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Lasserre, P
Globalization of markets and competition
Lasserre, P
Global strategic management, 3rd ed
2012 / ---- / ---Basingstoke : Palgrave Macmillan
ISBN / ISSN: 9780230293816

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chapter

GLOBALIZATION OF MARKETS
AND COMPETITION

1
Introduction

Chuptcr 1 ddines what globalization means for a business enterprise. lL differentiates global
ization from thc t.raditional process of setting up subsidiaries abroad and makes a distinction
between a

IIlU/liI/UliUlW/

company and a global company. Based on the example of the Otis

Elevator Company, it looks at how a company having multiple international subsidiaries cun
move toward a global competitive configuration through which its international activities can
he strongly coordinated and integrated across bordcrs. 'I his Lransition from a multinational to
u global position was driven by various social, political, cconomic and technological factors
that arc described in the chapter. lhe benefits of globalization (Ire described, as well as the
constraints. Some factors are still pushing toward a local approach to management. on a
country-by-country basis. lind the fadors inducing this localization arc analyzed.
Finally. global/multi-local mapping is prescnted as a tool to position industries. companies
and businesses according to the relative importunce of global versus local approaches. 'nle
chapter ends by introducing some of the societal issues associated with globalization.

Learning objectives
At the end of the chapter yOIl will be able to:
define globalization, understand what a global finn is. and how it diflers from a
multinational company
identify the forces pushing toward globalization
identify the forces pushing for localization
position all

indu~Lry

or a business 011 the global/multi-local map

discuss the benefit.s lind pitfalls of globalization.

The phenomenon of globalization


Over the past 30 years int.ernational tr(lde and investment have grown much faster than the
world economy as a whole. Firms have multiplicll their prcsellCC outside their COlllltry of
origin. employing more and more people and selling and buying technology internationally.
(Sce Table 1.1). More and more produCLq are sold in similar stores, with similar features and
carry

11

common hrand across the globe. Factories that were prosperolls in the \I\festern

....

GLOBALIZATION OF MARKETS AND COMPETITION

ll'lve been closed lind InlllsferreJ Lo low-cost countries. 'Ihe English language is now
( <

wo r Il
<"lcred as lhe lingua franca for major business transactions. Televised broadcast.~ of

cons

cl'cnL~ taking plac(~ ill one place on earth arc visible in real time everywhere. lhis is what is

(;01111110nly named 'globalization'.


Table 1.1: Globalization dala

fU5i;t2010~prif:es($billion)

1982

Average

2010

1990

growth rale

1982-2010
World GOP
Trade {export of goods and servicesl
FOI"cign direct investment (inward stockl
CrosS border M&A

Sales of foreign affiliates'

Employment of foreign affiliates 11000s1"


Export of loreign affiliates'

Royalties

Daily foreigr'l exchar'lge transactions

10.899

22,206

62,909

6.5%

2247

4382

18,713

7.9%

647

2081

19.141

12.9%

25

99

339

9.8%

2741

5101

32,960

9.3%

19,537

2H70

62,218

4.2%

647

1498

6239

8.4%

29

30

191

11.5%

4000

19.1%

Tilis refer,; to .llili.les of muflinotionaf comp,nies deflnod,s firms 11',.,nq maro II1.n SO% equity tn wl10lly awned
."terp"''' abroad or at least 10% equoty in Joi"t venlUres.

So,,,'"

UNClAD, World lm-e5lmenl Reporl20ll.

In (oday's husiness world. managers, poliLicians, journalists and academics commonly usc
the cOJll::epls of 'glubalizaUoll', 'global industries" 'global competition', 'global strategies'
and 'global corporations', More and more companies arc confronted with the need to
globalize or die, While these concepts arc widely flsed, their exact meaning is often not
properly understood. For some people, glohalization means to expand the company's pres
ence ahroad, for oLhers iL means standardizing a product and selling iL 10 Ihe world, for yeL
others it denOLes an approach to management in which decision-making is centnrlized at
corporate headquarters, 'There arc many reasons for this confusion; one is due to the fact
that the concept of globalization is relatively new, Before the 1970s hardly anyone talked
about globalization: the most frequently used terminology, when referring to companies
operating ill various parLs of the world, was 'illlemaLional', 'llllflLinaLional' or occasionally
'trans-,national'. IllternaUollal ulld multinutionul companies huve

h~~n

around for lIlany

years. Even if we ignore the East Indiu Company, which sturted in the curly

sevente~l1th

century, modern corporations like Unilever, Nestle and Procter & Gamble were operating
allover the world at the end of the nineteenth century, 'nleY arc known as multinational

companies, but nobody would have caJled them global. 11lC global concept appeared in
the early 1970s and progressively invaded boardrooms, classrooms and editorial offices,
What is the exact meaning of
consequences for firms?

globalization'~ What

forces gcnerated ifI And what arc thc

THE PROCESS OF GLOBALIZATION

"Illerc is no wcll-eslablishoo definition of globalization. Ilere we wilt propose as


tion: "lllc process by which people,

prodllct.~,

defini

information and money CUll move freely across

borders'. As a consequence, markeL'l may lend to converge, providing room for slllnrl;mliZll
lion of products. nnd production cenLres can he located at economical and convenient places
around the world. lhis implies. ;IS we will see, a more centralized management of firms. We
will look first at the macro-economic, tcchnological lind politicul factors that howe geller-lled

such a glob1environment and then look at how firms ha\'e ChUllgt"<.l their operations to take
udvantagcs of [,he Ilew opportunities offered by these fad Drs.

SOME GLOBAL OEFINITIONS


Globalization: The process by which people, products. information and money can move
freely across borders
Global Industries are industries in which, in order to survive, competitors need to operate
in the key world markets in an integrated and coordinated way. Industries like aerospace.
computers, telecommunication equipment, appliances, power generation. large industrial
projects, insurance and re-insurance and corporate data transmission are examples, In these
sectors it is difficult to sustain competition if you do not cover the whole world (or nearly) as a
market, and if you do not integrate operations to make them cost- and time-effective.
GlobAl eompanies are the companies that operate in the main markets of the world in an
integrated and coordinated way. Companies like Coca Cola, Asea Brown Bovery, Sony and
Citibank are global companies,
Globalizing is the phenomenon of the transition of industries whose competitive structure
changes progressively from multinational to global. Industries such as telecommunications,
processed food, personal care and retail are in the process of globali:tation.
Global integration and coordination are the organi:tational structure and management
processes by which various activities scattered across the world are made interdependent.
As examples, global manufacturing integration implies the speciali:tation of factories and
the cross-shipment of parts between different production sites; global product development
requires the coordination of various research centres and marketing teams; global account
management demands that different country subsidiaries provide a service according to a
plan negotiated centrally, and so on.

What are the factors that push for globalization?


Political factors: liberalization of trade and investments
Globali:r..' ttioll beclllne rl reality at the heginning of the 1970s hecause of the convcrgence of
several political, Iechnologicrll. social al\{! competitive factors.'
TIle nmin poJit ielll I"actor Ilus heen the developmcnt ufJrcc tmde among nations, Two llluill
organizations have bl..'t:o the SOUTce of trade liberalizrltion; Ihe Geneml Agreemcot on Tariffs

and Trade (GATI') (now replaced by the \Vorld Trade Organi:r.ation. \\ITO) aod the European

..

>

GLOBALIZATION OF MARKETS AND COMPETITION

Union (EU). to which we lllay add the progrcssil'c opening of emerging nations to foreign
investments.
'Ole liArI'. which was founded in 1946 by 23 nations, initialed a series uf negotiations,
culled 'rounds', :limed at reducing tariff concessions to create liberalization of trade. The
GI\'l~r

became the WTO ill 1995. '1l1C Kennedy Round ill the mid-I%Os, the Tokyo Round in

Ihe carly 1970s and Ihe Uruguay round ill the late 19ROs created an environment Ihnt. fostered

international trndc; during t.he period following the Kennedy Bound the average lVeighted
tari(fraLe among GATT members decreased by 34% and aftcr the TokJ'0 round by 60%.
'Ilw European Economic Community (EEe) was established on 25 Mnfch 1957 by thc Treaty
of Rome. signcd by Bclgillm, France, Italy. Germany, Luxembourg and the NeLherlands. with
the aim of creating a COllllllOll market and ecollomic and political inLegration among the six
membcr st.ul.es. '\s a result, gnods, people and financial flows could movc frcely across eoun
t.ries. During t.he

1970.~,

the EEC was cnlarged with the cntry of the United h:.ingdom, Ireland

and Denmark. folluwed by Spain. Portugal and Greece in the 1980s and by Swcden, Austria
and Finland in the I990s. Companies like OLis could take advantage of European integration
to create their own integrated Lrading network.

Finally, in parallel with what was happening in the illdustrialized countries, developing
nat.ions progressively adopted more positive attit.udes toward foreign direct investment. (FIJI).
At first,

il\ve.~tJlleot

laws were designed to attract foreign investors in order to induce t.hem

to pruduce 10l;ully, but. over the years the legislation has evolved Loward a more open stance.
favuuring cruss-border investments. Between 1991 lind 2004 the number uf regul<l1ory changes
favourable to PDI totalled 2006 wurldwide while unfavourable changes numbered just 150.

Technological factors: transport, communication and economies of scale


Another set of'push factors' for globalization is related to fedlllologiu(/l progress, which lowered
the cost of transport and communication as well as the unit cost ofproduction through econo
mies of scale or the localization of productive capacities and sourcing in low-cost economics.

100

Cost index

r''C'=ic--.;----o::-,------,

80

__ Ocean freight
__ Air transport

60

__ Tl:'Ll:'phool:'

40

20

-------------~----~-~-----

_Satellite
_CIF-FOBlndex

o
Figure 1.1 International transportation and communication costs, 1920-90
Source, World Bank, World {kvelopmenl Reporl, 1995,

THE PROCESS OF GLOBALIZATION

Air, rnil and road transport and

th~

use

or containers in maritime transport have reduced

lhe cost of shipping g;oods from country to country as well as, in the case of air transport,
favoring the travel of managers. "lhe development oftelecomlTlunicatiolls has reduced the cost
of information exchange between business units scattered around the globe. Between 1950
and J 990, the transportatioll costs of air trall.~porl, ocean freight and transatlantic phone calls
decreased by some 56%, 14% and 29%. respectively. Fur satellite charges. there was an approxi
mate decrease 01'90% between 1970 and 1990 (Figure 1,1).
I'rngress in manufacturing technology gave a trelllendous impcl.llS t.o the Ileed to concen
trate producLion in world-class factories benefiting from huge economics of scale, Lllus
encouraging Lhe ratiollali,.;aLion and integration of production systems.
Beside

manllf~lclurillg conccnLraLioll,

companies have been able to source components or

services from low-cost. countries, either by setting up their own operations or by purchasing
locally.
A.nother soun:e of ct;ll1lomies of scale
Table 1.2 Illustrations of the shortening of product life cycles

comes from the need to quickly amort.i,.;e

Time 01 invention to commercial


exploitation (yearsl

research and development (R&D) expendi

General product
category
Electric motor

65

TV

52

Vacuum tube

OJ

Zip-f<lstener

30

X-ray lube

18

Frozen foods

15

Nuclear reactors

10

Lures. Companies are confronted with a dual


pressure: H&D

htldgeL~

are increasing and

product life cycles (l'I.Cs) are redudng (Table


1.2), Companies need to launch

proJ1Jcl.~

and

services at the same time in all major markets


in order 1.0 be able to recoup thdr investments,

Radar

Social factors: convergence of


consumer needs

Solar batteries

International air transporL and the diffusion


of

Appliance category

Average length of introductory


stage (no_ of yearsl

life~tyles

by

ll1(lvie~

and TV series have

increased the brand awareness or consum


ers worldwide. Brands like Sony, Nike, Levi

Period 1922-"2

12.5

or Coca Cola arc known nearly everywhere.

Period 1945-/,4

Kenichi Ohmae,l in his book 'Triad Power',

Period 1965-79

has discussed the 'Califomization of society'


Leenagers in Sao Paolo. MUl1lbai. Milan or Los

Intel microprocessor
products

Ouration of life cyete

286

386

486

Pentium

Angele~

listening to the same music, using the

same MP3 H1Hl weHring I,he S,llne pair orhlue

Sources, Baker and Harl 1'999, p. 1151: Ml(h,,"ls, O!shoysky and [luaU..
pp.77 81: Miche', Salle arid valla 11996, p.1781.

11981,

jeans, Convergence of Cllstomer behaviour


and needs is also facilitated by the urbaniw
Lion Hl1d indusLriali,.;at.ion of societies. -nle less
cultural Hnd the more tedmical
the more likely it is to be

tllC

product,

standl1rdi~,ed

and

. ---------------

toB" I A

NO

MARK rAND

,.

appel,l to masses of(:onsumers in all countries: DVIJs. PCs, mobile phones or elevators, c ....lnes
lmd robols lire

prodllCL~

for which Illiliona! differences do not maller much.

Competitive factors
'Ihe 19(108 So'!\\' Ihe emergence ofJap.'lnesc COrlll>elitors in markets that lmditionally had 1x..'Cn
duminulLod by American or European COIllI>ctitors. Japanese firms. and laler Korean firms,

adopted a global approach al the vcry beginning ofthcir international expansion. One orillc
reasons is thatlllcy did nol ha\'c many national subsidiaries and their international expansion
WllS occllrril\g at Ule lilllc ofthe opcnillg oft rllde barriers. Bighl. lit the beginning the)' designed
products for the world market, creating global bralltls stich as 'Sony' or 'anllsonie', and their
cflident produdion systcm gave them a cost advanluge in e1eelronics alHlaut,omntive parls.
Competitors had to adopt a similar strill cgie stance if they wished to survive.
Another compctitive force that flushed companies to
';lIstoIl/CI'~'. During

g[oba1i~.IJ

is the t:!obalizatioll of

the I'nos. CiUbank cl'ented n Global Account Management Unit

lhose corporate customers who had interlHlUnnul subsidiaries. Figure

J.~

Lo

service

SIIIIH1Hlrizcs these

'push factors' ill favour of globali,mtion.


Political
faclors
, GAn

EEC

FDI

Social
lactors

Technological
lactors
Transport
M~nuI;Kluring
TelecommUnication R&D
Red<Ke the C051 or
coord/flallOfl
rfICrea5e economJes
01 scale

Globalization

<,--"I

Corwergence 01
customcrs' nel"d5
TraW!'!. TV. ~5
F{JVf)r 5landardlza/<on
and global bnmd/fl9

Competilive
faclors
, Japl\nc$c and I<ore~n
, Mullonational customers
Induce integra/lOll
and coordmatlon

Figure 1.2 Globalization push factors

The benefits of globalization


'Ihe benefits of globalization can be assessed from two points of view: the business and
cOJllI>etitjve poinl of view and the macro socio-economic poinL of view. In this chapLer we
will focus 011 Lhe business and COIllI>eLilive l>ellcfits. A more generlll discussion 011 the socio

THE PROCESS Of GLOBALIZATION

l-'COllomic benefits and costs of gJobaJi:r.ation will be inclll(k.od laler in Ule chapter. while this

part focuses on the benefits to a corporation ofadopting a global strategy.


'Ihe business and competitive benefits CliO he grouped into four categories; cost. [curning.
liming and arbitmge.

(I) CostlJlmejils. lhcsc come. on the one hand, from economics of scale ill product/process
standardization as well as im;reased bargaining powers over suppliers of raw materials.
components. equipmellt and services and. on the other hand. from the ahility to organ
ize a logist.ic UIll! sourcing network based on location (,lclors. Examples of economics of
scale through standardization arc llllnlcrnllS; in the cxurnplc mentioned earlier, Oris W(lS
able to lower the cosl of elevators in Europe by 30% after inlroducing a pan-European
mun ufactllring systelll.
(2) Timing bemifiL<;. 111esc are due to the coordinat<:d approach to product launching in the

early stage of the product life cycle. [n a multinational setting. each subsidillry is more
or less frec to lldopt products for its own market. This is sometimes called 'the shopping
caddy' approach to product adoption. Such an approach gencmtes inefficiencies in the
m:umgcmenl of tile producllifc cycle sincc the optimal volume is obtained only after a
lengthy process of product adoption by all subsidi:lrit:s. A classic examplc ofthe deficiency
of the 'shopping cuddy' approach is the refusal of Philips America to adopt the video
system, the V2000, developed by Philips's mother company in the Netherlands, In the late
tl)(iUs a theory of mult inational product introduction, known

ltS

tile 'international prod

11(;1 life cycle' theory, postulated a progressiv!! adoption of products ovcr time according
to the level of economic ;.Ind scientific development of countries (sec rigure Ill. I. p. 285),
Such 1I theory is no longer v:llid when industries globali:f.e: waiting too long 10 laullch a
product can be fatal, particularly if the product has a short life cycle, which is more and
more frequently the c....se, Microsoft.launchro Windows 2000 at the smnc timc c,'crywhcre
in the world.
(3)

J,~(lrllillg

benefits, '(hcse accrue from the coordinated transfer of information, best

practi,:e and peoplc across suhsidiaries. '(his transfcr eliminates thc ,.'ostly 'reinvcntion
of the wheel' and facilitates the accumulation of cxperience and knowlt:dge. In 'Ihailand.
Unilcvcr formulated lind implcmented nn innovative strategy to l)I'odllCC and market ice
creams. 'Ihc 'Ihai experience served as n tcmplate for olher ctllllliries in the Asia Pacific
region. ~iving 10 the company a firsl-nllwer advantage. 'I his example illustrales the
hcnclit.s that can he gained from a coordinated transfer of besl praci icc.

(4) Arbilrtlgc benefits, llu:sc come from the advalltagc.'i Lhat a compan)' managed glolmll)'
C:lIl gain ill using resources in olle country for the bcnefit of another c.;ountry subsidiary.
'Ihese ad\':mt:lges can be direct compelilivc ad,'ant:tges or indin:ct cost advantugcs. A
compctitive advantage can be gained by playing a 'glohal chess g..'lmc: for instance, engag
ing in a price war in one (.'ountry in order to Illobilize the resources of(.'OIllI;lelitors in that
country, deprh'ing thcm of cash now which could be u~ elsewhere. This stnltegy was

GLOBALIZATION OF MARKETS AND COMPETITION

used by Goodyear.lhe US tyrc giallt, when in the carly J970s, Michelin from France moved

into North America. Goodyear. which had a small market share

ill

Europe. engaged

ill II

price waf that Michelin was obliged to counter by lowering its prices. amI de facto reduc

ing it.s financing scope for its American expansion. !\nother type of arbitrage comes from

(!irfcrcl1!.iaJ cost clemenlS such as t.axes. interest and possibly risk reduction through the

pooling of currencies.

1hosc four bCllcfits are real hut achieving them is subject to certain conditions. and their
~ldopt.ion has

to be measured against the rcal cOlllpetitive advantage they provide La the firms

adopting them.
'111C benefits ill cost reduction obtained by economies 01' scale are contingent upon the
market responsivencss to standardization and whether customers are pricc sensitivc. If, on
the contrary, customers arc not responsive aud prefer tailored products and scrviccs to stand
ardizat.ion, a global approach is less appropriate. A similar reasoning applies to the benefits
of timing. As for purchasing power, it may be limited for culturally sensitive services such as
advertising.
'Ole henelits of learning arc positive if the experience gaine{l ill one COllntry is applicable to
~lIlother.

[f it is not the case, thcrc is a liming dfjici/: the time it takes til rculize that you have

made a mistake, plus the timc to learn about the new environment.. AI. Disneyland Paris', two
years were lost because the transfer of knowledge from Florida and California did not help the
European operation.
The benefits of arbitrage can be offset by the cost of managing the arbitrage and the legal
balTiers tlmt. may exist in onler to prcvent such arbitrage. In the case of tax arbitrage, govern
ments are very careful to make sllre that global companies do not abuse their arbitrage power.
Despite tllose limitatiolls, more and more companies recognize the competitive benefits
of globalization. However. you should he aware there are still some factors that work against
globalization and this is what we will consider aller the following example of globalization.

Globalization at the level ofthejirm

o illustrat.e the phellomenon of

globa1i~,aUon

lel us takc the example of the elevator

industry in Europe in the late 1960s as represented in Figure 1.3.

In each COllntry of Europe, different firms fought for a share or the elevator market. Competi
tors were either local companies or subsidiaries 01' large multinational companies like Otis or
Schindler. Each competitor designed, marketed, manu(uclured, installed and serviced eleva
tors for their respective

lJlarkeL~. 'J lIe

suhsidiaries of the multinationals had all the activities of

the value chain (marketing, design. production. instullation and service) under their control.
The French subsidiary of OUs designed elevators for the French market, manufactured them
in French llletories, sold them with a French sales force and maintained them with a French
arr.er~sales

organization: the management was essentially French. In Germany, Otis designed,

manufactured, sold, installed and serviced elevators for the German market; and so on in nearly
every major country. In smaller coulltries products or components were exported from major

<

"mc

10

THE PROCESS OF GLOBALIZATION

countries' subsidiaries. 'lhe 0l'craLiolls were .I'clfcolliaillcd in each country and the resulLq
wcrc evaluated on a coull/ry-hy-country hasis. Such a situation had prevaileJ since the [RHOs. It.
corresponds to what. was referred to as a multinat.ional or multi-domestic world, in which multi
national companies like Otis were compelingill.';cpara1.e domestic

markcL~ around

the world.

By the end of t.he 19605 several key clements p1<lycd a rule in changing this competitive
structure. One national manager at Otis perceived that the Eurupean business context was
changing. First, the Treaty of Rome in 1957 had created the European Economic Community
(EEC), at that time called the Common Market. 'Olis meant that tariff barriers across Europe
were coming down; it became possible to produce components in one country and export
them to other countries. lhis allowed companies to concentrate on the production of compo
nents in one specialized flldory and to have a network of specialized factnries across Europe,
eHch of them making one product category or olle componenL. CornpOllenl<; would be cross
shipped fur ultimate installatiun in t.he variuus client count.ries.

OTIS UK

OTIS GERMANY

>DeSign/roductiO'/JrkClin~crv,c')

>oe5ign/roduclion/arketin~ervic')

Compete against

Compete against
German and multinational
competitors

UK and multin<:ltional

competitors

foe

foe

the UK market

the German market

OTIS FRANCE

OTIS ITALY

>Des'9r/roductien/arkCI,n~er'iC/
Compete against
French and multin<:ltional
competitors

)DeSi9n'jrodlKlionJarkelin9Jervice)
Compete against
Italian and multinational
competitors

foe

foe

the French market

the Italian market

Figure 1.3 A multln<:ltlonal competitive configuration

Cll ie henefits of' such 11 system were ohvious - lly concentrating production the company could
benefit frum economics of scale and some cost savings could be passed to the cuslomer in the
form of price reductions. leading to higher market share. Products could be designed for the
whole market (standardized): instead of having country segmentation you would have pan
European segmentatioll hased on lise,

i.I~.

high-rise buildings. low-rise buildings. (lnd so on.

.--------------
1

GLOBALIZATION OF MARKETS AND COMPETITION

'this would be po~siblc only if customers in Europe - architects, engineers, real-est.ate


developers. housing departments.

ell;, -

had a common view ahout what un elevat.or should

be like. Despite the differences in housing orgunizutiOIl across coulltries, elevators wcre CSSCll
ti.dly technictl! products with vcry little cultural content and therefore able to be standard
ilCU. Only selling methods would vary from
thi.~

as

Ull

COUll try

to country.

'nlC

Otis manager perceived

opportunity to gain market share in Europe and engaged in the pan-European

strategy depicted in Figure IA in which design centres and fUdorics were speciulized alld

inter-dependent.
From a management point of view this was a radical change; national managers were no
longer responsihle for the whole value chain as before, but only for part of it. lhey were obliged
to coordinllle with other countries and they were dependent on a coordinating organization
called the Europenn headquarters. 'Ihis led to a very successful out.come. By 1975, Otis had
captured 40% of thc !::uropellll market, containing Japanese pelletration, and competitors
if they wanted lo survive were obliged to adopt a similar strategy. 'Ihis (;ollcept
expanded and today Otis is

organi~ed

WHS

further

by product lines on a worldwide basis. lherc arc still

counlry subsidiaries, which take care of installation, maintenance, public relations and
personnel. but otherwise product development and manufacturing is coordinat.ed globally by
rroducl.lines. From being a 'multinational'. Otis has become a 'global' company.

OTIS UK

OTIS GERMANY,c-_ _,

~---,~,,~===;::--t-J"'>De5igy
~

"D"i,~
~

)L . , - '

.. 7""-

>arkeli3>)serviY
Local market

'"

S"i"

Local market

OTIS
EUROPE
~

y
",)ProdUCliO;>

>arketi3>>servi~
Local market

OTIS FRANCE

Figure 1.4 A globill competitive configuration

Local market

OTIS ITALY

11

12

THE PROCESS OF GLOBALIZATION

1his

plu~nomenon of

an aCl;vc coordinated and ifllcgrated presellCi1 in the main regions of

the world is what 'glohal company' means. It is important to ollM'f\'c that this change gave
Otis

11

compctith'c advantage and coml>ctitors were obliged to adopt a similar approach in

order to survive. GlobaJi:l:.'ltion is neither u consultanfs fad nor a nmnagcmcnt buzzword; it is


11 compclilh'c impcr,lti\'c in an increasing IUlmher of industries.
Hist.orically the evolution

or

globalization from an enterprise point of view cun be

best duscribed as in Figure 1.5. It has cvolvc{] ill three steps: (I) international lrude:
export alld sourcing. (2) lllull.inaLionaJ investments: seiLing up valllc:,ddillg activities in
different countries and (3) inl.t:gration and coonlination of activities m.:ross regions and
cOllntries.

J
!

Global Integration (globaL)

Internationalization
Imultinational!

Export

Itrade)

Cenlunes ago

Started on 17th centul"f

but mainly early 20th Ctnlul"f

191>05 and laler

Figure 1.5: Historically globalization tooK pl<Jce in three steps

The factors that work against globalization: the


localization push
As mentioned earlier, globalil.:llion is associaLL'l.I wilh some degree of standardil.lllion of
products amI practices plus a high level of coonlination and inlegmtion of activities in the
company's value chain. Faclors that defeal standardization, coordination and integration arc

SA 12:ATlON

I MAliK

ANO COMP

lION

working ag.'linSl sJobaliz.ation. \\'c can group Ihose factors into four main clItcgorics: cultural,
commercial. l.t..c1mical and legal.

(I) C"ltllrllijoclors: altillldes,lasles. beJwll;or ami social codes


When the consumption of a product or a service is linked 10 traditions and national or

religious values. glohal standardiz,,'ltiOI1 is not cffccti\'c. Some products - for instance.
....retek (tobacco and dove) cigarellcs in Indonesia, or the I'llcllinko (pinball) game in

j'lpan - are ullique to one society and their globalization is ncurly impos-'liblc. although
it could be argued that with inllOVl.livc marketing it Illay be possible. Examples are the

MrivuJ of'Beaujolais nouveau" wine. typically a Burgundy and Parisian bistro event before
I,he 19705. now available in Tokyo, Paris or New York on Lhesame day. and Jlalloween trick
or treating, a typical US festivity. is now celebrated in Eurnpc. 'I his shows that even some
highly cultuml goods alld customs can be appreciated by eustomcrs all over thc world, but
it rClllflins Uwt tastes ill food and <trillk. social interactions in sales negotiations, attitudes
toward hygiene, cosmetics or gifts vary rrom culture to culture, !llIlS hampering a global
product dcsign or approach. In t.he Asill-Pacilic region, for instance, personal relationship
buildillg rather than legal conl.nu;t'i is lhe normal way to conduct

busincs.~.

Time and

efforture required to build thcse pcrsunlll ties. which in a US contcxt woul(1 be considered
a waslc of Iimc.
(2) CommcrclldftlClur.;: dislrUmlion, Cllstomi:;aUQ/llIIlll res/Jol1sil'l!/ICSS

III somc sectors. distribution networks and prnctices differ from country to country and
as a consequcnce the wuys of managing thc nel\....ork,

moti\~dUng dealers

and distributors.

pricing and ncgotiation are hardly amcnable to global coordination. For instancc, thc
markeling and distribution of pharmaceutical products diffcr according to the country's
hculth system. In some countrics, like J:IP:lI1. doctors sell medicinc, while in other coun
trics phllrmacists are selling to paticnts who gt!t a refund (or not) from their insurance
company. while in yet other cases pharmaccutical

producl~ are

deli....ered free of charge to

the patient.
Itesponsiveness to customers' demands as wcll as cuslomizaUon are othcr factors
which almost. by dcfinition dcfcat standardization. Private sa....ings or currcnt accounts for
individlwls. [nans to small and medium-size enterprises (SMEs), mortgages, consulting
activitics nmlindividual architectural designs arc services for which u local presence and
a fast reaction to customcrs' requircmcnts nrc nccded for competitivc succcss. Although
some practiccs. processes or methodologics can bc standMdizcd on a worldwide basis
(consultants, engint.'Cring, architects or auditors, for example), it rcmains that spccific
customer requcsts ha\'c to be taken into considcratioll, thus limiting globaliz.'ltion.
(3) TedmiclllftlCIOrs: stmldards, spatllli pre.'il!lIce, lrallsporlallo" ami ilmgfll1ge

Technicul standards in electrical, civil, chemical or mech:Ulical cngint.'ering can creatc a


hurden for global companies. Sc.'tlc (.(;onomies and cost bencfits of glohal integration
and stmuJardi:t.ation cannot be cxploitt.'<.I fully when technical stundurds \l"'dfY greatly. In
certain ClIses. standards can be changcd without major modification -

liS.

for instance, in

13

14

THE PROCESS OF GLOBALIZATION

consumer electronics, where creating video multi-standard

prouuct~

with PAL for some

European countries. SEeM] for France and the Middle East. und NTSC for the USA does
not represent a major hurdle for global manufacturing. In other instances, stundards arc
not that easy to accommodate and require specific

loc~t1

productiun1incs. as is mainly the

case for beer. for instance.


Some industries need to occupy a physical space in order to create and distribute their
products and services: retail hanking, retailing, hotels, local telephones services. hospitals.
entertainment and car dealers are examples of industries where the services have to be
produced locally. In those im.lustries there are still some advantages ill globalizing certain
fUllctions such as hack office functiOIlS (accounting, data processing, global sourcing,
transfer of best practice, etc.) bllt the location constraint still limits globalization benefit.s.
In the future, e-commerce is likely to reduce spatial constraints considerably, particularly
when it comes to virtual services such as banking or movies on demand. E-cornrnerce
with physical products can also eliminate the spatial constraint as far as the customer
interface is concerned but is still hampered by logistical constraints. The example of
Amazon.com demonstrates that it is possible for a customer ill Paris or in Rio de)aneiro
to order a hook through Amazon. but the Same customer will have to bear shipping costs
that wil! elirnin(tte the basil: l:ost advantage of the e-bookstore. 'Ihis is the reason why
Amazon is looking for local partnerships outside the United States, thus moving toward a
more multinat.ional business design.
The impediments of transportation are significant if the cost of transport cancels
out the benefits of concentration of production. Bulk cOlTllllodities like cement

OJ"

basic

chemicals are more economically produced in local plants rather thau in global cent.ral
il,ed units, despite the scale economies that could he gained: t.he cost and the risks of
t.ransport cancel out the benefits of ccn!.raliz,ed production. Similarly, when production
systems arc not sl:ule-intcnsive and small pro(luction units can achieve similar cos!.s to
large plants - in plastic moulding. for instance - there are no major benefits in building a
global production system.
Finally, languages can add constraints to global approaches. These constraints can be
significant when it comes to services to individual customers: training services, personal
banking and personal telecommunication or retailing are possible examples. However,
there are two major trends that can reduce language constraillts. English has become
more and more a 'global language' and industries such as grn(luate business training or
high-level consuJlallcy ClUJ usc English wit.houl.the need for tnlllsialion.

(4) Legalfactors: rt:glliatitm lind ,wlionaL security issues


Govemments impose regulatory constraints that oft.en work against globali,mtioll, either
bccHuse they limit the free flolV of personnel (regulation on work permits), cash (exchange
control, tax), goods (customs duties, quotas), data (censorship, the lnlernct and EDI
cOlltrol), or because they impose localil.atioll constraints (local content policies, local
ownership and joint venture policies).

p
1

GLOBALIZATION OF MARKUS AND COIotPETlTIDN

O,'cr the yeafS.thanks to the GA'rr and now the \V1'O and also mullil:ltcral agrcemcnL'l

(Eurol>C1UI Union (EU). ASEAN. NAFTA. etc.) and International Monetary Fund (1l\'(F)
re<juesls. go\'cmmcnl legislation is leaning loward more open legislative context.~ thai fa,,'or
g1ob.'llb.lItion. Uowe\"er. some conslrninlS still cxisl:. Some sectors such as 1,c1l..'COrmmmK:a
lions.. media. hanking and insurance ure stilt tightly controlled and some countries (such as

China and India) or regional blocks (the EU). still impose local content n.'t!uircments.
Finally. go\'ernments are mLlch concerned with national security and will pre\'cnl

foreigners guilling 100 much control orlheir defence or strategic seclor industries. In the
defence sector, for insLam.:e. where H&D costs arc huge and economies ofsClIlc significant
g1ohaJizlItion would be fully justified, hili is in facl Iirnil,ed because of naUonal security
constraints. Figure 1.6 summarizes Ihe loculization push.
Culturallactors
IIltitudes. tastes
BehaVIor
SOCial codes
RtKJucc lI,c bene firs
of slandardJlit~"~"~"_~

Technical
factors

Commercial
factors

Standards
Transport.:lhon
Spattal presence
liIngu;og~
Reduce fhe bctlf'fifs of

Localization

O,stnbutlOfl networks
Customlzatlon
ResponSl'W'enus

Reqlllf'e d,ft..-MllilftKJ
<lppro;'Khn to SiI/es
md mMkelmg

of 5UIe.
cenfr1lbzallOfl md

KotlOt7Ne5

Sl~al...

Legallactors
R~ulatlons
Naltonal sec:unty
L,m,' IrH flow 01 pelJplf'.
goods.d.Jta. cash ,tnpOW
locMJZal1Oll CClnSlra"'ts

Figure 1.6 Localization push factors

The benefits of localization


'Jhc bcndlls of localization. instead of a global integrated and coordinated approach, arc
elSsctllially customer-oriented bCllcliL~ IhaL give firms an incrcasc<] tlUll'kel power and ulti
mately an increased market share. 'Ihe benefits of localization arc f1exibilily. proximity and
quick response time.
Proximity is the capability to he dose to the market to undcrsland the customcr's value

curve.

F'IexibiJily is the capability to adapt to consumer demand in the various dimensions of


the marketing mix: producL/scrvicc design, distribution, brnnding. pricing and services.
Ultimalely. ncxibility leads to cuslom;::;{jl;oll.

15

16

THE PROCESS OF GLOBALIZATION

Quick response time is the ability to rc:;pOIlU at once to specific customers' demands.
Proximity, flexibility and quick response lime arc very much related to each other: proximity
provides the basis for llexibility and flexibility provides the basis for a quick response. All three
give a competitive advantage when

JOel,]

cultural, technical, cOlllmercial and legal contexts

vary so much from country to country.

Global/multi-local mapping
"[ he two

sel.~ of fon;cs

- globalization and Jocali..:atioll - are shaping the compditivc structure

of industries und inducing companies to COIl figure their worldwide business systems with the
right mix of coordination. inLegraLion or deccnLf(llizaUoll, Global/multi-local mapping is a
tool that has been developed to position industrics and industry segments according to the
relative importance of each set of forces. Figure 1.7 represcnts the mapping for various indus
tries, while Figure 1.8 shows II similar rcprescntation for various

segJllel1L~

of thc finandul

sector.

Global industries
in which firms carl suslaill
competitive advantages
only if:
they preselll in the key
counlries of the world
alld
they integrate arld
coordirlale their
activities across the
world ill a celltralized
marmer.
No

Civil alrcralt
Microprocessors
Institutional banking
Bulk chemicals

Nahonal
public services
No

Telecommunication
eqUipment
Corporate banking
Automotive
Pain!

Package lours
Retail banking
Caler",g
Food
relail

Yes
Multi-local illdustries in which firms carl sustain
competitive advantages independerlily wilhin
the boundaries 01 countries in which they operate

Figure 1.7 Global/multi-local mapping: different industries have different competitive requirements
Thc mapping in Figures 1.7 and 1.8 reveals that industries and segments call be broadly
posilioned into three types of competitive situations:
Type I: Globalforces dominate and firms in those industries I;an sustain compdiU\'c
advantage by operating across the world in a coordinated way. 'Ihere are few advantages
to pushing for local adaptation ofproduClS. services and approaches. What matters is
efficiency, speed, arbitrage and learning. 111ese indust.ries (Ire global, as in the casc of the
microchip, bulk chemical or civil aircraf"l. industries.
Type II: Localjim;es dominate and ficxibility, proximity and quick response are determining
capllhilities for competitive advantage. Firms can operat.e independently in different

.--------------------
l08AlilATtON OF MARK T

AND

DMPE 11

17

(;UUlIlries; their approaches are different from country 10 country. 1:00d retailing. consumer

banking or ,'oice telephony rail in this cntcgory.

Ttl>e III: In these industries there is a mix ojgfobtll and localfarccs al "/(/1 lmd oompetiti\'cm.."SS

(;.'Innol be achieved without achieving the henefits of global coorrlimtlion (md. at the !mille

lime, the benefits ofOcxibility. proximity and quick response time. 'Ihis !>ositioning is

incrc;lSingly becoming the dominant (;ompctith'c battleground for a vast nmjorily ofsectors.

YES

INVESTMENT

"'"""'

GLOBAL CORPORATI:

ACCOUNTS

CREDIT CARDS

Global
approach

dominates

TRADE FINANCE

COMt-IERCw.emKlNG

RETAIL BANIQNG
SAVlNQ5ACCOUNTS
PERSON,tlLINSURMIcE

NO
NO

YES

Local approach dominates

Figure 1.8 Global/multi-local mapping for the fmancial sector: different segments have dillerenl
competitive requirements

Glohal{multi-lol.:lll mllpping call he used for assessing a situation at 1I point in time or to


anticipate evolution over time. It can 1I1so serve as mapping for the various aclivities of the
value chuin. As will be seen ill Chapters 2 and 3, l\ good um.lerstundingofindustry positioning
will hclp the formulation ofbllsincss and nalional strlll,cgies. as well as the implcmcntation of
all dfel.:livc ol'ganizalional design.
In Appendix l.J there is a questionnaire I.hat will help managers to position their business
Llsing the Glohal/multi-Iocal mapping tool.

Globalization: the macro picture


In 1817, David Ricardo in his 11loory ujColII/Xlmtille AdllO.tllage' showl'({ that it was heneficiallo
nations to specialize and trnde goods in which they had a oompamliw:. adwlIllage. 'Illis laid the
foundation oftrode theory. which itsclf is the underlying foundation ofg1ob.."l.liUltion: in a perfect

18

THE PROCESS OF GLOBALIZATION

global setting where goods. people, dala and moncy flow freely, companies can adopt an inte
grated ~Lnd coordinated approach to their operations and the competitive battlefield would be the
world. Since Hieardo's time, partisans and adversaries offrcc tntdc have exchanged heated debates
about the pro ami cons ofglohalization for sodety. Table 1.3 summarizes those arguments.
'I his debate gained political visibility during the J 990s. In Europe, the Treaty of Maastricht
(signed in 1')92) adopted the curo as a single currcncy, generating a heated debate on the loss
of sovereignt.y and the advantages of fmthcr political and economic integration. III North
America. t.he NAFTA agreement (1995) created similar discussion. In Asia, after Lhe 1997
financial crisis, globali7,ation was called into question and, at the end of that decade, t.he W'I"O
at the Seattle ministerial conference could not set up an agenda for launching unother trade
rO\lnd because of public criticism of the whole concept of globalization. Since 200 I, there
has been a growing debate about the fuLure 01" glohllli~,aUon. Some, like Alan Rugman, have
announced the 'end of globali:t.ation'," an issue Lhal. will be discllssed in Chapter 16,
Table 1,3 The societal effects of globalization

~------

Arguments in favour of globalization

Arguments against globalization

Creates overall wealth for all nations because


specialization increases trade

Imposes massive strain on labour force both in developed


countries Ijob destruction) and developing countries
(sweatshops. child labor!

Reduces inflation because of cost efficiencies

Standardizes customer tastes. Reduces diversity

. Benefits customers because of price reduction owing to


I cost efficiencies

Induces concentration of power in a few global

corporations

Introduces a 'jungle' leading to the domination of the


strongest multinational

Better allocation of natural, financial arlo' human


resources

Harms the environment because of unrestrained

exptoitation of natural resources such as forests

Reduces corruption because of free market trade

Reduces capacity for natiorlS to protect their national


interests, cultures and values

Source, Ricardo 1196'/)

Despite all this polil.ical t.~rmoi1, some analysts think that the world is becoming progressively
more int.egrat.ed. According to the consulting firm McKinsey,S by 1997, truly global markets
represenLed approximat.c1y US$6 trillion out of a total world output of US$28 trillion (21%),
'Ihe firm anticipates that by 2030 the proporLion of global markets will alllount to US$73 tril
lioll out of US$91 trillion (80%), However, as 'I'll! he secn in Chaptcr 16, this forecast lIlay he
challcngcd,
Pragmatically, companies adopt. a competiLive positioning which tends to !()sLer I"urt.her
globnlization. l1w development

or inl"ormaLion

technologies, the fluidity of capilul markets,

the creation of mcgHlllergers in the telecoms, computer, oil. pharmaceutical, powcr and car
industries dcmonstrate that business firms are increasingly bchaving as if they were already
living in a global world.

GLOBALIZATION OF MARKETS AND COMPETITION

______ 'I!@A11
Mobile Telephony Services
Mobile telephony expanded rapidly during the two decades of the 19905 and 2000s. By
2011 there were around 5.2 billion mobile subscribers in the world (77% of the world's
population).

According to the International Telecommunication Union (fTC), the distribution of customers


is as follows: Asia Pacific: 2.649 billion, Americas: 880 million. Europe: 741 million. rest of
the world: 979 million.
The industry is divided broadly into two major sub-industries: a) mobile equipment
manufacturers: phones and docking stations, for example; and 2) mobile services operators.

Around the world, mobile services are operated mainly by local telephone companies with
their own national brands. Some operators such as Vodaphone {UK} or Orange (France)
have developed their presence internationally by acquiring or participating in the capital of
local operators.
Most consumers use pre-paid services for the use of mobile phones. Various packages of
pre-paid services as well as additional add-ons (Internet access, mobile banking. email,
games ... ) are offered by the operators according to the characteristics of their markets.
Customers are divided between personal accounts (roughly 65 to 90%. according to the
country) and corporate accounts (from 10 to 35%). Some of the corporate accounts are
multinational firms that want to benefit from a 'global' offer.
Mobile operators purchase their own network equipment and control its installation. They
also procure large quantities of handsets that they include in their pre"paid contracts at
discounted prices.
The key activities of mobile phone operators are:
Procurement of network hardware and software: suppliers are multinational firms such
as Nokia, Erikson and Alcatel-Lucent. There are two major standards used in the world:
Global Standard Mobile with around 80% penetration and CDMA (15%). Japan and Korea
use a standard of their own.
Procurement of handsets. The major manufacturers of handsets are Nokia (23% global
market share). Samsung (16%), LG (7.5%), BlackBerry (3%) and Apple (4.6%).
Network installation and maintenance carried out by equipment suppliers plus local
infrastructure companies under the control of the service provider.
Software developments for new applications and services. From 2008 to 2011 around
300,000 applications for mobile phones and smartphones have been developed in the
world. The main applications are games, news and social networking.
Marketing and brand management. Products are marketed under a variety of local brands.
Multinational players try to use their global brand (such as Orange). although advertising
is country specific.
Sales and distribution are organized differently from country to country.
Billing is done according to local standards.
Regulation with local authorities. Operators have to comply with local regulations.
Finance and controL Treasury is managed centrally while day-to-day transactions are the
duties of local managers.

19

20

I THE PROCESS OF GLOBALIZATION

"!!''12\11

Human Resources. Employment regulations are specific to countries' legislation while


human resource policies are decided by the Corporate Office.
Strategy, Mergers and Acquisitions, Alliances belong to the corporate domain.
Questions:
1) Using your knowledge, the data provided and global/multi-local mapping can you decide
whether mobile telephony is a global industry?
2} Now do the analysis for each of the activities listed above.

Summary and key points


Companies

A global company:
can be defined as a company that operates in the main markets ofllle world in an
integrated and coordinaLed way
carries out one activity (e.g. manufacturing) or a component orthe uctivity (e.g.
manufacturing olle sub-part only) of the value chain in one country. which serves the
company's worldwide market.
;\ multinational company:
operates in many markets oCthe world with little or no integration or coordination among
operations.

GLobalization:
Is the phenomenon of the progressive transition of industries from a nlliltinational to a
global competitive structure
Four factors arc pushing companies 1.0 glohalize:
- Political: reduces trade barriers
- Technological: reduces the cost. of coordination and increases economics of scale
- Social: encourages standardization and global branding
- Competitive: induces integration and coordination
Going global has four competitive bendits:
- Cost: economics of scale and increased bargaining powers
- Timing: reaches the optimal production volume and increases the reach of a product
with a short product life cycle
Learning: facilitates best practices to be adopted across suhsidiaries through the
experience eITect and the transfer of knowledge
Arbitrage: is derived when H globul company uses resources in oue country for the benefit
of a subsidiary in another country.

Localization
Four driving forces reduce the need to globalize:
- CII/tllml; re(luces the benefits ofstandardizaLion

p----------------
21

GLOBALIZATION OF MARKETS AND COMPETITION

CUI/II/lcrciaf: requires differentiated approaches to sales and marketing

lee/mica!: rerllices the benefits of economics of scale, centralization and standardi:wt.ion

limits free Dow of resources and illlposes localizaLion constraints

I3cing local has three benefits:


!,I'ga{;

proximity

Ho:ibility

Quick rcsp0/l.~e limc.

GlobaL jmulti-Local mapping

is used to idcnLify the competitive requiremellts of an industry or a business segment and


can assist companies in formulating business and national strah~gics.

Appendix 1.1 Positioning a business on the global/multi-local mapping


!\ssi<1!l a score fur each question from I
--~---

lo'~

~T:

what extent customers have simi!;;!r


demands for function;;llity ;;Ind design ;;IcrOSS

countries

---

I Very dlffCfl!nt

-To what extent products or services have

Low proportion of
standard components

a high proportion of standard components


across countries

-To what extent customers lor distributorsl are

Buying locally

=--J

Very similar

High proportion
of st,)Ildard

components

- i

Buying centrally

themselves operating in different countries


and are buying centrally your products or
servICes
Low economies of scale

High economies
of scale

extent the speed of introducing


new products worldwide is important for
competitiveness

Speed is not that


import;;lnt

Speed is very

important

To what extent the sales of your product or

Highly cultural

Highly technical

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

To what extent competitors in your industry


operate in a 'standardized' way across

countries and are successful in doing so

Competitors are
localizing

Competitors

are successful

in standardized
;;Ipproaches

To what extent pricing can be diff(lf('nt


from country to country without introdUCing

dysfunctionality

Pricing has to be
coherent across
borders

Pricing can be

very different

To whal extent distribution channel


management differs from country to country

Not so different

Yes. very

different

To what extent significant economies of scale


in your industry are important lor the cost
I of the product li.e. business needs very high
i volume to obtain low cost 1

I To what

I service are based on technical factors or

allernatively on cultural factors

~-~

-------

22

I-

THE PROCESS OF GLOBALIZATION

--

To what e
dent business regulations and

Not 100 different

contexts d
,ller from country 10 country
requlnrog
Oil high degree of locaL practices
Towna! e
Xlenl products or sel'Vlces require
a h'9h deg
fee of Interaction with customers

3
HIghly different

ILow,",,,mi~I'OO

!custom'lallOnl

High

cuSlornlzahon

To what e xtenllransportation costs are h,gh

Not so high

Very hl9h

To what e xlen! customer interface IS critical

Not critical

Very cntlcal

I compared 10 the product costs

for succes

Questions 1 to 8 representlhe importance of global forces while questions 9 to 14 represent the


importance of local forces. It is then possible to map a business by a simple mathematical operation

as in the following figure. Add your totals for each


suited 10 a global or local approach.

scor~

to

th~ bo~

below to find out if your business is

Global
approach
dominates

(Questions lto BJ

Local approach dominates


IQuesl.ions 9 10 141

IllDiltH:"::'11
Among the enterprises that you know, can you identify one that can be classed a g10bul
compllllY? Why?

ps-------------------
1

,
I

GlOOAllZATlON OF MARKETS AND COMPETITION

Why. in Figure 1.8. are savings accounts positioned low on global approaches and high
ol11oc ll i approach while investment banking is high on global approllch and 10won local
approach?
III Figure 1.7, food retailing is positioned as a local business. with a very low glob.1.lizalion
S(;orc. Ilo\\'cver. in the press. companies like Tesco. Wal-Marl ami Carrefollt arc classed
as 'global rcl:tilers". Explain this discrep,'lIJcy.
Whal arc the social factors thai hm'e been pushing for globaliz....tion and which hu\'c
heen pushing llg.'linsl.?

WIIlII nrc the benefits of having a localllpproach?

When the Otis Elevator Company inl rodllCt.-'d the change descrlbt.od at Ihe beginning
of the chapter. there was a lot of resisl:lncc from the various heads of tile EUropCllll
suhsidiuries. Why'! What argulTlents do yOlllhink Lhe people hoslile 10 globa1i7AIt.i01l used'!

C(II! Apple he classed as a global firm? Why?

,,
ArbitnLge benefits
Comparative advanlage
Globnl companies
Global industries

Global/multi-Ioc<llmupping
Glob.tli7,ation
International producllife cycle
~'Iultinational companies

<hUp://knowledge.inscad.cdu/homc.cfm>

A link Lo the database oflNSEAD Knowledge under lhe categoryofGlobalizalion.

<http://www.l)llsinessweek.com/mcdiucenter/>

Business Week- Globalization.

<11 tI p://www.lIlckillsc}"(luarterly.com/>
McKiluey Quarterly - Globalization.

<hup://WWW.Il11to.int>

Provides information on North Atlantic Treaty Organir;aLion (NA'I'O).lllcluding its 19 member

count.ries. its organization and vulues.

<http://www.wlo.org/>

Provides information about the WTO.

<http://www.imf.org!>

Provides statistics and papers from the Inlernlltional Monetary Fund (IMF).

<http://data.\\Iorldbank.org/>

World Bank data online.

<http://www.unclad.org/>

Uf\'CfAD data. particularly the World lnvl.'Stmcnt Ileport section.

23

24

THE PROCESS OF GLOBALIZATION

<htlp:llwww.occd.org!>

DECO resources.

<hu 1':/1cpp.curoslllLcc.curopll.cu!>

European Union data.

\bit Ihe (omp.... nioll

w{'b~il(' al

htt p:. ww\\.palgnl\ (',nllll, hllsincs"ila....(......l'3c for ,I


(111l~..1ion... fur r('\ j.. ioll .1Ild il st'MI'h(lhl('

Im,1I iludl' III wcblink.. and rt'source;" self-II''''


~Iu.....nn.

Gl..'Orgc Yip (1992) gives four globalization drivers: cost, market. cornl>elition and

government. 'Ihest: are similar to those presented here.

2 Ohmac (1985).

:~

Ricardo (1967).

HUglTlllll (2000).

Lowell and ):mser{I999. PI'. 68-81).

References and further reading


Books lUll/articles
Baker. Michael and Sus'lll Harl. IJrodllcl
StratcgyamJ MmwgclI/cl/l.l.ondon:
Prenlice-i-lall.I999.
r~nrtlcU. Christopher A. and Surnantra
Ghoshal, MOl/aging Across Borders: Ihe
7'rtm.mllliOlw/ SO/iltion. Boston, MA:

Uarl'ard Busilless School Press, 1989.

Fr3~er,Jane N. and Jeremy Oppenheim,


'Whar~ New about Globalization'!',

McKinsey Quarterly, 2,1997, pp.168-79.


lIurJl(II"(} 1J1I,~illes.~ School Global Strategies:
fnsightsJl"OIlIlhe Worlds Leading Ihillkl~rs.
llosluli. MA: Harvard Business School

Press, 1<)00. ('lhis book contains a


collectioll of /-/arvard Busilless ReI/ieit'
(lIIjU) IIrt ides.)
I IUlllCS, S~Hl1UcI, Mmwging Ihe Alllililla/iollal:
COllfrollling the G/obal-row{ IJi!ellllllll.
London: Prentice-Ilall, 1993.

International Bank ror Reconstruction and


Development. Global Ecol/omie Prospects,
Mauagillg the New mwe ofG/obali:;ation,
'Ihe World Hank, Washington, 2007
Lowell, L Hryan and Jane N. Fraser, 'Gelling
to Glolmr, McKinsey Quarterly, 'I, 1999. pp.
68-81.
Michllcls, J\.I.:" II.Z. Ol~haysky and W. Qualls.
Short.ening oft.he ['I.e - An EmpiricaJ
Tesf, IO/lf/wl ojMflrkeliflg, 'I, 1981.
J\'lichcl, Do, II. $ulle andJ. Valla. Il'!arketillg

illdllslriel,l'aris: Economicu. I<)%.JI'OIII


NouI,c!I:tOllOlIIisw, J 02(l.
Micklcthwait.Juhll alld Adrian Wnoldridge.
A Flilurc Pc/fcCI: '1111: CllfIl!l'flges - (1m)

tlte Promise - ofGlobalizalion. I.ondon:


Ilcincmalll1.2000.
Mirla, Ilafiz (cd.). Glofml COIII/Jctilii/e Slmteb';cs
ill World Ecollomy: Multilmcmlism,
Ikgio/lali:;(/fio/l a/ld flle Tmllslla/iollal Firm,
New I [ori1,ons in Intcrnaliomlll~Ll~ines.s.
London: Edward Elg;lr.I998.

L aAUlATION

Olmwc, Kcnichi. Hccomi/lga Triad Power.


New York: McKinsey & Co.. 1985.
porter, Michael E. (cd.). COllljJl!lili(JI/ ill Global
Industries. Boston, MA; Harvard Husiness

School Press. 1986.


Porter, Michael E.. 111e Competitil'c
Advantage ofNa{i(m.~ New York.: Free
Press. 1998.
Pnlhalad, C.K. and Yves L Uo'/.. 111e
Mu1lillalional Mission: lJulaf/cing I,Dcal

F MARK

SAND

DMPUll ON

Yip, George, Total Global Strategy: MlI/wging

lor World llIide Competitive I1dvalllagl',


Ellglewood Cliffs, NJ: Pl'cnlicc-J lalL 1992.

j(JllrlUt!.s
BUSINESS

Busincss week
Iorllllle
""cO/wlllist.
flllel'l/u/imlflf Mallagcmelll

Demands and Global Vision, IsL edll. New


York: Fn.>e Press. 1987.
It:mgan. Suhmmanian and Hobert Z.
L.... wrence. A Prism all Gfoba/i::;a/;oll.

SEMI-ACADEMIC

Washington. DC: Brookings Institution.


1999.
llicardo, David. thc Princi!Jlcs ofPolitical
Hcollomym/{/ Taxatioll. Homewood,IL:
Irwin, 1967.

California MlIIwgemelll Review


Columbia jOl/rnal afWorld Business
Sloll/l Manllgement NevicJV
h'l/ropellll Management journal

Bugman Alan, 'file End ojGlobali.::-a/iQII: II

ACAoeMIC

New alld HlidicuJ Analysis ofGlobnli:;ntioll

alld IVlIa! it MCWl$for BmUIess. London:


Kandom I louse, 2000.

Fimll/cial

Time.~

MullillationallJusillcss
J/arll(lrd Busincss Review

joumal alil/lematiollal Busincss Studies


Stralegic Management jOflrnal
Intemationailiumall Resources Management

25