G LOBALISATIONG LOBALISATION

Along with decisions about positioning, Along with decisions about positioning, mergers, & acquisitions ,decisions about mergers, & acquisitions ,decisions about global moves are among the most global moves are among the most important ones the strategists make. important ones the strategists make. A firm that is considering doing business A firm that is considering doing business abroad must have a rationale & logic for abroad must have a rationale & logic for how it can compensate for & overcome the how it can compensate for & overcome the liabilities &disadvantages that arise from liabilities &disadvantages that arise from its foreignness. its foreignness.

Globalization is the increasing Globalization is the increasing interdependence, integration & interaction interdependence, integration & interaction among people and corporation in various among people and corporation in various locations around the world. locations around the world. Interdependence is a dynamics of being Interdependence is a dynamics of being mutually responsible to and sharing common mutually responsible to and sharing common ET of principles with others. ET of principles with others.

Globalization refers to rapid increase in Globalization refers to rapid increase in the share of economic activity taking the share of economic activity taking place across national borders. place across national borders. It goes beyond the international trade It goes beyond the international trade includes the way in which goods/ includes the way in which goods/ services are produced /created, delivered services are produced /created, delivered &sold & movement of capital.&sold & movement of capital.

DefinitionsDefinitionsA typical - but restrictive - definition can be taken A typical - but restrictive - definition can be taken from the from the International Monetary Fund which stresses the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology.

This goes beyond the international trade in This goes beyond the international trade in goods and includes the way those goods goods and includes the way those goods are produced, the delivery and sale of are produced, the delivery and sale of services, and the movement of capital.services, and the movement of capital.

Threat or opportunity...Threat or opportunity...Globalization can be a force for good. It has the Globalization can be a force for good. It has the potential to generate wealth and improve living potential to generate wealth and improve living standards. But it isn't doing that well at the moment. standards. But it isn't doing that well at the moment. The benefits from increased trade, investment, and The benefits from increased trade, investment, and technological innovation are not fairly distributed. technological innovation are not fairly distributed. The experience of the international trade union The experience of the international trade union movement suggests that the reality for the majority of movement suggests that the reality for the majority of the world's population is that things are getting worse. the world's population is that things are getting worse. Globalization as we know it is increasing the gap Globalization as we know it is increasing the gap between rich and poor. This is because the policies between rich and poor. This is because the policies that drive the globalization process are largely that drive the globalization process are largely focused on the needs of business. focused on the needs of business.

KEY PLAYERSKEY PLAYERSThey are-They are-Multinational firms which carry out Multinational firms which carry out business across the national borders.business across the national borders.The World Trade Organization (WTO) The World Trade Organization (WTO) THROUGH WHICH INTERNATIONAL THROUGH WHICH INTERNATIONAL TRAD E AGREEMENTS ARE TRAD E AGREEMENTS ARE NEGOTIATED& ENFORCDNEGOTIATED& ENFORCDThe World Bank & International Monetary The World Bank & International Monetary Fund (IMF) are means to assist Govt .in Fund (IMF) are means to assist Govt .in achieving development aims through the achieving development aims through the provision of loans, technical assistance.provision of loans, technical assistance.

STAGES IN GLOBALISATION-STAGES IN GLOBALISATION-Domestic company links with dealer & Domestic company links with dealer & distributor.distributor.Company does the activities on its own. Company does the activities on its own. Company begins to carryout its own Company begins to carryout its own manufacturing , marketing & sales in the foreign manufacturing , marketing & sales in the foreign markets.markets.Company starts fullfledged operations including Company starts fullfledged operations including business systems and R&D. At this stage the business systems and R&D. At this stage the managers are expected to perform the tasks managers are expected to perform the tasks which they were doing in domestic markets to which they were doing in domestic markets to replicate them in foreign markets. replicate them in foreign markets.

Conditions for globalizationConditions for globalizationBusiness Freedom-No unnecessary Government Business Freedom-No unnecessary Government restrictions like restriction, restrictions on sourcing restrictions like restriction, restrictions on sourcing of funds and other factors from abroad. Hence the of funds and other factors from abroad. Hence the liberalization is the 1liberalization is the 1stst step towards facilitating step towards facilitating globalization. globalization.

Facilitators-Infrastructure facilitation available at Facilitators-Infrastructure facilitation available at home country an help entrepreneurs go globally.home country an help entrepreneurs go globally.

Government support –Government support available Government support –Government support available in the form of policy & procedure reform encourage in the form of policy & procedure reform encourage globalizationglobalization

Resources-Resources is an important factor Resources-Resources is an important factor which decides the ability of affirm to globalize. which decides the ability of affirm to globalize. They include finance ,technology, brand image, They include finance ,technology, brand image, company’s image, managerial expertise etc.company’s image, managerial expertise etc.Competitors- This is an important factor which Competitors- This is an important factor which company’s success in global market bank on. company’s success in global market bank on. The factors like low costs& price, product quality, The factors like low costs& price, product quality, product differentiation, technological superiority. product differentiation, technological superiority. After sales service, market strengths etc are few After sales service, market strengths etc are few to name.to name.

Reasons For GlobalizationReasons For Globalization

Firm operate internationally for a number of Firm operate internationally for a number of reasons:reasons:They may be seeking to secure better sources of raw materials They may be seeking to secure better sources of raw materials & energy.& energy.They may want to obtain access to low cost factors of They may want to obtain access to low cost factors of production such as labour.production such as labour.They may be attracted to certain countries because of They may be attracted to certain countries because of subsidies those countries provide.subsidies those countries provide.They may be seeking new markets for their products.They may be seeking new markets for their products.Domestic markets may no longer be able to absorb production Domestic markets may no longer be able to absorb production at minimum efficient scale.at minimum efficient scale.

Contd…Contd…

They may be motivated by life style They may be motivated by life style factors.Domestic markets become factors.Domestic markets become saturated .As they mature , firms look saturated .As they mature , firms look abroad for new opportunities.abroad for new opportunities.They may be seeking opportunities for They may be seeking opportunities for economies of scope & for learning.economies of scope & for learning.

So why go ‘Global’?So why go ‘Global’?Competition within your national market is Competition within your national market is becoming too intense so you decide to push becoming too intense so you decide to push sales in overseas markets.sales in overseas markets.Your products within your national markets Your products within your national markets are reaching the end of the lifecycle so you are reaching the end of the lifecycle so you wish to push it into national markets.wish to push it into national markets.Sales and profit are generally declining in Sales and profit are generally declining in national markets.national markets.You wish to become a global player.You wish to become a global player.

The Difference Between Competing The Difference Between Competing Internationally & Competing GloballyInternationally & Competing Globally

A company will start to compete A company will start to compete internationally by entering just one or maybe a internationally by entering just one or maybe a select few foreign markets. Competing on a select few foreign markets. Competing on a truly global scale comes later , after a truly global scale comes later , after a company has established operations on several company has established operations on several continents & is racing against rivals for global continents & is racing against rivals for global market leadership. market leadership.

There is a meaningful difference between the There is a meaningful difference between the competitive scope of a company that operates competitive scope of a company that operates in a few foreign countries & company that in a few foreign countries & company that markets its products in 50-100 countries & markets its products in 50-100 countries & expanding its operations into additional expanding its operations into additional country markets annually.country markets annually.

Former is termed as Former is termed as International International CompetitorCompetitor while the later qualifies as a while the later qualifies as a Global Competitor. Global Competitor.

Entering global markets:Entering global markets:

There are a number of steps that need to be There are a number of steps that need to be taken before you decide to enter international taken before you decide to enter international markets.markets.

Analyze the international marketing Analyze the international marketing environment. A PEST/STEP analysis needs to environment. A PEST/STEP analysis needs to be conducted on the market you enter, to be conducted on the market you enter, to assess whether it is worthwhile or not. assess whether it is worthwhile or not.

Political factorsPolitical factorsConsider:Consider:

The political stability of the nation. Is it a The political stability of the nation. Is it a democracy, communist, or dictatorial democracy, communist, or dictatorial regime? regime? Monetary regulations. Will the seller be Monetary regulations. Will the seller be paid in a currency that they value or will paid in a currency that they value or will payments only be accepted in the host payments only be accepted in the host nation currency? nation currency?

Economical FactorsEconomical FactorsConsider:Consider:

Consumer wealth and expenditure within the Consumer wealth and expenditure within the country. country. National interests and inflation rate. National interests and inflation rate. Are quotas imposed on your product. Are quotas imposed on your product. Are there import tariffs imposed. Are there import tariffs imposed. Does the government offer subsidies to Does the government offer subsidies to national players that make it difficult for you national players that make it difficult for you to compete?to compete?

Social Factors Social Factors ConsideConsiderr

Language.Language. Will language be a barrier to Will language be a barrier to communication for you? Does your host nation speak communication for you? Does your host nation speak your national language? What is the meaning of your your national language? What is the meaning of your brand name in your host country’s language? brand name in your host country’s language? CustomsCustoms: what customs do you have to be aware of : what customs do you have to be aware of within the country? This is important. You need to within the country? This is important. You need to make sure you do not offend while communicating make sure you do not offend while communicating your message. your message. Social factorsSocial factors: What are the role of women and : What are the role of women and family within society? family within society? ReligionReligion: How does religion affect behaviour? : How does religion affect behaviour? ValuesValues: what are the values and attitudes of : what are the values and attitudes of individuals within the market? individuals within the market?

Technological FactorsTechnological FactorsConsiderConsider::

The technological infrastructure of the market. The technological infrastructure of the market. Do all homes have access to energy Do all homes have access to energy (electricity) (electricity) Is there an Internet infrastructure. Does this Is there an Internet infrastructure. Does this infrastructure support broadband or dial up? infrastructure support broadband or dial up? Will your systems easily integrate with your Will your systems easily integrate with your host country’s?host country’s?

Market entry methodsMarket entry methodsAfter assessing the environment in your selected country, how do you After assessing the environment in your selected country, how do you

decide which are the best countries to enter? Following factors to be decide which are the best countries to enter? Following factors to be considered before entering-considered before entering-

Speed – How quickly do you wish to enter your selected Speed – How quickly do you wish to enter your selected market?market?

Costs- What is the cost of entering that market?Costs- What is the cost of entering that market?

Flexibility – How easy is it to enter/leave your chosen market?Flexibility – How easy is it to enter/leave your chosen market?

Risk Factor – What is the political risk of entering the market? Risk Factor – What is the political risk of entering the market? What are the competitive risk? How competitive is the What are the competitive risk? How competitive is the market?market?

Payback period – When do you wish to obtain a Payback period – When do you wish to obtain a return from entering the market? Are there pressures return from entering the market? Are there pressures to break even and return a profit within a certain to break even and return a profit within a certain period?period?

Long- term objectives- What does the organization Long- term objectives- What does the organization wish to achieve in the long term by operating in the wish to achieve in the long term by operating in the foreign market? Will they establish a presence in that foreign market? Will they establish a presence in that market and then move onto others? market and then move onto others?

Trading overseasTrading overseasThere are a number ways an organization can start to There are a number ways an organization can start to sell their products in international markets.sell their products in international markets.

1. Direct export.1. Direct export.The organization produces their product in their home The organization produces their product in their home market and then sells them to customers overseas. market and then sells them to customers overseas.

2. Indirect export2. Indirect exportThe organizations sell their product to a third party The organizations sell their product to a third party who then sells it on within the foreign market.who then sells it on within the foreign market.

3. Licensing 3. Licensing Another less risky market entry method is licensing. Here Another less risky market entry method is licensing. Here the Licensor will grant an organization in the foreign the Licensor will grant an organization in the foreign market a license to produce the product, use the brand market a license to produce the product, use the brand name etc in return that they will receive a royalty name etc in return that they will receive a royalty payment.payment.

4. Franchising4. FranchisingFranchising is another form of licensing. Here the Franchising is another form of licensing. Here the organization puts together a package of the ‘successful’ organization puts together a package of the ‘successful’ ingredients that made them a success in their home ingredients that made them a success in their home market and then franchise this package to oversea market and then franchise this package to oversea investors. The Franchise holder may help out by investors. The Franchise holder may help out by providing training and marketing the services or product. providing training and marketing the services or product. McDonalds is a popular example of a Franchising option McDonalds is a popular example of a Franchising option for expanding in international markets.for expanding in international markets.

5.Contracting5.ContractingAnother of form on market entry in an overseas Another of form on market entry in an overseas market which involves the exchange of ideas is market which involves the exchange of ideas is contracting. The manufacturer of the product will contracting. The manufacturer of the product will contract out the production of the product to another contract out the production of the product to another organization to produce the product on their behalf. organization to produce the product on their behalf. Clearly contracting out saves the organization Clearly contracting out saves the organization exporting to the foreign market.exporting to the foreign market.

6.Manufacturing abroad6.Manufacturing abroadThe ultimate decision to sell abroad is the decision to The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the host country. establish a manufacturing plant in the host country. The government of the host country may give the The government of the host country may give the organization some form of tax advantage because organization some form of tax advantage because they wish to attract inward investment to help create they wish to attract inward investment to help create employment for their economy.employment for their economy.

7.Joint Venture7.Joint VentureTo share the risk of market entry into a foreign To share the risk of market entry into a foreign market, two organizations may come together market, two organizations may come together to form a company to operate in the host to form a company to operate in the host country. The two companies may share country. The two companies may share knowledge and expertise to assist them in the knowledge and expertise to assist them in the development of company; of course profits development of company; of course profits will have to be shared out alsowill have to be shared out also

The International Marketing MixThe International Marketing MixWhen launching a product into foreign When launching a product into foreign markets do you standardize or adapt your markets do you standardize or adapt your marketing mix to the foreign market? A marketing mix to the foreign market? A company can adopt to use a standardized company can adopt to use a standardized marketing mix around the world or an adapted marketing mix around the world or an adapted marketing mix in each country. marketing mix in each country.

International Product Strategies International Product Strategies Standardization Vs AdaptionStandardization Vs Adaption

Basic marketing concepts tell us that we Basic marketing concepts tell us that we will sell more of a product if we aim to will sell more of a product if we aim to meet the needs of our target market. In meet the needs of our target market. In international markets, we have to take into international markets, we have to take into consideration consumer’s cultural consideration consumer’s cultural background, buying habits, levels of background, buying habits, levels of personal disposable income etc in order to personal disposable income etc in order to deliver a tailored marketing mix program to deliver a tailored marketing mix program to suit their needs. suit their needs.

In today’s global world, where consumers In today’s global world, where consumers travel more, watch satellite television, travel more, watch satellite television, communicate and shop internationally communicate and shop internationally over the internet, the world now is over the internet, the world now is becoming a lot smaller. Because of this becoming a lot smaller. Because of this there is no need to adapt products to local there is no need to adapt products to local markets. markets. Brands such as Coca-Cola, MTV, Nike, Brands such as Coca-Cola, MTV, Nike, Levis are all successful global brands Levis are all successful global brands where they have a standardized approach where they have a standardized approach to their marketing mix, all these products to their marketing mix, all these products are targeted at similar groups globally.are targeted at similar groups globally.

In many circumstances a company will have to adapt In many circumstances a company will have to adapt their product and marketing mix strategy to meet their product and marketing mix strategy to meet local needs and wants that cannot be changed.local needs and wants that cannot be changed. McDonald is a global player however, their burgers McDonald is a global player however, their burgers are adapted to local needs. In India where a cow is a are adapted to local needs. In India where a cow is a sacred animal their burgers are served with chicken or sacred animal their burgers are served with chicken or fish. fish. Coca-cola is some parts of the world taste sweeter Coca-cola is some parts of the world taste sweeter then in others. Yes we can argue that standardization then in others. Yes we can argue that standardization is better for the organization because it reduces cost, is better for the organization because it reduces cost, however many organizations will have to ‘think however many organizations will have to ‘think global, but act local’ if they are to successfully global, but act local’ if they are to successfully establish them selves in foreign markets.establish them selves in foreign markets.

Types of International strategyTypes of International strategy

International strategyInternational strategy

MultiCountry Global

Multicountry competition strategy varies somewhat Multicountry competition strategy varies somewhat across nations, since –across nations, since –Buyers in different countries are attracted to different Buyers in different countries are attracted to different product attributes.product attributes.Sellers vary from country to country.Sellers vary from country to country.Industry conditions & competitive forces in each Industry conditions & competitive forces in each national market differ in important aspects. national market differ in important aspects.

Multi Country strategyMulti Country strategyProduct customized for each market.Product customized for each market.Decentralized control—Local decision making.Decentralized control—Local decision making.Effective when large difference exists between the Effective when large difference exists between the countries.countries.Advantageous product differentiation, local Advantageous product differentiation, local responsiveness, minimal political risk.responsiveness, minimal political risk.

With multicountry competition , rival firms battle for With multicountry competition , rival firms battle for national leadership & winning in one country does national leadership & winning in one country does not necessarily signals the ability to fare well in not necessarily signals the ability to fare well in other countries.other countries.

Global strategy involves consistent strategy Global strategy involves consistent strategy for each country which includes,-for each country which includes,-Integrating & coordinating the company's Integrating & coordinating the company's strategic moves worldwide.strategic moves worldwide.Selling in many if not all nations where there Selling in many if not all nations where there is significant buyer demand. is significant buyer demand.

Global strategyGlobal strategyProduct is same in countries.Product is same in countries.Centralized controlCentralized controlEffective when the difference between the Effective when the difference between the countries is small.countries is small.Advantage cost, coordinated activities, fast in Advantage cost, coordinated activities, fast in product development.product development.

International Promotion StrategyInternational Promotion Strategy

As with international product decisions and organization can either As with international product decisions and organization can either adapt or standardize their promotional strategy and message. adapt or standardize their promotional strategy and message. Advertising messages in countries may well have to be adapted Advertising messages in countries may well have to be adapted because of language barriers or the current message used in the because of language barriers or the current message used in the national market may be offensive to overseas residents.national market may be offensive to overseas residents.

The use of certain colours may also need to be thought about. In The use of certain colours may also need to be thought about. In India red is the colour worn by the bride in weddings, white is the India red is the colour worn by the bride in weddings, white is the colour for mourning in Japan.colour for mourning in Japan.

The level of media development has to also be taken into account. The level of media development has to also be taken into account. Is commercial television well established in your host country? What Is commercial television well established in your host country? What is the level of television penetration? How much control does the is the level of television penetration? How much control does the government have over advertising on TV and radio? Is print media government have over advertising on TV and radio? Is print media more popular then TV? Many organization go for a strategy of more popular then TV? Many organization go for a strategy of adapting advertising messages to local markets to best meet adapting advertising messages to local markets to best meet consumer demand.consumer demand.

International Pricing StrategiesInternational Pricing Strategies

Pricing on an international scale is difficult. As Pricing on an international scale is difficult. As well as taking into account traditional price well as taking into account traditional price considerations considerations Fixed and variable costs,Fixed and variable costs,Competition,Competition,Company objectives ,Company objectives ,Proposed positioning strategies,Proposed positioning strategies,Target group and willingness to pay,Target group and willingness to pay,

The organization needs to consider the costs of The organization needs to consider the costs of transport, any tariffs or import duties that may be transport, any tariffs or import duties that may be levied on their product's when they are sold on the levied on their product's when they are sold on the international scale. Also what currency do you expect international scale. Also what currency do you expect to be paid in? Will it be home or international to be paid in? Will it be home or international currency? Exchange rate fluctuation will also impact currency? Exchange rate fluctuation will also impact profitability and influence pricing decisions. profitability and influence pricing decisions. Other factors to consider include local incomes, what Other factors to consider include local incomes, what are income. What is the general economic situation of are income. What is the general economic situation of the country and how will this influence pricing?the country and how will this influence pricing?The internet is now making pricing more transparent The internet is now making pricing more transparent for consumers. Goods can be purchased online from for consumers. Goods can be purchased online from any overseas organizations at local currency prices.any overseas organizations at local currency prices.