G LOBALISATION

Along with decisions about positioning,

mergers, & acquisitions ,decisions about
global moves are among the most
important ones the strategists make.
A firm that is considering doing business
abroad must have a rationale & logic for
how it can compensate for & overcome
the liabilities &disadvantages that arise
from its foreignness.
Globalization is the increasing
interdependence, integration & interaction
among people and corporation in various
locations around the world.
Interdependence is a dynamics of being
mutually responsible to and sharing common
ET of principles with others.
Globalization refers to rapid increase in
the share of economic activity taking
place across national borders.
It goes beyond the international trade
includes the way in which goods/
services are produced /created, delivered
&sold & movement of capital.
Definitions
A typical - but restrictive - definition can be taken
from the International Monetary Fund which stresses
the growing economic interdependence of countries
worldwide through increasing volume and variety of
cross-border transactions in goods and services, free
international capital flows, and more rapid and
widespread diffusion of technology.
This goes beyond the international trade
in goods and includes the way those
goods are produced, the delivery and sale
of services, and the movement of capital.
Threat or opportunity...
Globalization can be a force for good. It has the
potential to generate wealth and improve living
standards. But it isn't doing that well at the moment.
The benefits from increased trade, investment, and
technological innovation are not fairly distributed.
The experience of the international trade union
movement suggests that the reality for the majority of
the world's population is that things are getting worse.
Globalization as we know it is increasing the gap
between rich and poor. This is because the policies
that drive the globalization process are largely
focused on the needs of business.
KEY PLAYERS
They are-
Multinational firms which carry out
business across the national borders.
The World Trade Organization (WTO)
THROUGH WHICH INTERNATIONAL
TRAD E AGREEMENTS ARE
NEGOTIATED& ENFORCD
The World Bank & International Monetary
Fund (IMF) are means to assist Govt .in
achieving development aims through the
provision of loans, technical assistance.
STAGES IN GLOBALISATION-
Domestic company links with dealer &
distributor.
Company does the activities on its own.
Company begins to carryout its own
manufacturing , marketing & sales in the foreign
markets.
Company starts fullfledged operations including
business systems and R&D. At this stage the
managers are expected to perform the tasks
which they were doing in domestic markets to
replicate them in foreign markets.
 Conditions for globalization
Business Freedom-No unnecessary Government
restrictions like restriction, restrictions on sourcing
of funds and other factors from abroad. Hence the
liberalization is the 1st step towards facilitating
globalization.

Facilitators-Infrastructure facilitation available at

home country an help entrepreneurs go globally.

Government support –Government support available

in the form of policy & procedure reform encourage
globalization
Resources-Resources is an important factor
which decides the ability of affirm to globalize.
They include finance ,technology, brand image,
company’s image, managerial expertise etc.
Competitors- This is an important factor which
company’s success in global market bank on.
The factors like low costs& price, product quality,
product differentiation, technological superiority.
After sales service, market strengths etc are few
to name.
 Reasons For Globalization
Firm operate internationally for a number of
reasons:
They may be seeking to secure better sources of raw materials
& energy.
They may want to obtain access to low cost factors of
production such as labour.
They may be attracted to certain countries because of
subsidies those countries provide.
They may be seeking new markets for their products.
Domestic markets may no longer be able to absorb production
at minimum efficient scale.
 Contd…
They may be motivated by life style
factors.Domestic markets become
saturated .As they mature , firms look
abroad for new opportunities.
They may be seeking opportunities for
economies of scope & for learning.
So why go ‘Global’?
Competition within your national market is
becoming too intense so you decide to push
sales in overseas markets.
Your products within your national markets
are reaching the end of the lifecycle so you
wish to push it into national markets.
Sales and profit are generally declining in
national markets.
You wish to become a global player.
 The Difference Between Competing
Internationally & Competing Globally
A company will start to compete
internationally by entering just one or maybe a
select few foreign markets. Competing on a
truly global scale comes later , after a
company has established operations on several
continents & is racing against rivals for global
market leadership.
There is a meaningful difference between the
competitive scope of a company that operates
in a few foreign countries & company that
markets its products in 50-100 countries &
expanding its operations into additional
country markets annually.
Former is termed as International
Competitor while the later qualifies as a
Global Competitor.
Entering global markets:

There are a number of steps that need to be

taken before you decide to enter international
markets.

Analyze the international marketing

environment. A PEST/STEP analysis needs to
be conducted on the market you enter, to
assess whether it is worthwhile or not.
Political factors
Consider:
The political stability of the nation. Is it a
democracy, communist, or dictatorial
regime?
Monetary regulations. Will the seller be
paid in a currency that they value or will
payments only be accepted in the host
nation currency?
Economical Factors
Consider:
Consumer wealth and expenditure within the
country.
National interests and inflation rate.
Are quotas imposed on your product.
Are there import tariffs imposed.
Does the government offer subsidies to
national players that make it difficult for you
to compete?
Social Factors
Consider
Language. Will language be a barrier to
communication for you? Does your host nation speak
your national language? What is the meaning of your
brand name in your host country’s language?
Customs: what customs do you have to be aware of
within the country? This is important. You need to
make sure you do not offend while communicating
your message.
Social factors: What are the role of women and
family within society?
Religion: How does religion affect behaviour?
Values: what are the values and attitudes of
individuals within the market?
Technological Factors
Consider:
The technological infrastructure of the market.
Do all homes have access to energy
(electricity)
Is there an Internet infrastructure. Does this
infrastructure support broadband or dial up?
Will your systems easily integrate with your
host country’s?
 Market entry methods
After assessing the environment in your selected country, how do
you decide which are the best countries to enter? Following
factors to be considered before entering-

Speed – How quickly do you wish to enter your

selected market?

Costs- What is the cost of entering that market?

Flexibility – How easy is it to enter/leave your chosen

market?

Risk Factor – What is the political risk of entering the

market? What are the competitive risk? How
competitive is the market?
 Payback period – When do you wish to obtain a
return from entering the market? Are there pressures
to break even and return a profit within a certain
period?

Long- term objectives- What does the organization

wish to achieve in the long term by operating in the
foreign market? Will they establish a presence in that
market and then move onto others?
Trading overseas
There are a number ways an organization can start to
sell their products in international markets.

1. Direct export.
The organization produces their product in their home
market and then sells them to customers overseas.
2. Indirect export
The organizations sell their product to a third party
who then sells it on within the foreign market.
3. Licensing
Another less risky market entry method is licensing. Here
the Licensor will grant an organization in the foreign
market a license to produce the product, use the brand
name etc in return that they will receive a royalty
payment.
4. Franchising
Franchising is another form of licensing. Here the
organization puts together a package of the ‘successful’
ingredients that made them a success in their home
market and then franchise this package to oversea
investors. The Franchise holder may help out by
providing training and marketing the services or product.
McDonalds is a popular example of a Franchising option
for expanding in international markets.
5.Contracting
Another of form on market entry in an overseas
market which involves the exchange of ideas is
contracting. The manufacturer of the product will
contract out the production of the product to another
organization to produce the product on their behalf.
Clearly contracting out saves the organization
exporting to the foreign market.
6.Manufacturing abroad
The ultimate decision to sell abroad is the decision to
establish a manufacturing plant in the host country.
The government of the host country may give the
organization some form of tax advantage because
they wish to attract inward investment to help create
employment for their economy.
7.Joint Venture
To share the risk of market entry into a foreign
market, two organizations may come together
to form a company to operate in the host
country. The two companies may share
knowledge and expertise to assist them in the
development of company; of course profits
will have to be shared out also
The International Marketing Mix
When launching a product into foreign
markets do you standardize or adapt your
marketing mix to the foreign market? A
company can adopt to use a standardized
marketing mix around the world or an adapted
marketing mix in each country.
International Product Strategies
Standardization Vs Adaption
Basic marketing concepts tell us that we
will sell more of a product if we aim to
meet the needs of our target market. In
international markets, we have to take into
consideration consumer’s cultural
background, buying habits, levels of
personal disposable income etc in order to
deliver a tailored marketing mix program
to suit their needs.
In today’s global world, where consumers
travel more, watch satellite television,
communicate and shop internationally
over the internet, the world now is
becoming a lot smaller. Because of this
there is no need to adapt products to local
markets.
Brands such as Coca-Cola, MTV, Nike,
Levis are all successful global brands
where they have a standardized approach
to their marketing mix, all these products
are targeted at similar groups globally.
In many circumstances a company will have to adapt
their product and marketing mix strategy to meet
local needs and wants that cannot be changed.
McDonald is a global player however, their burgers
are adapted to local needs. In India where a cow is a
sacred animal their burgers are served with chicken or
fish.
Coca-cola is some parts of the world taste sweeter
then in others. Yes we can argue that standardization
is better for the organization because it reduces cost,
however many organizations will have to ‘think
global, but act local’ if they are to successfully
establish them selves in foreign markets.
 Types of International strategy
International strategy

MultiCountry Global
Multicountry competition strategy varies somewhat
across nations, since –
Buyers in different countries are attracted to different
product attributes.
Sellers vary from country to country.
Industry conditions & competitive forces in each
national market differ in important aspects.
Multi Country strategy
Product customized for each market.
Decentralized control—Local decision making.
Effective when large difference exists between the
countries.
Advantageous product differentiation, local
responsiveness, minimal political risk.
With multicountry competition , rival firms battle for
national leadership & winning in one country does
not necessarily signals the ability to fare well in
other countries.
Global strategy involves consistent strategy
for each country which includes,-
Integrating & coordinating the company's
strategic moves worldwide.
Selling in many if not all nations where there
is significant buyer demand.
Global strategy
Product is same in countries.
Centralized control
Effective when the difference between the
countries is small.
Advantage cost, coordinated activities, fast in
product development.
International Promotion Strategy
As with international product decisions and organization can either
adapt or standardize their promotional strategy and message.
Advertising messages in countries may well have to be adapted
because of language barriers or the current message used in the
national market may be offensive to overseas residents.

The use of certain colours may also need to be thought about. In

India red is the colour worn by the bride in weddings, white is the
colour for mourning in Japan.

The level of media development has to also be taken into account.

Is commercial television well established in your host country? What
is the level of television penetration? How much control does the
government have over advertising on TV and radio? Is print media
more popular then TV? Many organization go for a strategy of
adapting advertising messages to local markets to best meet
consumer demand.
 International Pricing Strategies
Pricing on an international scale is difficult. As
well as taking into account traditional price
considerations
Fixed and variable costs,
Competition,
Company objectives ,
Proposed positioning strategies,
Target group and willingness to pay,
The organization needs to consider the costs of
transport, any tariffs or import duties that may be
levied on their product's when they are sold on the
international scale. Also what currency do you expect
to be paid in? Will it be home or international
currency? Exchange rate fluctuation will also impact
profitability and influence pricing decisions.
Other factors to consider include local incomes, what
are income. What is the general economic situation of
the country and how will this influence pricing?
The internet is now making pricing more transparent
for consumers. Goods can be purchased online from
any overseas organizations at local currency prices.