Country Globalization And Business Strategy

Country Globalization and Business Strategy Syed H. Akhter Marquette University

Globalization Defining

globalization Drivers of globalization Measuring globalization Impact of globalization

Globalization McDonaldization Coca-Colonization Nikification

Globalization Global

Village Global Pillage World Government

Globalization & Unit of Analysis Country Industry Firm Consumer

Globalization

Country Globalization: A Multi-Dimensional Concept Economic

Cultural

Country Social Globalization

Political

Technological

Economic Globalization  Definitions  Drivers  Degree  Impact

Economic Globalization Increasing

cross-country integration of economic systems through trade and investments

Economic Globalization Drivers Richard Harris and Simon Fraser 1995

 Reduction

in trade and investment barriers  Rapid growth and increase in size of the developing countries economies and their impact on global production capacity  Innovations in technologies involving transport and communications

Trade Barriers Removal  Non-discrimination  Reciprocity  Transparency  Fairness

(The MFN principle)

Declining Trade and Investment Barriers: Average Tariff Rates on Manufactured Products 1913

(% value) 1950

1990

2000

France

21

18

5.9

3.9

Germany

20

26

5.9

3.9

Italy

18

25

5.9

3.9

Japan

30

-

5.3

3.9

Britain

-

23

5.9

3.9

21

18

5.9

3.9

USA

Globalization and the Global Economy (Changing pattern in % share of world output and trade) 1963 (Output) ( Exports)

1997 (Output)

1998

United States

40.3

20.8

12.7

Japan

5.5

8.3

7.3

9.7 (West)

4.8

10

France

6.3

3.5

5.7

United Kingdom

6.5

3.2

4.5

Italy

3.4

3.2

4.5

Canada

3

1.7

4.0

China

NA

11.3

3.4

South Korea

NA

1.7

2.5

Germany

Direction of World Exports, 1965-1995 (percentage of world total) Between Developed Economies 1965 1975 1985 1995

59.0 46.6 50.8 47.0

DevelopedDeveloping

32.5 38.4 35.3 37.7

Between Developing economies 3.8 7.2 9.0 14.1

Totals do not sum to 100 due to trade with Comecon countries, countries not otherwise classified and errors Source: Calculated from IMF, Direction of Trade Statistics Yearbook, various years

Falling Transport and Communication Costs 1930-1990 (constant 1990 US$) Year:

Sea Freight

Air Transport Cross-Atlantic Telephone Call

1930

60

0.68

244.65

1960 1990

27

0.24

45.86

29

0.11

3.32

Average ocean freight and port charges per short ton of import and export cargo. Average air transport revenue per passenger mile. Three-minute New York-London call. Source: HufBauer, 1991

Measuring Economic Globalization  Exports

of goods / GDP  Exports of goods and services / GDP  Exports and Imports of goods / GDP  Exports and Imports of goods and services / GDP  Inflow of foreign direct investment / GDP  Income receipt /GDP  Income payment / GDP

Economic Globalization: Degree Developed Countries 0.3 0.25 0.2 % value 0.15 0.1

Countries

USA

UK

Japan

Italy

Germany

mgdp France

0.05 0

xgdp fdigdp

Economic Globalization: Degree Developed Countries

yrgdp

Countries

USA

UK

Japan

Italy

Germany

ypgdp France

0.14 0.12 0.1 0.08 % Value 0.06 0.04 0.02 0

Economic Globalization: Degree Developing Countries 1.4 1.2 1 0.8 % Value 0.6 0.4 0.2 0 -0.2

xgdp

Countries

Malaysia

Indonesia

India

China

Brazil

mgdp fdigdp

Economic Globalization: Degree Developing Countries 0.09 0.08 0.07 0.06 % Value 0.05 0.04 0.03 0.02 0.01 0

yrgdp

Countries

Malaysia

Indonesia

India

China

Brazil

ypgdp

Economic Globalization: Degree Less Developed Countries 0.45 0.4 0.35 0.3 0.25 % Value 0.2 0.15 0.1 0.05 0

xgdp mgdp fdigdp

Bangl '

Bolivia

Kenya Contries

Uganda

Zimbab

Economic Globalization: Degree Less Developed Countries

yrgdp

Countries

Zimbab

Uganda

Kenya

Bolivia

ypgdp Bangl '

0.07 0.06 0.05 0.04 % value 0.03 0.02 0.01 0

Economic Globalization: Degree Emerging Countries 1.8 1.6 1.4 1.2 1 % value 0.8 0.6 0.4 0.2 0

xgdp mgdp fdigdp

Hong K'g

Korea Countries

Singapore

Economic Globalization: Degree Emerging Countries 0.3 0.25 0.2 % Value 0.15

yrgdp

0.1

ypgdp

0.05 0

Hong K'g

Korea

Singapore

Countries

Impact of Economic Globalization  Economies – Interdependent economies – Integrated economies – Complex economies

 Business – Production--Rationalization – Assembly--Outsourcing – Marketing—Value proposition

Technological Globalization  Technological

Globalization: The diffusion of technologies (hardware and software) that facilitate the flow of information globally.

Technological Globalization: Drivers  Innovation  Market

Seeking Behavior (PLC)  Increasing Market Potential  Economies of Scale  Economies of Scope

Technological Globalization: Degree  TV’s  Radio  Phones  Fax  Computer  Internet

Technological Globalization: Impact  Easier

Connectivity  Information Overload  Coordinated Business Activities  Internet Business Model

Cultural Globalization  Culture

refers to the social construction, articulation, and reception of meaning  Cultural globalization refers to the movement of objects, signs and people across regions and intercontinental space (Weld, et. al. 1999)

Cultural Globalization: Drivers  Exposure  Adaptation  Change  Learning

Global Cultural Environment  Power

distance  Uncertainty avoidance  Masculinity  Individualism Clustering of cultures  Values Hofstede

Country Classification Power distance

USA Japan France

Uncertainty avoidance

Masculinity

Individualism

Country Classification & Strategies Power distance

Uncertainty avoidance

Masculinity

USA Japan France

Entry and Marketing Strategies

Individualism

Cultural Globalization: Degree  Books  Music  Movies  Magazines  Games UNESCO Statistical Yearbook

Cultural Globalization: Impact  Harmonization – Beliefs – Values – Practices – Lifestyles

and Differentiation

Political Globalization  Political

globalization is the extension of political relations (political power and political activity) across time and space.

Political Globalization: Drivers  Systems

(Communism, Fascism, etc)

failures  Security  Resource  Performance expectations

Political Globalization: Degree  Bilateral

agreements  Regional agreements  Multilateral agreements

Political Globalization: Impact  Sovereignty

under question  Bipolarization (east vs. west, civilizational conflicts)

Transnationality index of host economies, 1997  Developed

Countries

 Developing

Countries

– New Zealand – Belgium/Luxembourg

– Trinidad & Tobago – Singapore

– Greece – Netherlands

– Malaysia – Hong Kong, China

– Ireland

– Panama

Implications of Country Globalization  Human

Development Index  Corruption  Economic Growth  Political Stability  Market Attractiveness  Market accessibility

Globalization and Strategic Actions—State Actors  How

much to globalize?  What to globalize?  How to globalize?  When to globalize?

Thank You