Transcript GLOBALIZATION - Bar

GLOBALIZATION - THEN AND NOW
“The World is a City”
Karl Meyer Rothschild (1875)
 The Workforce is less mobile today then in the 19th century.
Example: There was no need for passports and most people moved
freely from one country to another. 60 million Europeans
migrated to North and South America, Australia. In 1900, 14%
of the American population were immigrants, compared to 8%
today.
 In the 1860s and 1870s, many goods were traded freely.
Example: 95% of German imports were customs free. According to
the “Capital Mobility Index” of the IMF, the volume of capital
movements in relation to GNP is less today than in the 1880s.
1
YES, BUT...
19th Century trade was primarily in
commodities, today it is primarily in goods and
services.
 19th Century capital movements were
concentrated in the hands of small groups of
wealthy people for long term investment.
 Capital movements today are faster, but shorter
term.

2
GLOBALIZATION
What Is A Global Industry?
3
4
THE MULTINATIONAL
CORPORATION
A company with significant operations and
market interests outside its home country.
 Affiliated firms are linked by ties of common
ownership.
 The MNC draws on a common pool of
resources.
 Its affiliates are linked by a common strategic
vision.

5
TWO INDUSTRIES: TWO
STRATEGIES
MULTIDOMESTIC INDUSTRY
 The MNC pursues separate strategies in each of
its foreign markets.
 Each overseas subsidiary is strategically
independent.
 MNC headquarters coordinates financial
controls and marketing worldwide.
 Each subsidiary is a profit center.
6
GLOBAL INDUSTRY
One MNC’s entire worldwide system of product
and market is positioned against a competing
MNC(s).
 Strategy is centralized.
 Response to local market needs where and
when necessary.

7
WHY FIRMS BECOME MNCs
To protect themselves from the risks and
uncertainties of the domestic business cycle.
 To tap the growing world market for goods and
services.
 In response to increased foreign competition
and to protect world market shares.
 Internalization to reduce costs and protect
knowledge.

8
GLOBAL STRATEGY LEVERS
Lever
Multidomestic
Strategy
Global Strategy
Market Participation
No Particular Pattern
Significant Share in
Markets
Product Offering
Fully Customized
Fully Standardized
Location of Value-Added All Activities in Each
Activities
Country
Concentrated
Marketing Approach
Local
Uniform
Competitive Moves
Stand-alone by
Country
Integrated
9
SOME INDUSTRY EXAMPLES:
GLOBAL INDUSTRIES
 Caterpillar & Komatsu
(heavy construction
equipment)
 Timex, Seiko & Citizen
(watches)
 GE, Siemens &
Mitsubishi (heavy
electrical equipment)
MULTIDOMESTIC
INDUSTRIES
 P & G (household
products)
 Honeywell (controls)
 Alcoa (aluminum)
 General Foods (branded
foods)
10
ELEMENTS OF GLOBAL ORGANIZATION
•Global strategy information
system
•Cross-country coordination
•Global strategic planning
•Global budgeting
•Global performance review
and compensation
MANAGEMENT
PROCESSES
ORGANIZATION
STRUCTURE
ABILITY TO DEVELOP
AND IMPLEMENT
GLOBAL STRATEGY
•Global identity
CULTURE
•Commitment to worldwide
(vs.) domestic employment
•Interdependence (vs. autonomy)
of businesses
•Centralized global authority
•No international division
•Strong business dimension
PEOPLE
•Use of foreign nationals
•Multicountry careers
•Frequent travel
•Statements and actions
of leaders
11
ORGANIZATION FEATURES FOR TYPES OF
GEOGRAPHIC BUSINESSES
GEOGRAPHIC
SCOPE
ORGANIZATION
STRUCTURE
GLOBAL
CENTRALIZED GLOBAL
AUTHORITY.
NO
DOMESTIC-INTERNATIONAL
SPLIT.
STRONG BUSINESS
DIMENSION RELATIVE TO
GEOGRAPHY AND FUNCTION.
MULTILOCAL
DISPERSED NATIONAL
AUTHORITY.
NO
DOMESTIC-INTERNATIONAL
SPLIT.
STRONG GEOGRAPHIC
DIMENSION RELATIVE TO
BUSINESS AND FUNCTION.
EXPORTBASED
CENTRALIZED HOME
COUNTRY CONTROL.
SEPARATE DOMESTIC AND
INTERNATIONAL DIVISIONS.
MAY HAVE STRONG
FUNCTIONAL DIMENSIONS.
MANAGEMENT PEOPLE
PROCESSES
CULTURE
EXTENSIVE
COORDINATION
PROCESSES.
GLOBAL SHARING OF
TECHNOLOGY.
GLOBAL STRATEGY
INFORMATION
SYSTEM.
GLOBAL STRATEGIC
PLANNING AND
CONTROL.
TRANSFER OF
TECHNOLOGY FROM
HEADQUARTERS OUT.
NATIONAL
INFORMATION
SYSTEMS.
NATIONAL STRATEGIC
PLANNING AND
CONTROL.
DIRECTION NOT
COORDINATION.
ONE-WAY
INFORMATION FLOW
TO HEADQUARTERS.
NO TECHNOLOGY
MULTICOUNTRY
CAREERS.
FOREIGN
NATIONALS IN
HOME AND THIRD
COUNTRIES.
EXTENSIVE
TRAVEL.
GLOBAL IDENTITY.
INTERDEPENDENCE.
PROFESSIONAL
EXPATRIATES.
NATIONALS RUN
LOCAL
BUSINESSES.
LIMITED TRAVEL.
MULTINATIONAL
IDENTITY.
AUTONOMY.
HOME COUNTRY
NATIONALS RUN
LOCAL
MARKETING
SUBSIDIARIES.
HOME COUNTRY
CULTURE.
12
LEVELS OF CROSS-COUNTRY
COORDINATION
INCREASING COERCION
HQ DIRECTING
NEGOTIATING
PLANS
CLEARING
PLANS
SHARING
INFORMATION
INCREASING COORDINATION
13