globalization drivers mahesh p. joshi director of research & practice center for innovation and...
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Globalization Drivers
Mahesh P. JoshiDirector of Research & Practice
Center for Innovation and Entrepreneurshipand
Associate Professor of Global Strategy and Entrepreneurship
School of Business – George Mason University
President - Joshi International, [email protected]
Mahesh Joshi - Globalization Drivers
Some Thoughts
• Globalization is very difficult• All firms are born global• US was created as a result of globalization• To be successful a firm must be active in
global arena
Mahesh Joshi - Globalization Drivers
Why Firms Internationalize
• Demand– New Markets– Follow the customer– Follow the competition– Fend off new competition
• Supply – Raw materials– Land– Labor– capital
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Benefits of Globalization
• Cost reduction– Economies of scale, lower factor cost, focused production
(rationalized production), flexibility, enhancing bargaining power
• Quality enhancements– Exposure to demanding customers, focused offerings
• Enhanced customer preferences– Global availability, global serviceability, global recognition
• Increased competitive leverage– Cross subsidization of competitive moves, entering the backyard
of your competitor
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Costs of Globalization
• Main cost – Coordination of resources and people
• Levers used to globalize pose their own costs– Market participation may have unique reasons– Standardized products/service created by
committee– Location may be not suitable for global activities– Centralized marketing message may miss the
local flavor– Cross competition may not be feasible
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Core Strategy
• Several dimensions to • What is offered• Who is the customer• What geographic markets• What functional strategy• What is the competitive advantage
• Key focus• Board versus narrow strategic choices
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International Strategy
• International Market Selection leads to• A need for geographic market selection• Appreciation of barriers to trade (tariffs and quotas)• Foreign ownership and repatriation rules• Knowledge of local laws• Knowledge of Local preferences in customer
behavior• Cross-Cultural interaction
• Results: Weakening of the core strategy
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Core Strategy and Globalization
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Creating a Global Strategy
• To overcome weakening of the core strategy
• Need to find a fit between external and internal environment
• Competitive position of the firm• Resource base and businesses of the firm• Industry globalization drivers• Organization’s ability to implement global strategy
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Industry Globalization Potential
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External: Industry Globalization Drivers
• Market Drivers: Consists of but not limited to– Common customer needs and tastes– Global customer: Lifestyle and taste plus global travel– Global distributors and global brands– Global Marketing and advertisement message– Emergence of lead countries in specific industries– Growth of ICT
• Cost Drivers: Consists of but not limited to– Economies of scale plus learning curve effect– Sourcing efficiencies and favorable logistics– Differences in country costs (including exchange rates)– Accelerating technological innovation at a higher cost– Changing product life cycles
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External: Industry Globalization Drivers: 2
• Government drivers: Consists of but not limited to– Reduction in tariffs and other protective actions– Growth of compatible technical standards– Uniform or common marketing regulations– Government owned customers and competitors
(Denationalization, deregulation, open economies)– Host government concerns (if managed well leads to
reduction in isolated economies)
• Competitive drivers: Consists of but not limited to– Rising world trade levels (high export and import)– New competitors are not restricted to developed economies
because of born global firms -variety of countries– Global networks in many industries allow for global focus
(interdependence of counties)– Globalized competitors (increased foreign ownership
among corporations)– Transferable competitive advantage
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Global Strategy Levers
• Market participation– Choice of countries or regions to exploit competitive advantage
• Choice of Products/services– Product modification versus standardization
• Activity location– Understanding the value added and hence location to exploit competitive
advantage
• Marketing– Choice of message that would be uniform or modified
• Competitive Moves– Integration of competitive moves across the world
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The Globalization Triangle
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Integration or Responsiveness
Mahesh Joshi - Globalization Drivers
Global strategy
International strategy
Transnational strategy
Multi-domestic strategy
National responsiveness
Low High
Glo
bal i
nte
gra
tion
Low
High
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References
• Based on:• The Multinational Mission: Balancing Local
Demands and Global Vision by C.K. Prahalad, Yves L. Doz, 1999.
• Global Strategy... In A World Of Nations? By George S. Yip., Sloan Management Review; Fall 1989; pages 29-43.
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Contact
Mahesh P. JoshiDirector of Research & Practice
Center for Innovation and Entrepreneurshipand
Associate Professor of Global Strategy and Entrepreneurship
School of Business – George Mason University
President - Joshi International, [email protected]
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