External triggers

External triggersExternal triggersExternal triggers to the External triggers to the

internationalization processinternationalization processMeta-level development in Meta-level development in

the world economythe world economyPEST analysisPEST analysis

Internationalization Internationalization of industries: of industries:

globalisation vs. globalisation vs. localisationlocalisationBi-polarisationBi-polarisation

3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 22

Derivative trendsDerivative trends

FundamentalFundamental PEST headings PEST headings

Political Economic Social Technological

Protectionismv

Liberalisation

Changes inexchange

rates

Labour costsand market

changes

Changing

tastesMulti-

formity

Innovationand

development

Meta trendsMeta trends

Changes toworldwide supply

and demand

Dynamicchanges in

GNP and trade

Changes toconsumerlifestyle

Diffusion ofnew

technology

Figure 3.9. The relationship between PEST and meta trends


Worldwide supply and demandWorldwide supply and demand growing number of products, growing number of products, services traded internationallyservices traded internationally

Governments believe they may Governments believe they may persist =>further rapid declinepersist =>further rapid decline





Protectionismv

Liberalisation

Changes inexchange

rates


changes

Changing

tastesMulti-

formity

Innovationand

development



and demand

Dynamicchanges in

GNP and trade


Diffusion ofnew

technology



Dynamic change in GNP and Dynamic change in GNP and tradetrade

stagnating, declining stagnating, declining industries supplantedindustries supplanted

vital, growing industries vital, growing industries supportedsupported

long term opportunities for long term opportunities for mutual enrichment: no ‘zero mutual enrichment: no ‘zero sum struggle’ => no absolute sum struggle’ => no absolute losers or winnerslosers or winners

renewal triggered by exchange renewal triggered by exchange rates, labor cost adjustmentrates, labor cost adjustment





Protectionismv

Liberalisation

Changes inexchange

rates


changes

Changing

tastesMulti-

formity

Innovationand

development



and demand

Dynamicchanges in

GNP and trade


Diffusion ofnew

technology



Changes to consumer lifestylesChanges to consumer lifestyles Increasing multi-formity, Increasing multi-formity, dynamism of marketsdynamism of markets

shorter life cyclesshorter life cycles





Protectionismv

Liberalisation

Changes inexchange

rates


changes

Changing

tastesMulti-

formity

Innovationand

development



and demand

Dynamicchanges in

GNP and trade


Diffusion ofnew

technology



Diffusion of new technologyDiffusion of new technology fast proliferation of know-how fast proliferation of know-how =>=>

generate successful products generate successful products and services =>and services =>

high devl’t costs => large int’l high devl’t costs => large int’l markets neededmarkets needed


GLOBALISATION LOCALISATION

ConvergenceConvergence

World market structure

World level compet’n

World: single market

DivergenceDivergence

Collection of nat’l industries

Nat’l level compet’n

Many markets: treated separately

Internationalization of industries: Internationalization of industries: globalization vs. localizationglobalization vs. localization


Assesing the extent of globalisationAssesing the extent of globalisation:

How boundaries to the industry might be drawn?

• including rivals (close substitutes)

• customer’s viewpoint: paramount


Industry IIndustry ICollection of competitors with similar technologies, processes and skills

Firm A Firm B Firm C

Market segment

(i)

Market segment

(ii)

Market segment

(iii)

Figure 3.10 Industries and markets

Firm X Firm Y Firm Z

Industry IIIndustry II (substitute products) (substitute products)Collection of competitors with similar technologies, processes and skills


Globalisation v.

Localisation

Figure 3.11. Assessing the extent to which an industry is globalising

Changes at meta level

Four sets of Four sets of industry driversindustry drivers

CostCost-new product

developm.-scale

economic-transport

costs

CountryCountry-trade policies

-technical standards-culture,

regulations

CustomersCustomers-customer

requirements-distribution

-uniform marketing

CompetitionCompetition-competitive

interdependence-new entry compet’n

4 Cs4 Cs


a) a) Customer driversCustomer drivers

Customer requirementsCustomer requirements– Some products: worldwide acceptance Some products: worldwide acceptance

=> standardized global product=> standardized global product– Within industry: marked variation (rice & Within industry: marked variation (rice &

paste / tomato kechup)paste / tomato kechup) UK: sweetUK: sweet France: spicyFrance: spicy USA: vinegaryUSA: vinegary


DistributionDistribution– Different channels => to be customiseDifferent channels => to be customise– Customer push or pullCustomer push or pull– Special national distribution system: Special national distribution system:

Japanese electronics companies => Japanese electronics companies => retired employer: ‘pop and mum’ shopsretired employer: ‘pop and mum’ shops


Uniform marketingUniform marketing– Convergence of lifestyle: selling to Convergence of lifestyle: selling to

different national marketsdifferent national markets Same product (satellite TV)Same product (satellite TV) Same product – variety of brand namesSame product – variety of brand names

Unilever: All, Omo, Persil, Presto, Skip, ViaUnilever: All, Omo, Persil, Presto, Skip, Via



Globalisation v.

Localisation





developm.-scale

economic-transport

costs



regulations



-uniform marketing



4 Cs4 Cs


b) b) Cost driversCost drivers

New product developmentNew product development– Escalating cost of R&D, huge resource Escalating cost of R&D, huge resource

demanddemand– Only the largest firms => trigger to be Only the largest firms => trigger to be

largelarge Smaller car manufacturers absorbedSmaller car manufacturers absorbed 1994: VW, Fiat, Renault, Peugeot/Citroën, 1994: VW, Fiat, Renault, Peugeot/Citroën,

Ford, GMFord, GM Further rationalization aheadFurther rationalization ahead


Scale economiesScale economies– Trigger to globalization: achieve high volume Trigger to globalization: achieve high volume

sales => larger plantssales => larger plants– Counterbalancing: Counterbalancing: Flexible Manufacturing Flexible Manufacturing

SystemsSystems (FMS) => sm (FMS) => smaaller plantsller plants– Find relative balanceFind relative balance– Minimum Efficient ScaleMinimum Efficient Scale (MES): (MES): smallest size smallest size

to achive min. cost/unitto achive min. cost/unit– FMS can offset the pressure of scale of FMS can offset the pressure of scale of

economies! (integrated steel plants economies! (integrated steel plants mini mini mills)mills)

World sales MES output Nr. of plants Pressure to glob.

120 $m 10 12 decreased

120 $m 20 6 current position

120 $m 40 3 increased


Transportation costsTransportation costs– Sometimes: countervailing force to the Sometimes: countervailing force to the

trend of globalizationtrend of globalization Low value/bulky product: remain localizedLow value/bulky product: remain localized High value/small weight: not prevented to High value/small weight: not prevented to

be globalbe global

– GenGeneeral trendral trend: transport costs fall, : transport costs fall, reduce restrictionsreduce restrictions



Globalisation v.

Localisation





developm.-scale

economic-transport

costs



regulations



-uniform marketing



4 Cs4 Cs


c) c) Country driversCountry drivers

Trade policiesTrade policies– Some countries: individual trade policies (duty Some countries: individual trade policies (duty

on products outside the bloc)on products outside the bloc)

Technical standardsTechnical standards– E,g: electric power supply, food products laws, E,g: electric power supply, food products laws,

measure unitsmeasure units– Converging int’l standards: encouraging Converging int’l standards: encouraging

globalizationglobalization

Cultural and regulatory barriersCultural and regulatory barriers– Forms of advertising, business practices Forms of advertising, business practices

(aggressive)(aggressive)



Globalisation v.

Localisation





developm.-scale

economic-transport

costs



regulations



-uniform marketing



4 Cs4 Cs


d) d) Competitive driversCompetitive drivers

Competitive interdependenceCompetitive interdependence– Broadening geographical scope => interlinked Broadening geographical scope => interlinked

nat’l markets => competitor: disadvantagenat’l markets => competitor: disadvantage– Competitive dynamics of industry: reflects life Competitive dynamics of industry: reflects life

cycle. toocycle. too

New entry competitionNew entry competition– May have powerful influence on the May have powerful influence on the

global/local balance global/local balance – May reflect liberalization, new tech and May reflect liberalization, new tech and

business practicebusiness practice



External triggersExternal triggersExternal triggers to the External triggers to the

internationalization internationalization processprocess

Meta-level development Meta-level development in the world economyin the world economy

PEST analysisPEST analysisInternationalization of Internationalization of industries: globalisation industries: globalisation

vs. localisationvs. localisationBi-polarisationBi-polarisation


Bi-polarisationBi-polarisation

Medium-size Medium-size companiescompanies

Giants Small

Close down


Globalisation Localisation

Industry driversIndustry drivers

Figure 3.12. The pendulum of change: convergence versus divergence

Industry


GlobalisationGlobalisation LocalisationLocalisationHigh Med Low Industry drivers Low Med High Customer drivers

Customer requirementsCustomer requirementsDistributionDistributionMarketingMarketing

Cost driversNew product developmentNew product development

Scale economiesScale economiesTransport costsTransport costs

Country driversTrade policiesTrade policies

Technical standardsTechnical standardsCultural/regulatory barriersCultural/regulatory barriers

Competitive driversCompetitive interdependenceCompetitive interdependence

Entry of new competitorsEntry of new competitors

High Overall

Figure 3.13. Summary of industry drivers for the consumer electronics industry over the next five years


NarrowNarrow BroadBroad

(i)

Local or national

regional or national niche

strategy

(ii)

Local or national regional or

national broad-based strategy

(iii)

International niche strategy

(iv)

International broad-based

strategy

Geographical scope

Product scope

Figure 3.14 International competition and bi-polarisation

Restric-Restric-ted nat’lted nat’l

Internat’lInternat’l

Documents

External triggers