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Globalization Drivers
Mahesh P. Joshi
Director of Research & Practice
Center for Innovation and Entrepreneurship
and
Associate Professor of Global Strategy and Entrepreneurship
School of Business – George Mason University
President - Joshi International, Inc.
[email protected]
Mahesh Joshi - Globalization Drivers
Some Thoughts
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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
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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
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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
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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
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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
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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
Global integration
National responsiveness
Low
High
High
Global
strategy
Transnational
strategy
Low
International
strategy
Multi-domestic
strategy
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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. Joshi
Director of Research & Practice
Center for Innovation and Entrepreneurship
and
Associate Professor of Global Strategy and Entrepreneurship
School of Business – George Mason University
President - Joshi International, Inc.
[email protected]
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