1 2 3 4 5
GLOBAL FACTORS
A To what extent customers have similar demands for functionalities and design across countries
Very different Very similar
B To what extent products or services have a high proportion of standard components across countries
Low proportion of standard components High proportion of standard components C To what extent customers
(or distributors) are themselves operating in different countries and are buying centrally your products or services
Buying locally Buying centrally
D To what extent significant economies of scale in your industry are important for the cost of the product (i.e. one needs very high volume to obtain low cost)
Low economies of scale
High economies
of scale
E To what extent the speed of introducing new products worldwide is important for competitiveness
Speed is not that important
Speed is very important
F To what extent the sales of your product or service are based on technical factors or alternatively on cultural factors
28 The process of globalisation
LOCAL RESPONSIVENESS SCORE Sum of K to O / 5 = ...
One obtains scores between 1 and 5 and one can position the business on the Grid below.
1 2 3 4 5
G To what extent experience gained in other countries by a ‘sister’ subsidiary can be successful if applied in other countries
No great benefits
Yes, highly beneficial
H To what extent competitors in your industry operate in a ‘standardised’ way across countries and are successful in doing so
Competitors are localising Competitors are successful in standardized approaches I To what extent customers ‘behave’
the same way across countries
Customer behaviour is very different
Customers behave
in the same way J To what extent innovative
activities (R&D, design) require concentration of expertise in order to be effective (critical mass)
Low critical mass
High critical mass
GLOBAL INTEGRATION SCORE Sum of A to J / 10 = ... K To what extent pricing can be
different from country to country without introducing
dysfunctionalities
Pricing has to be coherent across borders
Pricing can be very different
L To what extent distribution channel management differs from country to country
Not so different Yes, very different
M To what extent business regulations and contexts differ from country to country requiring a high degree of local practices
Not too different Highly different
N To what extent products or services require a high degree of interaction with customers (customisation)
Low customisation
High customisation
O To what extent transportation costs or customer interface are such that local operations are needed
Not so different Local operations are essential 1 2 3 4 5 1 2 3 4 5
Globalisation of markets and competition 29
Key words
a Arbitrage benefits a Comparative advantage a Global companies a Global industriesa Global Integration/Local Responsiveness grid a Globalisation
a International product life cycle a Multinational companies
Web resources
<http://knowledge.insead.fr/category.cfm?catid=8>A link to the database of INSEAD Knowledge under the category of Globalisation <http://www.businessweek.com/mediacenter/specials/globalization.html>
Business Week – Globalisation
<http://www.mckinseyquarterly.com/category_archive.asp?tk=86032::&L3 =33>
McKinsey Quarterly – Globalisation
<http://www.nato.int>
Provides information on North Atlantic Treaty Organization (NATO), including its 19 mem- ber countries, its organisation and values.
<http://www.wto.org/>
Provides information about the WTO <http://www.imf.org/>
Provides statistics and papers from the International Monetary Fund (IMF).
Learning assignments
1 Among the enterprises that you know, can you identify one that can be qualified as a global company? Why?
2 Why, in Figure 1.8, is voice telephony positioned low on global forces and high on local forces while global corporate accounts is high on globalisation forces and low on localisation forces?
3 In Figure 1.7, food retailing is positioned as a local business, with a very low global- isation score. However, in the press companies like Tesco, Wal-Mart or Carrefour are qualified as ‘global retailers’. Explain this discrepancy?
4 What are the social factors that have been pushing for globalisation and which have been pushing against?
5 What are the benefits of not being global and having a local approach?
6 When the Otis Elevator Company introduced the change described at the beginning of the chapter, there was a lot of resistance from the various heads of the European subsidiaries. Why? What arguments do you think the people hostile to globalisation used?
30 The process of globalisation
Notes
1. George Yip (1992) gives four globalisation drivers: cost, market, competition and govern- ment. These are similar to those presented here.
2. Ohmae (1985).
3. Prahalad and Doz (1987). 4. Ricardo (1967).
5. Rugman (2000).
6. Lowell and Fraser (1999, pp. 68–81).
References and further reading
Books and articles
Baker, Michael and Susan Hart, Product Strategy and Management. London: Prentice-Hall, 1999. Bartlett, Christopher A. and Sumantra Ghoshal, Managing Across Borders: The Transnational
Solution. Boston, MA: Harvard Business School Press, 1989.
Fraser, Jane N. and Jeremy Oppenheim, ‘What’s New about Globalization?’, McKinsey Quarterly, 2, 1997, pp. 168–79.
Harvard Business School Global Strategies: Insights from the World’s Leading Thinkers. Boston, MA:
Harvard Business School Press, 1900. (This book contains a collection of Harvard Business
Review (HBR) articles.)
Humes, Samuel, Managing the Multinational: Confronting the Global–Local Dilemma. London: Prentice-Hall, 1993.
Lowell, L. Bryan and Jane N. Fraser, ‘Getting to Global’, McKinsey Quarterly, 4, 1999, pp. 68–81. Michaels, R.E., R.Z. Olshavsky and W. Qualls, ‘Shortening of the PLC – An Empirical Test’,
Journal of Marketing, 4, 1981.
Michel, D., R. Salle and J. Valla, Marketing industriel, Paris: Economica, 1996, from Nouvel
Economiste, 1026.
Micklethwait, John and Adrian Wooldridge, A Future Perfect: The Challenges – And the Promise –
of Globalization. London: Heinneman, 2000.
Mirza, Hafiz (ed.), Global Competitive Strategies in World Economy: Multilateralism Regionalization
and the Transnational Firm, New Horizons in International Business. London: Edward Elgar,
1998.
Ohmae, Kenichi, Becoming a Triad Power. New York: McKinsey & Co., 1985.
Porter, Michael E. (ed.), Competition in Global Industries. Boston, MA: Harvard Business School Press, 1986.
Porter, Michael E., The Competitive Advantage of Nations. New York: Free Press, 1998.
Prahalad, C.K. and Yves L. Doz, The Multinational Mission: Balancing Local Demands and Global
Vision, 1st edn. New York: Free Press, 1987.
Rangan, Subramanian and Robert Z. Lawrence, A Prism on Globalization. Washington, DC: Brookings Institution, 1999.
Ricardo, David, The Principles of Political Economy and Taxation. Homewood, IL: Irwin, 1967. Rugman Alan, The End of Globalization: A New and Radical Analysis of Globalization and What it
Means for Business. London: Random House, 2000.
Yip, George, Total Global Strategy: Managing for World Wide Competitive Advantage. Englewood Cliffs, NJ: Prentice-Hall, 1992.
Globalisation of markets and competition 31
Journals
Business Semi-academic Academic
a Business week a Fortune a Economist a International Management a Financial Times a Multinational Business
a Harvard Business Review
a California Management Review
a Columbia Journal of World Business
a Sloan Management Review
a European Management Journal
a Journal of International
Business Studies
a Strategic Management Journal
a International Human
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