 Global Management Team-
 Global vision/cross-cultural training
 Global Strategy—cross country alliances(no
home-country thing)
 Global Operations and Products-Common
operating process qty and uniformity.
Product will have best cost & market
advantage.
 Global Technology and R&D
 Global Financing
 Global Marketing
Factors That Drive Global
Companies
 Global Technology and R&D
 Global Financing—global financing
lowest cost, hedge, local currency, listing
 Global Marketing—global brands,
GLOBAL CHALLENGE--Market
Requirements and Product Characteristics
 Firms must assess two key dimensions of
customer demand:
 customers’ acceptance of standardized products
 The rate of product innovation desired
 Products can be arrayed along a continuum from
products that are not subject to frequent product
innovations to products that are often upgraded
Quadrant Wise— Marketing &
Products (for globalization)
1-Computer Chips, Automotive Electronics—
MAINTAIN DIFFERENTIATION
2-Steel,Cola—MINIMIZE DELIVERY COST
3-Consumer Electronics, Toothpaste,
Shampoo—MAINTAIN EVER-
CHANGING GLOBAL WAREHOUSE
4- —PRACTICE NICHE
International Markets—Mode of Operations