Documente Academic
Documente Profesional
Documente Cultură
Mrs.Jayashree Patil-Dake
BA (Eco-Hons), MA (Eco-Hons), MBA (Marketing), NET, SET, PhD (perusing) Senior Faculty, MBA Dept and Coordinator PGDMIB, BCPGC, Hyd-27
Introduction
Globalization of Health Care
Evolution of IB
Evolution of IB is as old as human civilization, however to simplify 1) First phases of globalization began around 1870 and ended with WW-I (1919): Industrial revolution in UK, Germany n USA- import of raw material by colonial empires from colonies and exporting finished goods to overseasresulted in sharp increase in volume of trade.( vast game of beggar-thyneighbour. GDP/Trade ratio= 22.1 in 1913 and GDP/Trade ratio= 9.1 in 1930 Sharp decline in trade due to trade barriers, excess production to domestic demand, decline in Int trade, breakdown of gold std leading to vacuum in field of Int trade. Hence there was a need felt for International co-operation in global trade and balance of payments affairs. Efforts resulted in IMF and IBRD
Goals of IB
To achieve higher rate of return Expanding the production capacities beyond the Demand of the Domestic Company Sever competition in the Home country Limited Home Market Political Stability Vs. Political Instability Availability of Technology and competent Human Resource High cost of Transportation Nearness to Raw Materials Availability of Quality Human Resource at Less Cost Liberalization and Globalization To increase Market Share To achieve Higher Rate of Economic Development Tariff and Import Quotas
Japan:
-industrialized, free economy -worlds 3rd largest PPP after US n China -2nd largest market exchange rates -International Trade is Highly efficient and competitive -But low productivity in agri, distribution and services -Mastery of high technology -comparatively small defense allocation -extraordinary speed to be a large economy -10% population moved from working age to elderly age
Canada: -dominated by service industry -also has sizeable manufacturing sector -Logging and Oil are imp industries -International Trade major contributor to Economy :especially natural resources -Free Economy -Lower Per Capita GDP than US but Higher than many European Economies
Australia: -western style market economy -dominated by service sector(68%of GDP -yet agricultural and mining sector (8%) That account 65% of its exports -Rich natural resources -Major exporter of agri products, various metals, coal and natural gas
Advantages of IB
Higher Living Standards Increased Socio-Economic Welfare Wider Market Reduced Effects of Business Cycles Reduced Risks Large-scale Economies Potential Untapped Markets Provides the Opportunity For & Challenge to Domestic Business Division of Labour and Specialization Economic Growth of the world Optimum and Proper Utilizations of World Resources Cultural Transformation Knitting the world into a closely interactive Traditional Village
Advantages contd...
- mobility of labour forces across the globe. - use of portfolio planning for synergistic advantage by allocating more resources to those portfolios/products which have higher mkt demand and by reducing resources to those products with low market demand. (reducing/stopping further investments in Dogs, diverting income from Cash Cows to problem children and Star portfolios.) - Economics of Scale - Latest Technology - Human Resources -continuous up gradation of employees through training - Computer-aided design, product process, e-commerce, business process re-engineering and enterprise resource planning would also sources for competitive advantages - product and process innovation and development - acquiring market power to understand, monitor and control suppliers of inputs, customers, dealers or market intermediaries and competitors - cheap sources of raw materials, finances etc. in various foreign countries
India:
- protectionist policies since independence - 1990s foreign exchange crisis led to globalization - Led to IT revolution in India - Successful Educational System to produce good engineers, medicos, MBAs, Scientists etc - India is producing more than 2.5 million graduates including 120000 IT professionals - Indian middle class highly educated in IT, biotech, medicine, pharma and management - Top educational institutions are world class - 50% of Indian population is in age group of 25-30,which is highly energetic. - this group is endowed with challenging, competitive attitude - India is largest English speaking country in world - cost of professional is 10-15 times less than US and European labour markets - All these favorable factors led to Software industry growth with world class std. - Satellite communication helped serving global business without software companies going global - Software and other firms around world depend on Indian by Outsourcing - Indian Software and service export crossed $23.4 Bn in 2006 and it targets to cross $60 bn by 2010
Problems of IB
Political Factors Huge Foreign Indebtedness Exchange Instability Entry Requirements Tariffs, Quotas and Trade Barriers Corruption Bureaucratic Practices of Governments Technological Pirating Quality Maintenance High Cost
Drivers of Globalization
Former communist and socialist economies opened themselves to rest of the world After 1990 shifts from globalization to IB have been faster. The external environmental factors have been contributing significantly for remarkable strides in global business. Drivers to globalization/factors contributing to globalization include:
establishment of WTO, emergence and growth of regional integration, decline in trade barriers, decline in investment barriers, increase in FDI, technological changes and growth of MNCs.
Variety of Goods
High Living Std Economic Growth Competitive Advantage Problems: Political risks Foreign Debt Exchange instability High Cost
Exports
Direct Investment Licensing Franchising Turnkey Projects Joint Ventures Mergers & Acquisitions
Establishment of WTO
1994: govts of member countries of GATT concluded Uruguay round negotiations on 15th Dec 1994. Final draft was singed in Marrakesh, Morocco on 15th April 1994; declaring results of Uruguay round would, strengthen the world economy and lead to more trade, investment, employment and income growth thought-out the world. The value of exports increased by 245% and import increased by 1014% after the establishment of WTO (during1995-2006)
Emergence and Growth of Regional Integration The regional integration of countries of same region or areas increase the size of market, aggregate demand for products and services, quantity of production, employment and ultimately the economic activity of the region. People of the region get variety of products at comparatively lower prices. This enhances purchasing power and living std of people The significant regional integrations (trade blocks) include EU, NAFTA, ASEAN, EFTA,APEC,MERCOSUR and ANDEAN.
FDI is an investment made by a company in new manufacturing and/or marketing facilities in a foreign country. FDI increased due to: Increase in sales and profits Enter into rapidly growing markets Reduces costs Consolidate trade blocks Protect domestic markets Protect foreign markets Acquire technological and Managerial know-how FDI flows have increased in last 25 yrs with rapid growth during 1990a. The outflow of FDI was more than 15 times after 1990s compared to during 1970s. FDI increased from US $ 564 bn in 1980 to US$8981 bn in 2007 FDI flow is expected to increase further once world economy picks up from recent recession in advanced countries DCs i.e. Advanced countries major players in FDI flows. They were predominate providers and recipients of FDI; as 84% of FDI was provided by DCs they received 69% of FDI in 2007. Indicates that DCs provide only 16% of total FDI and received 31% total global FDI in 2002. USA was largest provider as well as recipient of FDI followed by UK in 2007. Emerging economies are now receiving high FDI than 1980s. However, Vienna, HK, Brazil, Mexico, India and Singapore are receiving over 50% FDI among DCs. Growth and spread of FDI enlarged globalization of production and marketing.
Increase in FDI
Strides in Technology
Technological change is amazing and phenomenal after 1980s.Revolution in telecommunication, IT, Transporting Technology, etc Microprocessor and Telecom: high power, superior speed, low cost of computing, handling vast amount of info Internet and WWW: backbone for future global business. The usage of search engine to down load info on product designs, specifications, models, prices, services to customers, market info On-line Globalization: info regarding changes in raw material, customer preferences, changes in product designs can be sent easily. Transportation Technology: commercial jet aircraft, super fighters, containers etc development in transportation technology reduced distance among countries drastically. Transshipment from one mode to another became easier and reduced travel time.
Growth of MNCs
A multinational corporation/company is an organization doing business in more than one country. Transnational company produces, markets, invests and operates across world. MNCs & TNCs have been growing and spreading their operations due to market, financial and other superiorities and expansion of international markets. EU had 163 out of 500 top MNCs in world(2007) followed by USA(162) and Japan(67). MNCs of developing countries have been increasing in contrast to developed countries. India had six MNCs among top 500 MNCs.
Influences of IB
Political Social Cultural Economic factors These factors differ from country to country which makes conducting and managing IB crucial venture. Africa and Europe preferences to price and quality etc
Characteristic Features of IB
Accurate Information: Europe Shoes-Bata
Market Segmentation: generally, Geographical Mkt Segmentation Daewoo segmented as North America, Europe, Africa, Indian Sub-continent and Pacific markets
Potentiality of Markets
Int markets are more potential Wider in scope, varied in consumer tastes, preferences and purchasing abilities, size of population (IBM sales more in foreign countries than in US, similarly Coca-cola sales, P&G, Satyam, sale more other than home countries World population is on rise. Size of population may not determine size of market due to backwardness, low purchasing power etc( Eritrea-an African country roughly equals to UK in terms of Land, Size of Population. But per capita income of Eritrea is only US $ 150 pa. Willingness to buy and ability to buy is important Many MNCs entered in India with expectations but they failed due to heavy inflow of goods and decline in size of middle class led to slump -Wider Scope: -Inter-country comparative study:
Difference in Govt Policies, Laws and Regulations -Host countrys monetary system -National security policies of Host country -Cultural factors -Language -Nationalism and Business policy
Changing Scenario of IB
Globalization of various economies including communist and socialistic states WTO IT revolution Transport Technology revolution EU: 15 members to 27 members High growth rates of BRIC, Mexico, S. Korea, Singapore, Malaysia, Thailand Increase in business alliances: M&A JVs etc Globalization of Cultures Increase in Education Opportunities, careerorientation in china India etc- growth of MNCs
Stages of Internationalization
1. 2. 3. 4. 5. Domestic Company International Company Multinational Company Global Company Transnational Company
1. Domestic Company
Domestic company limits operations, mission, vision to national political boundaries. Focus on domestic market opportunities Domestic suppliers Domestic financial companies Domestic customers Analyses national environment of country, formulates strategy to exploit opportunities offered by environment. Unstated motto: if it is not happening in the home country, it is not happening Never thinks growing globally. If it grows beyond present capacity, it selects diversification strategy of entering into new domestic markets, new products, technology etc. It does not select strategy of expansion/penetrating into international markets etc
2. International Company
Some domestic companies grow beyond their production or domestic marketing capacities, thin of internationalizing their operations. Who decide to exploit the opportunities outside the domestic country are stage two: international companies These companies remain ethnocentric or domestic country oriented. Believe practices adopted in domestic business, people, product of domestic business are superior to those of other companies. The focus of these companies is domestic but extends the wings to the foreign countries Select strategy of locating branch in foreign markets and extend same domestic operation. Extend domestic product, domestic price, promotion and other business practices to foreign markets Internationalization process of many companies start with this stage two process. They follow this strategy due to limited resources to learn from foreign markets gradually before becoming global company without much risk. International Companies hold marketing mix constantly and extends operations to new countries. Thus, the intentional company extends domestic country marketing mix and business model and practices to foreign countries.
3. Multinational Company
International company learns extension strategy (extending domestic product, price, promotion to foreign mkt) will NOT work.
Toyota, Japan Toyota in 1957 couldn't sell cars in USA, produced for Japan in Japan-overpriced, underpowered, tank built and unsold cars were shipped back to Japan) Toyota learnt from this failure. Designed new model cars suitable for US mkts. Int co turned into MNC when they started responding to specific needs of different markets regarding product, price and promotion This stage of internationalization is called multi-domestic. company formulating diff strategies for diff mkts. Orientation shifts from ethnocentric to polycentric. Orientation shifts from ethnocentric to polycentric Under polycentric orientation offices/branches/subsidiaries of MNC work like domestic company in each country where they operate with distinct policies and strategies suitable to the country concerned. They operate like a domestic company of country concerned in each of their markets. Phillips, Netherlands was multi-domestic company formulating diff strategies for diff mkts during 1960s.. With autonomous national organizations and formulation of strategies separately for each country. It worked until Japanese companies and Matsushita started competing based on global strategy which was based on focusing the company resources to serve the world market. Phillips strategy was to work like domestic company and produce number of models of product. It increased cost of production, price But Matsushitas strategy was to give value, quality, design, low price to customer. Philips lost its market share as Matsushita offered more value to customer Consequently, Philips changed its strategy and created industry main groups in Netherlands which are responsible for formulating a global strategy for producing, marketing and R&D
4. Global Company
Global company has either global marketing strategy or global strategy. Global company either produces in home country or in a single country and focuses on marketing these products globally, or produces products globally and focuses on marketing these products domestically. Harley designs and produces Super heavy Motorcycles in US and markets in global market. Dr. Reddys lab designs and produces drugs in India and markets globally. Both have global market focus. Gap procures products in global countries and market products through its retail organization in US. Thus Gap is example of global sourcing company Harley Davidson designs and produces in USA and gains competitive advantage as Mercedes in Germany. The Gap understands the US consumer and gets competitive advantage
5. Transnational Company
Transnational company produces, markets, invests and operates across the world. It is integrated global enterprise that links global resources with global markets at profit. There is no pure transnational corporation However, most of them satisfy many of the characteristics of global corporations, Coca-cola, Pepsi-cola etc. Its geocentric in orientation thinks globally and acts locally, adopts global strategy but allows value addition to customer of domestic country. This company allows adaptation to add value to its global offer. The assets are distributed throughout world, independent and specialized. R&D facilities are spread in many countries, but specialized in each country based on local needs and integrated in world R&D projects. Production facilities are spread but specialized and integrated. Caterpillar, manufacturing and assembly facilities are located in may courtiers. Components are shipped for assembly and assembled product is shipped to place of the customer.
1.Domestic
Domestic
2. International
International
3.Multidomestic
Multidomestic
4. Global
Global
5.Transnational
Global
Model
N.A. Federation
Coordinated Federation
Decentralized Hub
Centralized Network
Integrated
Home country
Extension or Resources
Ethnocentric
Global Markets
Mixed
Global Markets
Ethnocentric
Geocentric
Decentralized country except marketing or sourcing Exploiting local Opportunities Retained within developed jointly and shared
All in home Interdepend ent and specialized Marketing or sourcing worldwide Marketing developed jointly and shared
Dispersed
International Business
Polycentric or Regiocentric Min two countries max to entire globe Operations could be spread to entire globe
IB Approaches
IB approaches are similar to stages of Internationalization or globalization Ethnocentric Polycentric Regiocentric Geocentric
1. 2. 3. 4.
Ethnocentric
Maintenance of domestic approach towards international business is called ethnocentric approach. Under Ethnocentric Approach the domestic companies view foreign markets as an extension to domestic markets. The company exports the same product designed for domestic markets to foreign countries under this approach. This approach is suitable to the companies during the early days of internationalization and also to the smaller companies.
Managing Director
Manager R&D
Manager Finance
Manager Production
Manager HR
Manager Marketing
Polycentric
Under polycentric approach, companies establish foreign subsidiary and empowers its executives. Domestic companies which are exporting to foreign countries using ethnocentric approach find at the later stage that foreign markets need am altogether different approach. The company establishes foreign subsidiary company and decentralizes all the operations and delegates decision-making and policy making authority to its executives. In fact, company appoints executives and personnel including a chief executive who reports directly to Managing Director of the company. Company appoints key personnel from the home country and all other vacancies are filled by the people of the host country. The executive of the subsidiary formulate policies and strategies, design the product based on the host countrys environment (culture, customs, laws, government policies etc.) and the preferences of the local customers. Thus polycentric approach mostly focuses on the conditions of the host country in policy formulations, strategy implementation and operations. Managing Director CEO Foreign Subsidiary (Uganda)
Manager R&D
Manager Finance
Manager Production
Manager HR
Manager Marketing
Regiocentric
The company operating successfully in foreign country, thinks of exporting to neighboring countries of the host country. At this stage, foreign subsidiary considers the regional environment (e.g. Asian environment like laws, culture, policies etc) for formulating policies and strategies. However, it markets more or less the same product designed under polycentric approach in other countries of the region, but with different market strategies. Under Regiocentric approach, subsidiaries consider regional environment for policy/strategy formulation.
Managing Director CEO, Subsidiary South Africa Marketing (Botswana) Marketing (Namibia) Manager Marketing
Manager Finance
Manager Production
Manager HR
Under geocentric approach, the entire world is just like single country for the company. They select employees from the entire globe and operate with a number of subsidiaries The headquarters coordinate activities of the subsidiary. Each subsidiary functions like independent and autonomous company in formulating policies, strategies, product design, human resource policies, operations etc. Under geocentric approach, companies view, the entire world as a single country.
Managing Director
Geocentric
Subsidiary India
Subsidiary Namibia
Subsidiary Kenya
Subsidiary Lesotho
Thank You