globalization drivers

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

mailto:[email protected]

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


Why Firms Internationalize

• Demand– New Markets– Follow the customer– Follow the competition– Fend off new competition

• Supply – Raw materials– Land– Labor– capital

Mahesh Joshi - Globalization Drivers 3

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


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


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


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


Core Strategy and Globalization


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


Industry Globalization Potential


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


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


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


The Globalization Triangle


Integration or Responsiveness


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.


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]


mailto:[email protected]

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