Mod 1 - IBM Globalization of Markets - Final

8/9/2019 Mod 1 - IBM Globalization of Markets - Final

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MODUL

EGlobalization of Market

&Globalization of

Production

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GLOBALIZATION ! Used by an Indian

Set made inChina/Taiwan

Chip made in US

Transported to Indiain the ship owned bysome other countrypeople


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GLOBALI ATIONShift toward a more integrated and

interdependent world economy

Globalization has two different facets:

The Globalization of Markets

The Globalization of Production


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THEGLOBALI ATIONOFMARKETS

Refers to the merging of historically distinct andseparate national markets into one huge globalmarket place

Consumer products credit cards,soft drinks,sony play station video games, McDonalds

hamburgers, are offering a standardizedproduct worldwide and helping to create aglobal market


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BUTSIGNIFICANT DIFFERENCES

Between national markets and the various

dimensions like

Consumer tastes & preferencesDistribution channels

Culturally embedded value systems

Businesssystems & legal regulations


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CASE: WAL-MARTSGLOBAL

EXPANSION Largest retailer in the world Over 4500 stores

International expansion in 1991begins with Mexico in

response to market saturation in the US

Localization strategy adopted after trial and error

Global buying power has allowed it to reap economies

ofscale

Wal-mart facessignificant competition from otherglobal retailers, but has the first mover advantage in

some markets

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WHAT ISGLOBALI ATION?

The shift towards a more integrated and

interdependent world economy

Two components:

The globalization of markets

The globalization of production

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GLOBALI ATIONOF MARKETS

The merging of distinctly separate national

markets into a global marketplace Tastes and preferences converge onto a global

norm

Firms offer standardized products worldwide

creating a world market

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Significant differencesstill exist between

national markets on many relevant dimensions

These differences require that marketing and

operatingstrategies and product features be

customized to best match conditions in a

country.

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Countries are different

Range of problems are wider and more

complex

Government intervention in trade and

investment creates problems

International investment is impacted bydifferent currencies

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GLOBALI ATIONOF

PRODUCTION Refers to sourcing of goods and services

from locations around the world to take

advantage ofDifferences in cost or quality of the factors of

production

Labor

Land

Capital

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EMERGENCEOFGLOBAL

INSTITUTIONS

Globalization has created the need forinstitutions to help manage, regulate and police

the global marketplace

GATT

WTO

IMFWorld bank

United Nations

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GLOBAL DRIVERS

Macro factors that underlie trend towards

greater globalization

Decline in trade barriers

Technological change

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PATTERNOF DECLINING

TARIFFS

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DECLININGBARRIERSTO

TRADE

Globalization of markets and production has

been facilitated byReduction in trade barriers

Removal of restrictions to foreign direct

investment

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THE CHANGINGPATTERNOF WORLDOUTPUTAND TRADE

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PERCENTAGESHAREOFTOTALFDI

STOCK

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Fig: 1.3


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VOLUMEOFFDI INFLOWS, 1994-2002($BILLIONS)

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Fig: 1.4


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THEROLEOFTECHNOLOGICAL

CHANGE

Microprocessors and telecommunications

The internet and world wide web

Transportation technology

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THESHRINKINGGLOBE

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Fig: 1.2


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CHANGING DEMOGRAPHICSOFTHEWORLD ECONOMY

World output and trade

Changing foreign direct investment Changing nature of multinationals

Mini multinationals

Non US multinationals

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NATIONALORIGINOFLARGESTMULTINATIONALCORPORATIONS

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Fig: 1.5


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GLOBALI ATION DEBATE-

PRO

Lower prices for goods and services

Economic growth

stimulation

Increase in consumer income

Creates jobs

Countriesspecialize in production of goodsand services that are produced most

efficiently

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GLOBALI ATION DEBATE-CON

Destroys manufacturing jobs in wealthy,

advanced countries

Wage rates of unskilled workers in advancedcountries declines

Companies move to countries with fewer

labor and environment regulations Loss ofsovereignty

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Mod 1 - IBM Globalization of Markets - Final

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