OPEN UNIVERISTY OF MAURITIUS

GLOBAL & INTERNATIONAL BUSINESS CONTEXTS

Module Code : OUbs 009222

Anju Mungur
MBA IB
UNIT 2 : Globalisation and Internalisation in different
Industries and Markets
 Learning Objectives
 Understand the difference between globalization and internationalization

 Understand industry globalization

 Explain the concepts of industry

 Globalization drivers

 Explain the rationale behind Porter’s Five Forces Model

Overview
• According to the 
U.S. Department of Commerce
, more than 70 percent of the
world’s purchasing power is
located outside of the United
States. That’s why many
businesses are jumping on the
global bandwagon – to
capitalize on the potential of
tremendous growth.
Globalisation V/S Internationalization

Globalisation Internationalization

• Globalization refers to global • “Internationalization refers to the

economic integration of many increasing importance of
formerly national economies into one international trade, international
global economy, mainly by free trade relations, treaties, alliances, etc.
and free capital mobility, but also by International, of course, means
easy or uncontrolled migration. It is between or among nations.” The
the effective erasure of national basic unit remains the nation, even as
boundaries for economic purposes.” relations among nations become
Global Policy Forum 2000 increasingly necessary and important.
Global Policy Forum 2000
WHY GOING GLOBAL???

Key factors
• Increase in International Trade
• Mobility of people
• Investment
• Technology
• Cost efficient
• Flow of capital
• Production Network (MNC’s)
• Spreading Risk
UNDERSTANDING INDUSTRY GLOBALISATION
Hamel and Prahalad (1985) defines a global
company as one which is characterized by
production and distribution systems in key
markets around the world that enable cross-
subsidization, competitive retaliation, and
achieving economies of scale. Economies of
scale are among the most important drivers of
industry globalization
Globalisation of Market & Globalisation of Production
Gobalisation of Market
• The globalization of market refers to the
provision of standardized product worldwide
thus creating a global marketplace… coca-
cola , KFC, Samsung
• Achieving economies of scale through
standardization is among the most important
drivers of industry globalization
• Cost efficiency through minimum cost is not
the sole determinants of competitive
business ( Global Strategy)
Globalisation of Production
• Globalization of production is important; it
is where corporates source goods and
services from different nations to take
locational advantage of the respective
country
• Reduce their cost of production thereby
allowing them to compete effectively
worldwide
• Eg UNILEVER, WALLMART, NIKE,
MICROSOFT, NESTLE, COLGATE etc
INDUSTRY GLOBAL DRIVERS

Low High

(Domestic) (Global)
Yip’s (1992) Globalisation Drivers
• George S. Yip (1992) was the first to put forward the concept of four industry globalization drivers

Aim : To know the degree of Globalisation within an industry

• 4 Main Categories of Drivers
1. Market Globalisation Drivers

2. Cost Globalisation Drivers

3. Government Globalisation Drivers
4. Competitive Globalisation Drivers
Yip’s Framework
Market
Market
Technological
Technological Drivers Social &
Drivers
Factor
Factor Demographic
Factor

Potential
Potential for
for Government
Government
Cost
Cost Drivers
Drivers Globalisation
Globalisation Drivers
Drivers

Economic &
Financial Political &
Factor Competitive
Competitive Legal Factor
Drivers
Drivers
 Market Drivers

Airlines
Computers
Automobile
Soft Drinks
FMCG (Fast Moving Consumer Goods)
Retail Banking
Book Publishing
Baked Foods
Market Drivers
• Level of homogeneous needs

• coverage of customer base around the world

• development of global channel of distribution

• Transferable marketing platforms.

Market Drivers : Issues
• One important factor corporates need to pay attention to is to what
extent the common needs of customers depend on the cultural aspect
of the country.
• EXAMPLE
• Coca-Cola offers standardized products around the world, whereas
McDonald’s, KFC has standardized its operations however, it has also
adapted itself to satisfy the tastes and preferences of local customers.
Cost Drivers
• Achieve economies of scale
• Growing, learning and experience curve
• Sourcing efficiencies in costs and skills ( Locational Advantages)
• Product development
• Technological Advances ( Innovation)
Cost Drivers : ISSUES
Adopting such strategies in global industries will
make it harder for new entrants to be a threat; hence
barriers to entry in such industries are likely to be high

Since products are usually standardized to achieve economies of scale, a

competitive environment is promised with an increase in rivalry.
COMPETITIVE DRIVERS
• Trade flow of Industry
• Number of competitors
• Diversity of products
• The extent to which competitors from
different countries join hands by globalizing
their strategies and capabilities
• Creating interdependence between
geographical markets
GOVERNMENT DRIVERS
• favourable trade policies
• smooth regulatory climate

• ISSUES
• Having common standards which impact on all other
elements of the global strategy
• Acts as a pioneer in constructing a global industry in
this global environment.
 Yip’s Framework & Porter’s Five Force Model
Five Forces Model Globalisation Drivers
Government
• Common Customers – Increase
Government
Threat of Entry Drivers
Drivers
• Global economies of scale – reduce
Market • Global Marketing – Reduces
Market Drivers
Drivers
• High Production Cost – Reduces

• Lead Nations – Increases

Threat of Substitutes Government
Government
Drivers • R&D, Innovation – Increases
Drivers
Market
Market Drivers
Drivers

• Existence of global customers – Weaken

Power of Buyers / Suppliers Market
• Existence of global suppliers – Counteract
Market Drivers
Drivers
Cost Drivers
Cost Drivers
• Global Customers – Increase
Competitive Rivalry Competitive
Competitive
•
•
Economies of Scale – Increase
Global Sourcing – Increase
Drivers
Drivers • Compatible TS & Favorable Policies - Increase
Cost
Cost drivers
drivers
Porter’s 5 Forces Model :
Criticism
• Speed (1989)Thyrlby (1998)
Emphasized that Porter’s Model is static and
no solution is proposed to take time into
account.
It is therefore much more complicated to
determine where the forces lie in dynamic
markets where competition is high and their
operations are changing very quickly
Rationale
• The objective of the Five Forces Model is to
enable a company to assess the profitability
and attractiveness of an industry (Johnson et
al., 2008)
• Companies are able to identify the high and
low barriers and can come up with strategies
to have a stronger position within the
industry
Conclusion
• Industries and markets differ vastly in
Baked Foods
the extent to which they are globalized

• - Paint industry is largely globalized;

• - Advertising and brand names-
localized for linguistic and cultural reasons Automobile

• Countries with the most favorable

combination of drivers are likely to be
chosen as markets and as base by
global business Pharmaceutical
Activities
• Minicase: Cemex’s
Globalization Path Pg
11-12

• Act 2.5 Pg 17