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Our World is a System of Systems
Source: IBM
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Our World is a System of Systems
Source: IBM
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GlobalizationDefined as
,
across the globe.A force for economic growth, prosperity and democratic freedom.
world.
Represents one of the most influential forces in determining theu ure course o e p ane .
Benefits
Remarkable growth in trade and exchanges (including tech transfer)
Greater openness in the international economy
Growth of foreign direct investment (FDI)
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Areas affected by Outcomes ofOutcomes of
Increased interconnectedness of
o a za ono a za on
or ra e eve opmen
Investment
Technology
var ous econom es
Global sourcing & global supplychain
Extent
Cost
Culture
,
competitiveness & agility
Global strategies of organizations
Migration
Human rights
Increased accessibility to
technology
Com lex vendor ualification
n e ec ua proper y criteria
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27 fold increase in last 6 decades
Can result in economic growth but could also bring about socialdisruptions.
Extent of poverty has decreased (% of people living on < $1/day)
Results in development which is defined as The need and means by
which to provide better lives for people in less developed countries.
Wider selection of products for markets in different countries.
Interconnectedness of various economies.
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InvestmentInternational investment is the most powerful force in propelling the
world toward closer economic inte ration.
International investment can alter methods of production andthereby initiate much more change than the simple trading of goods.
FDI Yearly Total
1982 $57 Billion
2007 $1.5 Trillion
FDI just in China was $106 Billion in 2010.
2008 $ 1.4 Trillion
Le to ssues suc as a or stan ar s, wor ng con t ons, ea t ,safety & sustainability.
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IT revolution reshaping economies and societies around the globe
New ideas & increased access to information
Increased productivityComputers
e ones
Fiber optics led to widespread use of the internet
Rapidly reducing cost of technology
$400 laptop
$100 laptop in India
Shorter life cycle of products increases criticality of time to
market
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Has led to the widespread
ex ansion of the ca italist
model Opens minds to new ideas and
ex eriences chan es the wa
people think
A few consider this new
culture as a breach of their
values
Cultural Effect could be
+ve, -ve or neutral
More migration now than ever
before
Led to increasing health issues due
to people traveling more
internationally
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Human RightsHuman Rights
Human Rights recognize the Varying IP laws
Intellectual PropertyIntellectual Property
dignity inherent in every person
as a human being regardless of
any affiliation or characteristic
Level of implementation Losses incurred due to IP
infrin ement Era of globalization is also called
the era of the individual
Increasing degree of self
$500 Billion lost every year due to
counterfeit goods
Considered a major risk whenexpression
Think of what is happening in
the middle east
outsourcing technology to
countries where IP laws are
loosely defined
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Global Strategies of
rgan za ons
Problem Identification & Strategy formulationFeasibilit Economic & Social
Preparation (selecting vendors)
EvaluationCommitment / Investment
Business Transition/ Business Continuity
n go ng managemen
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Single Service Multiservice
Focused service: Clustered service:
Single * Dental practice * Stanford University
Location * Retail Store * Mayo Clinic* Family restaurant
Focused network: Diversified network:
u s e e era xpress* McDonalds * American Express
* Red Roof Inns * Accenture
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Benefits to the Franchisee
Management TrainingBrand Namea ona ver s ng
Acquisition of Proven Business
Economics of Scale Issues for the Franchisor
Franchisee Autonomy
ranc se ontractConflict Resolution
n o some examp es o ranc sesn o some examp es o ranc ses
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Generic International
Strategies
Transnational
StrateGlobal
High
Force
Towards
Global
Multi-domestic
Strategy
No
International
Strategy
ntegrat on
Low
Low High
Force Towards Local Responsiveness
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The Nature of the Borderless World The 5Cs
Customers - information has empoweredCompetitors - nothing stays proprietaryompany - xe cos s requ re arge mar e s
Currency -become currency neutral
Countr - de rive com etitor of home market
Planning Transnational OperationsCultural Transferability
or er ormsHost Government Policy
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International Strategic Service VisionService Delivery
System
Operating Strategy Service Concept Target Market
Segments
Available
technology?Infrastructure?
Utilit service?
Appropriate
managerial practice?Participative?
Autocratic?
What are customer
expectations?Perception of value?
Service ethic?
What are the market
segments?Domestic?
Multinational?
Labor market norms
and customs?
Labor market
institutions?
Government
Service encounter?
Language?
Acceptance of self-
Tourist?
What are important
cultural differences?
Space availability?
Interaction with
suppliers?
regulations?
Unions?
Host government
serve?
What are the usage
patterns?
Language?
Life style?
Disposable income?
Educating
customers?
policies?
Language?
Front office?
Cultural
transferability?
What are theworkforce
demographics?
Skills?
Back office? Age distribution?
Attitudes?
Work ethic?
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Considerations in Selecting a
o a erv ce ra egy
Globalization Global Service Strate ies
Factors
Multicountry Importing Follow Your Service Beating theExpansion Customers Customers Offshoring Clock
Customer Train local Develo forei n Develo S ecialize in Provide
Contact workers language & foreign back- office extended
cultural sensitivity customers office service hours of
skills components service
Customization Usually a Strategic Re-prototype Quality and More need forstandard opportunity locally coordination reliability &
service coordination
Complexity Usually Strategic Modify Opportunity for Time
routine opportunity operations focus compression
Information Satellite On site advantage Move Training Exploit
Intensity network experienced investments opportunity
Cultural Modify Accommodate Could be Cultural CommonAdaptation service foreign guests necessary to understanding language
achieve scale necessary
Labor Intensity Reduced Increased labor Hire local Reduced labor Reduced labor
labor costs costs ersonnel costs costs
Other Government Logistics Inadequate Home office Capital
restrictions management infrastructure employee investments
morale
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Recall that service operations can be classified asprocessing people, goods, or information. Whatchallenges are faced in each category whenglobalization is undertaken?