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first level
● entails export-import activity,
● minimal effect on the existing management orientation or existing product lines.
Second level
● Involve foreign licensing and technology transfer,
● requires little change in management or operation.
third level
● direct investment in overseas operations, including manufacturing plants.
● Large capital outlays and the development of global management skills.
● Although domestic operations of firm at this level continue to dominate its policy
● Categorized as true multinational corporation (MNC).
Fourth Level
● substantial increase in foreign investment,
● Foreign assets comprising a significant portion of total assets.
● Emerge as a global enterprise
● global approaches to production, sales, finance, and control
IBM
● establish a position of strength in the Japanese mainframe computer industry
before 2 key competitors,
● achieved a substantial share of Japanese market,
● Deny competitors vital cash & production experience needed to invade USA
market
(1)
● be proactive
● entering global markets in advance of other firms
● enjoy first-mover advantages often accruing to risk taker firms that intro new
G&S
(2)
● be reactive
● following other companies into global markets
● once customer demand has been proven and
● high costs of new G&S introductions been absorbed by competitors
START OF GLOBALIZATION
External assessment
EXAMPLE OF FACTORS
Coke
● achieving a goal that it had set a decade earlier when it went to India.
● take the market away from Pepsi and local beverage companies.
● found that Indian market extremely complex and smaller than estimated.
● Encountered cultural problem
● Changed its marketing strategy by pushing their “Thumb Up” products a local
brand owned by Coke.
● focus their efforts on creating new products for rural areas and lowering the
prices of their existing products to increase sales.
● new advertising campaign to better relate to Indian consumers.
● highlights the fact that global strategic planning is more complex than purely
domestic planning.
2. Interactions between the national and foreign environments are complex, because of
national sovereignty issues and widely differing economic and social conditions
.
3. Geographic separation, cultural and national differences, and variations in business
practices all tend to make communication and control efforts between HQ and
the overseas affiliates difficult.
Stakeholder activism
● demands placed on the global firm by the foreign environments in which it
operates,
● principally by foreign governments
Global Industries
1.
increased scope of the global management task.
● Growth in the size and complexity of global firms made management virtually
impossible without a coordinated plan of action
● detailing what is expected of whom during a given period.
● management by exception is impossible without such a plan.
2.
The increased globalization of firms.
● differences among the environmental forces in different countries,
● greater distances,
● interrelationships of global operations.
3.
Information explosion.
● ordered means for assembling, analyzing, and distilling the information required
4.
increase in global competition.
● adjust to changing conditions or lose markets to competitors.
● search for methods of increasing efficiency and economy.
5.
Rapid development of technology.
● Shortened product life cycles.
● ensure the replacement of products that are moving into the maturity stage, with
fewer sales and declining profits
● Greater control of all aspects of new product introduction.
Coca-Cola
● Tightly links its R&D and marketing functions worldwide
● offer a standardized brand name, concentrate formula, market positioning, and
advertising theme.
● operations function is more autonomous,
● artificial sweetener and packaging differing across locations.
Gigabyte Company
● Research & found out that that a sizable number of computer buyers wanted a
PC that could complete the basic tasks BUT needs to be considerably smaller.
● exporting their mini PCs into the USA with price of $200 to $300.
● Less than the closest U.S. manufacturer, Dell, minicomputer still larger & cost
$766
Franchising
● sell a highly publicized G&S using the parent’s brand name or trademark,
carefully developed procedures, and marketing strategies.
● In exchange, pays a fee to the parent company,
● on the volume of sales of the franchisor in its defined market area.
● operated by the local investor who must adhere to the strict policies
jointventure (JV)
Benefits
● Small company without the managerial or financial assets to make a profitable
independent impact on the integrated foreign markets
● Share management tasks & cash requirements often
● coordination of manufacturing and marketing allows ready access to new
markets intelligence data, and reciprocal flows of technical information.
Challenges.
● may involve managerial relationships where no single authority exists to make
strategic decisions or solve conflicts.
● Requires the disclosure of proprietary information and potential loss of control
over production and marketing quality standards.
● Compatibility of partners & enduring commitments to mutually supportive goals..
Foreign Branching
● Willing and able to make the highest investment commitment to the foreign
market.
● Full ownership for reasons of control and managerial efficiency.
● Policy decisions about local product lines, expansion, profits, and dividends
typically remain with the host senior managers.
● Started either from scratch or by acquiring established firms in the host country.
● Benefit significantly if the acquired company has complementary product lines or
an established distribution or service network
1.
if the high capital investment is to be rewarded,
managers must attain extensive knowledge of the market, host nation’s language,
business culture.
2.
thost country expects both a long-term commitment
portion of their nationals to be employed in positions of management or operations.
3.
Changing standards mandated by foreign regulations may eliminate a company’s
protected market niche.
Product design and worker protection liabilities may extend back to home office.