Forces of globalisation - Strategic Management

A global industry can be defined as:

  • An industry in which firms must compete in all world markets of that product in order to survive.
  • An industry in which a firm's competitive advantage depends on economies of scale and economies of scope gained across markets.

Market

    • Common customer needs favor globalization. For example, the facsimile industry's customers have more homogeneous needs than those of the furniture industry, whose needs are defined by local tastes, culture, etc.
    • Global customers: if a firm's customers are other global businesses, globalization may be required to reach these customers in all their markets. Furthermore, global customers often require globally standardized products.
    • Global channels require a globally coordinated marketing program. Strong established local distribution channels inhibits globalization.

Transferable marketing: whether marketing elements such as brand names and advertising require little local adaptation. World brands with non-dictionary names may be developed in order to benefit from a single global advertising campaign.

From-muti-domestic to global :Ford 2000

Cost

  1. Location of strategic resources
  2. Differences in country costs
  3. Potential for economies of scale (production, R&D, etc.) Flat experience curves in an industry inhibits globalization. One reason that the facsimile industry had more global potential than the furniture industry is that for fax machines, the production costs drop 30%-40% with each doubling of volume; the curve is much flatter for the furniture industry and many service industries. Industries for which the larger expenses are in R&D, such as the aircraft industry, exhibit more economies of scale than those industries for which the larger expenses are rent and labor, such as the dry cleaning industry. Industries in which costs drop by at least 20% for each doubling of volume tend to be good candidates for globalization.
  4. Transportation costs (value/bulk or value/weight ratio) => Diamonds and semiconductors are more global than ice.

Competitive

  1. Global competitors: The existence of many global competitors indicates that an industry is ripe for globalization. Global competitors will have a cost advantage over local competitors.
  2. When competitors begin leveraging their global positions through cross-subsidization, an industry is ripe for globalization.

Government

  1. Trade policies
  2. Technical standards
  3. Regulations

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