Globalization Market 2013

8/11/2019 Globalization Market 2013

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International Business: The New Realities

by

Cavusgil, Knight and Riesenberger

Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall

Dimensions of Market Globalization

Dimensions of Market Globalization Integration and interdependence of national economies Rise of regional economic integration blocs Growth of global investment and financial flows

Convergence of buyer lifestyles and preferences Globalization of production activities Globalization of services

Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall 2-2


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Stages of Economic Integration

A Free Trade Area Tariffs and quotas abolished within the FTA, i.e. between the participating

countries. No harmonization of the external trade regime.

A Customs Union

Equalize external tariffs (customs) and common quotas.

A Common Market

Further abolish restrictions on the movement of production factors (workers,goods, capital and services).[ECSC- Euratom EEC]

Further Union

Some degree of harmonization of national economic policies.Supranationality:unification of monetary, fiscal, social policies.

Free trade areas

Team 1- ASEA Free Trade Area !AFTA"

Team #- orth American Free Trade Agreement !AFTA"

Team $- %ulf &ooperation &ouncil !%&&"

Team '- Southern &ommon (ar)et !(E*&+S*"

Team - European nion

Team - Asia-/acific Trade Agreement !A/TA"

Team 0- &ommon (ar)et for Eastern and Southern Africa

!&+(ESA"

Team 2 3lac) Sea &ooperation Agreement

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This sessions learning objectives

1. Why globalization is not new :

Dimensions and Drivers of market globalization

2. Participants in international business arranged by value-chain (incl. SME

specificities)

3. Discussing some entry-strategies: BOP, franchising/licensing

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Why globalization is not new :

Drivers of market globalization

6nternational 3usiness: The e7 *ealities


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8istory of international trade

3efore the rise of the 9nation state;< 9trade over long distances

Sil) *oad !#55 3&E": connected Asia, Africa and Europe!,55 )m" a good e=ample of the transformati>e po7er of

international e=change : religions, languages, arts spread

and mi=ed as products and ideas 7ere e=changed .

1th !A?": the domestication of camel allo7s Ara@iannomads to control long distance trade in spices and sil)

from the Far East.

6nternational 3usiness: The e7 *ealities 0

*oman trade 7ith 6ndia

6nternational 3usiness: The e7 *ealities


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Chart of undersea telegraph cabling in 1899.Eastern Telegraph &ompany 1.

An e=ample of modern glo@alizing technology in the @eginning of the #5th century.

4 Phases of Globalization

Phase 1: 1830 to late 1800sAided by railroads and ocean transport; the rise of

manufacturing and trading companies

Phase 2: 1900 to 1930

Fueled by electricity and steel; early MNEs

Phase 3: 1948 to 1970sGATT, post-war era; reduction of trade barriers WW;

rise of global capital markets

Phase 4: 1980 to presentFueled by Internet and other technologies; rapid liberalization in

emerging markets2-10


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The Death of Distance


The Drivers of Market Globalization

Worldwide reduction of barriers to trade and investment Market liberalization and adoption of free markets

Industrialization, economic development, and

modernization

Integration of world financial markets Advances in technology



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Declining Cost of Global Communicationand Growing Number of Internet Users


NTIC - Manufacturing andTransportation Technologies

Revolutionary developments permit manufacturing that is low scale and lowcost, via computer-aided design of products (CAD), robotics, and IT-managedproduction lines.

In transportation, key advances include fuel-efficient jumbo jets, giant ocean-going freighters, and containerized shipping. The cost of internationaltransportation has declined substantially, spurring rapid growth in global trade.

Collectively, technological advances have greatly reduced the costs of doingbusiness internationally.



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Drivers of Market Globalization

Worldwide reduction of barriers to trade and investment: Over time,national governmentshave greatly reduced trade and investment barriers. The trend is partlyfacilitated by the World Trade Organization (WTO), an organization ofsome 150 member nations.

Market liberalization and adoption of free markets: The launch of freemarket reforms in China and the former Soviet Union marked theopening of roughly one-third of the world to freer trade.


Drivers of Market Globalization (cont.)

Industrialization, economic development, and modernization:These trends transformed many developing economies from producersof low-value goods to higher-value goods, such as electronics andcomputers.

Simultaneously, rising living standards havemade such countries more attractive astarget markets for salesand investment.



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Drivers of Market Globalization (cont.)

Integration of world financial markets: Enables firms to raise capital,borrow funds, and engage in foreign currency transactions whereverthey go. Banks now provide arange of services that facilitateglobal transactions.

Advances in technology: Reduces the cost of doing business

internationally by allowing firms to interact cheaply with suppliers,distributors, and customers worldwide. Facilitates the internationalizationof companies, including countless small firms.


Participants in Intl. Business

1. Governments & Intl. Institutions: Active in international business as

regulatorssuppliers and buyers.

2. NGOs

3. Focal firm: Initiator of an international business transaction; e.g., MNEs and

SMEs

4. Distribution channel intermediary: Specialist firm that provides distribution,

logistics, and marketing services in the international value chain

5. Facilitator: Firm that provides special expertise in banking, the law, customs

clearance, market research, or another field (ex. Visa.)

3-18Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall


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Governments as participants in international

business.


WTO - Ministerial Conference 18-20 May 1998

meets every two years, brings together all members of the WTO (countries or customs unions).

The Ministerial Conference can take decisions on all matters under any ofthe multilateral trade agreements.

Non-governmental organizations:

Many of nonprofit organizations conduct cross-border activities. They pursuespecial causes and serve as advocates for social issues, education, politics, and

research.

Examples The Bill and Melinda Gates Foundation and the British Wellcome Trust both

support health and educational initiatives

CARE is an international nonpro!it or"ani#ation dedicated to reducin" povert$



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International Focal firms

Multinational enterprise (MNE): A large company withsubstantial resources that performs various businessactivities through a network of subsidiaries and affiliates

located in multiple countries;e.g., Caterpillar, Samsung, Unilever, Vodafone, Disney.

Small and medium-sized enterprise (SME): Typically acompany with 500 or fewer employees. Over 90% of allfirms in most countries are SMEs. SMEs increasingly

engage in international business.-> Born global firm: A young, entrepreneurial SME that

undertakes substantial international business at or near thetime of its founding.


2. Focal firms, facilitators and distributionintermediaries arranged by value-chain activity



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Company Internationalizationand the Value Chain

The most significant implication of market globalization for companies isthat a purely domestic focus is no longer viable in most cases.

Market globalization compels firms to internationalize their value chainand access the benefits of international business.

Value chain: The sequence of value-adding activities performed by thefirm in the process of developing, producing, and marketing a product ora service.

Globalization allows the firm to internationalize its value chain, leading tovarious advantages.


The Firms Value Chain



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Typical Positions of Intermediaries

and Facilitators in the International Value Chain


Dells International Value Chain



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Dell to illustrate the International Value Chain.

Dell is based in USA-Texas. On a typical day, Dell processes orders for 140,000 computers,which are sold and distributed to customers worldwide. Non-U.S. orders account for roughly

half its total sales.

A Dell customerplaces an order for a notebook.

The Dell representative (India/Belgium/Taiwan/South Africa) enters the specifications intoDells order management system.

He verifies his credit card through Dells workflow connection with Visa, a global financialservices facilitator; and then releases the order into Dells production system.

That day, the order is sent to the Dell notebook factory in Malaysia, where employees accessfrom nearby suppliers (Malaysia, China, Costa Rica) the parts that comprise the 30 key

components of Dell notebooks these suppliers source from 400 suppliers primarily in Asia,

but also in Europe and the Americas. A hallmark of Dells value chain is collaboration.

Dell constantly work with their suppliers to make process improvements in Dells value chain.

6nternational 3usiness: The e7 *ealities #0

Globalization Market 2013

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