Factors Affecting Globalisation of Industries

Narrowing of demand characteristics Escalating costs of R&D Cost reduction pressures and economies of scale Government industrial policies Reduction of factor costs (e.g. labour, capital..) Rise of new distribution channels Reduction of transportation, communication and storage costs Internet access Reduction of tariff world wide

Global Strategy : Harnessing New Markets

Examples of Government Initiatives to Promote Industrial Development
USA
Japan

Sematech (semiconductors)
Steel, Computers, Autos, Artificial Intelligence, Advanced Materials Aerospace Semiconductors, Aerospace, Automobiles, Advanced Lasers, Optics, Defense

Europe

Examples of Declining Transportation, Communication, and Storage Costs

Transport Costs Containerization shipping/rail Air freight

Communication costs More global long distance carriers Massive proliferation of fiber optic cable lines Internet access everywhere

Storage costs Refrigeration Just-in-time inventory Reduction of perishability Supply chain management Virtual production/design

Global Strategy:

A strategy that seeks to achieve a high level of consistency and standardization of products, processes, and operations around the world; coordination of the firms many subsidiaries to achieve high interdependence and mutual support.

Multi domestic Strategy: A strategy that seeks to adjust a firms products, processes, and operations for markets and regions around the world; allows subsidiaries to tailor their products, marketing, and other activities according to the needs of their specific markets.

Global Strategy of Expansion

HQ

System wide approach to competing worldwide Mutually interdependent subsidiaries Centralized control and reporting of activities Facilitates cross-subsidization policies across markets

Key Characteristics of a Global Strategy

Standardized products
Global economies of scale in key components and activities Leverage technology across many markets Global coordination of marketing and sales system wide Cross-subsidization policies to respond to competitive moves by other global strategy firms

Cross-subsidization:

Using financial, technological, and marketing resources from one market to fight a competitor in another; involves extensive use of thrust tactics to gain new market positions.

Multi domestic Strategy of Expansion

HQ

Competitive advantage built in each separate national or regional market Markets and subunits treated independently from one another Control of activities are decentralized, reporting back to headquarters

Key Characteristics of a Multi domestic Strategy

Customization or frequent adaptation of products for each separate market

Few system wide opportunities for economies of scale

Value-adding activities performed and duplicated in each market

Coordination of marketing and sales within each market Quality and image across markets are important sources of competitive Perishability: The loss of economic value that occurs when a product or service is not used within a given time period, often used to describe the ease with which a product spoils or decays; a major economic consideration that promotes the use of multi domestic strategies.

Benefits of Global Expansion

Market growth and expansion opportunities

Recovery of R&D and investment costs Creation of a distinct image Accelerated learning and transfer of new skills

Intangible assets: Resources based on skills or other hard-to-imitate assets that are not physical in form; examples include brand equity, fast product development, management techniques, proprietary means of developing knowledge, innovation, and so forth.

Costs Associated with Global Expansion

Costs of strategic leverage

Sustained investment required Preserving and extending image Cost of flexibility High interdependence of subsidiaries (and business) Change or development affecting all markets Costs of cooperation Compromise

Accountability