Stategy for a global village

Globalisation

can be defined
as the growing integration and
interdependence of the world
economies.

Trade liberalisation

World Trade Organisation

Expansion and deepening of the European Union

Technological Progress
Cultural awareness and Recognition
Language ( growth of English speaking nations)
Transition to market systems in eastern Europe
Rising real living standards
Rapid growth in the Asian Tigers and more recently in
China and India
Privatisation in and liberalisation of domestic markets
Deregulation of international capital markets
Fall in transport costs
Improvement in global communications

(1) Market drivers

Degree of homogeneity of customer needs
Existence global distribution networks
Transferable marketing
(2) Cost drivers
Potential for economies of scale
Transportation cost
Product development costs
Economies of scope
3) Government drivers
Favour trade policies e.g. market liberalisation
Compatible technical standards and common marketing
regulations
Privatisation
(4) Competitive drivers
The greater the strength of the competitive drivers the
greater the tendency for an industry to globalise

Rapid expansion of international trade

Internationalisation of products and services by large
firms
Growing importance of multinational corporations
Increase in capital transfers across national borders
Globalisation of technology
Shifts in production from country to country
Increased freedom and capacity and firms to
undertake economic transactions across national
boundaries
Fusing of national markets
Economic integration
Global economic interdependence

 Increases

the Level of competition

Meeting Demands of Customer Expectations
and Needs
Economies of scale
Choice of location ( multinationals now look
for lower production costs)
Mergers and Acquisitions and Joint Ventures
Increased customer Base
E Commerce

Multinational corporation ( MNC) is a

business corporation that operates in two or
more countries.
Examples :
Coca Cola
Dell
Exxon
HSBC
Nike
NOkia

 Trade

in goods and services

Investment
Labour force movement
Products
Production
Technology
Research and development
Exchange of ideas and knowledge
Intellectual property

Forces driving the growth of MNCs:

The search for growth markets
Increase customer Base
Economies of scale
Spread the Risk
Globalisation of markets
Desire to reduce production costs
Desire to shift production to countries with lower
unit labour costs
Desire to avoid transportation costs
Desire to avoid tariff and non tariff barriers
Forward vertical integration
Extension of product life cycles
Deregulation of capital markets

 Lack

of Local Knowledge
Storage, Transportation and distribution costs
External Factors ex Legal restrictions
Language Barriers
Cultural Barriers
Political Factors
Economic conditions
Infrastructure

Host country is a nation

that allows a Multinational
Company ( MNC ) to set up in
their country

 Create

Jobs
Technology Transfer ( quality circles , Kaizen)
Creates More Competition
Increased GDP , Economic Growth
Effect on Balance of Payments
Increased exports

Treatment of Poorer countries

Lack of Corporate Social Responsibility (CSR)
Exploiting scarce resources
Environmental concerns
Child labour
Sweat shops
competition ( capital intensive firms)
Competition forces local industries to decrease
prices
Treat to local businesses
Create unemployment