Yip s Globalization Drivers

Academic Group 24 Abhineet Shweta Nidhi Swayam Rahul Vipin

Globalization
Globalization refers to the development of global or worldwide business activities, competition and markets and the increasing global interdependence of national economies Stonehouse et all. 2004 International integration in commodity, capital and labour markets Bordo et all. 2003, WTO World 3.0's remapping of the terrain suggests a better path forward. Specifically, a more realistic appraisal of both globalization and regulation suggests a path to greater prosperity that involves more market integration as well as limited and targeted market regulation. Ghemawat, World 3.0
Industry Top 5 seller concentratio n 71% 70% 68% 59% 59% 55% 53% 40% 37%

Entertainment Carbonated Soft Drinks Light Bulbs Computer Software Computer Hardware Aerospace/ Defense Automobiles Semiconductors Passenger Airlines
Source : Ghemawat and Ghadar, 2006

Globalization Drivers : Yip s Framework

Developed by George Yip(1992) Helps analyze the degree of globalization in the industries The 4 main categories of drivers are :
Market Globalization Drivers Cost Globalization Drivers Government Globalization Drivers Competitive Globalization Drivers

Low (Domestic)

High (Global)

Macroeconomic Environment & Framework

Technological Factor

Market Drivers

Social & Demographic Factor

Cost Drivers

Potential for Globalizatio n

Government Drivers

Economic & Financial Factor

Competitive Drivers

Political & Legal Factor

Yip s Framework : Market Drivers

Customer Needs
Similarities/ Differences Culture Economic Development Physical Environment Climate

Customers & Channels

Global Suppliers Global Distributers

Marketing
Names Advertising

Lead Countries
Product Innovations

Market Drivers : Explained

Driver MARKET Parameter Customers Channels Marketing Countries Pressure for globalization Global customers Global channels Transferable marketing Lead countries Pressure for localization Local customers Local channels Differentiated Marketing No obvious lead countries

Yip s Framework : Cost Drivers

Economies of Scale/Scope
National market size (Scale) Common distribution outlets (Scope) Group of goods packaged together

Experience Curve
Learning Curve

Sourcing
Names Advertising

Logistics
Transportation Costs

Country Costs, Productivity & Skills Product Life Cycles & Product Development Costs

Cost Drivers : Explained

Driver COST Parameter Economies of scale Experience curve Sourcing Pressure for globalization High fixed costs Steep learning curve Low transportation costs & perishable products, no need to locate near customers Differences in cost High Rapid Pressure for localization Low fixed costs Shallow learning curve High transportation costs & perishable products, need to locate near customers Similarities in cost Low Slow

Logistics Product development costs Technological change

Yip s Framework : Government Drivers

Trade Policies
Liberalization Trade barriers

Technical Standards
Commonality between countries

Marketing Regulations
Advertising Standards

Government-Owned Customers Government-Owned Companies

Govt. subsidies, protection of home markets

Host Government Concerns

National conditions

Government Drivers : Explained

Driver GOVERNMENT Parameter Trade policies Technical standards Marketing regulations Government ownership Host govt. concerns Pressure for globalization Low trade barriers Compatible Common Govt. owned competitors present Policies that favor global businesses Pressure for localization High trade barriers Incompatible Different Govt. owned competitors absent Policies that hinder global businesses

Yip s Framework : Competitive Drivers

Exports & Imports
Level of export & imports

Competitors
Domestic Global Global competition Global Strategy

Interdependence of countries
Level of interdependence Level of independence

Competitive Drivers : Explained

Driver COMPETITIVE Parameter Volume of exports & imports Competitors Interdependence of countries Pressure for globalization High exports & imports Competitors from different continents, globalized Countries largely interdependent Pressure for localization Low exports & imports Local competitors Countries largely independent

Yip s Framework : Summary of Drivers

Identifies the drivers that are local & global, attributes of transnational synergy can be tailored to match the drivers Can be mapped to Porter s five forces Changes in drivers indicated by macroeconomic analysis Analyze both industry and market Identifies the critical success factors of a global industry & market

Yip s Framework : Porter s Five Forces

Porter s Forces Threat of Entry Globalization driver impact Common Customer: Increase Global economies of scale : Decrease Global marketing : Decrease High product development costs : Decrease Global competition : Increase Lead nations : Increase Research & Development : Increase Innovation : Increase Global customers : Reduce supplier power Global suppliers : Counteract customer power Common customer needs : Increase Global customers : Increase Economies of scope : Increase Global sourcing : Increase Compatible technical standards & favorable trade policies : Increase Globalization Drivers Government Market

Threat of Substitutes

Government Market Market Cost

Power of Suppliers/Buyers

Competitive rivalry

Competitive Cost

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