david hughes professor of agribusiness and food marketing, imperial college, london theyve got...
TRANSCRIPT
David HughesProfessor of Agribusiness and Food Marketing, Imperial College, London
• “they’ve got nowhere else to go. Their domestic markets are saturated, so they are looking for countries with large populations, high population growth, per capita GDP edging toward consumer levels, high income levels, and low supermarket presence. Countries with all five of these characteristics are a good bet, and companies rush to get there before everyone else.”
Who is he talking about?
Tesco
UK1. Main competitors2. Tesco’s market share
International expansion strategy1. Why?2. Where? [USA; Poland; Slovakia; Japan; South Korea;
China]3. How?
Market share April 2009
% Total Grocers 100.0%Tesco 30.6%Asda 17.2%Sainsbury’s 16.3%Morrisons 11.5%The Co-operative 4.4%Waitrose 3.8%Somerfield 3.3%Total Independents 2.5%Iceland 1.8%Aldi 2.9%
Lidl 2.4%Netto 0.7%
Tesco in Japan
• 2001-03: research in retail markets and consumer purchasing patterns
• Entry in2003 by acquisition: bought a Japanese discount supermarket chain with 78 stores using brand name Tsurukame
• Continued expansion through acquisition
Tesco in Poland
• Entry in 1995• Now has 100+ hypermarkets• 2006 bought 220 convenience stores from
Casino [a French rival]
Vodafone buys into India's Bharti
Vodafone Group, the world's biggest mobile phone company, has agreed to buy a 10% stake in Indian firm Bharti Tele-Ventures for $1.5bn (£841m).
India now Nokia's second market
Mobile phone maker Nokia says India has overtaken the US to become its second largest market in terms of sales.
2005 2007
Vodafone buys into India's Bharti
Vodafone Group, the world's biggest mobile phone company, has agreed to buy a 10% stake in Indian firm Bharti Tele-Ventures for $1.5bn (£841m).
India now Nokia's second market
Mobile phone maker Nokia says India has overtaken the US to become its second largest market in terms of sales.
2005 2007
Why have companies such as Vodafone and Nokia chosen totarget developing countries as a source of revenue?
To examine the meaning of global sourcing and its impact on different stakeholders
“Make” - insource
Benefits And Risks Of “Make” v “Buy”
Benefits:• Low risk of intellectual capital loss and
technical know-how• High level of control• Cost savings retained in the business
Risks:• Large investment required to establish
infrastructure, technology and personnel
• High systems/technology maintenance costs
Benefits:• Guaranteed and significant cost
reductions • Focus on core competencies • Supplier will get Increased scale
advantages from having many clients
Risks:• Higher risk of loss of intellectual capital
and technical know-how• Costs savings shared with supplier
“Buy”-outsource
To examine the meaning of global sourcing and its impact on different stakeholders Make v. Buy Decision
Insource Outsource
Low value added
No need/desire to controlLow risk/uncertainty
High value added
High risk/uncertainty
High levels of control required
Pressures to Insource/Outsource
?
What is Globalisation ?FThe increased freedom and capacity of
individuals and firms to: undertake economic transactions with
residents of other countriesoperate on a global scale
To examine factors which have made increased globalisation possible
Examples of Globalisation
FFirms moving to lower cost locations
FPeople moving to higher wage locations
FGoods moving more freely around the world
FInformation moving more freely around the world
To examine factors which have made increased globalisation possible
Permissive factors
FImprovements in transport links
FImprovements in communication links
FA reduction in official obstacles/barriers and costs in conducting business with foreigners
To examine factors which have made increased globalisation possible
To examine factors which have made increased globalisation possible
Containerisation
To examine factors which have made increased globalisation possible
To examine factors which have made increased globalisation possible
Permissive factors
FImprovements in transport links
FImprovements in communication links
FA reduction in official obstacles/barriers and costs in conducting business with foreigners
To examine factors which have made increased globalisation possible
To examine factors which have made increased globalisation possible
To examine factors which have made increased globalisation possible
Permissive factors
FImprovements in transport links
FImprovements in communication links
FA reduction in official obstacles/barriers and costs in conducting business with foreigners
To examine factors which have made increased globalisation possible
Average Tariffs in Industrial Countries
40%
15%
4.5%
0
10
20
30
40
50
Post. War 1960's Now
To examine factors which have made increased globalisation possible
• The WTO deals with the rules of trade between countries
• It developed from the General Agreement on Tariffs and Trade (GATT)
• WTO agreements set the ground rules for international commerce
To examine factors which have made increased globalisation possible
Since WW2 there has been an exceptional growth in world trade.
Total trade in 2000 was 22-times the level of 1950.
The ten benefits1. The system helps promote peace
2. Disputes are handled constructively3. Rules make life easier for all
4. Freer trade cuts the costs of living5. It provides more choice of products and qualities
6. Trade raises incomes7. Trade stimulates economic growth
8. The basic principles make life more efficient9. Governments are shielded from lobbying
10. The system encourages good government
1. How does trade helpa. firms stay competitiveb. consumers improve their living standards
2. What does ‘liberalisation of world trade’ mean?
3. How does the ‘safe harbours’ example illustrate the work of the WTO in making trade easier?
4. What is a boycott? Would it be a good idea to boycott goods made by child labour?
5. What is meant by trade sanctions? What examples are there of trade sanctions having been used?
To examine factors which have made increased globalisation possible
The European Union
the impact of reduced trade and other barriers in the EU
the impact of reduced trade and other barriers in the EU
the impact of reduced trade and other barriers in the EU
Japan, the EU, and the USA
the impact of reduced trade and other barriers in the EU
500m 300m130m
Trading within the EU bloc
Benefits of trading blocs
The economies of scale argument
Greater efficiency argument
Consumer benefitsthe impact of reduced trade and other
barriers in the EU
Problems with trading blocs
The Common External Tariff
‘We pay more for our food’ argument
Protection imposes costs upon others and is inefficient
Trading within the EU bloc
Benefits of trading blocs
The economies of scale argument
Greater efficiency argument
Consumer benefitsthe impact of reduced trade and other
barriers in the EU
Trading within the EU bloc
the impact of reduced trade and other barriers in the EU
Problems with trading blocs
The Common External Tariff
‘We pay more for our food’ argument
Protection imposes costs upon others and is inefficient
Trading within the EU bloc
Benefits of trading blocs
The economies of scale argument
Greater efficiency argument
Consumer benefitsthe impact of reduced trade and other
barriers in the EU
Problems with trading blocs
The Common External Tariff
‘We pay more for our food’ argument
Protection imposes costs upon others and is inefficient
Different views
UK interests best served within the EU[1973 position]
UK should leave the EU[pre-1973 position]
the impact of reduced trade and other barriers in the EU
Different viewsThe EU should be just about free trade in goods[pre 1992 situation]
The European market in goods, labour and capital [1993 onwards] has benefitted the majority of Europeans
the impact of reduced trade and other barriers in the EU
Different viewsThe EU single market works best with a single currency [the euro since 2002] and a European Central Bank which sets interest rates for the Eurozone.
The European single market in goods, labour and capital [1993 onwards] has benefitted the majority of Europeans
the impact of reduced trade and other barriers in the EU
Different viewsThe EU single market works best with a single currency [the euro since 2002] and a European Central Bank which sets interest rates for the Eurozone.
The European single market needs to integrate further by introducing tax harmonization
the impact of reduced trade and other barriers in the EU
the impact of reduced trade and other barriers in the EU
The European Union
the impact of reduced trade and other barriers in the EU
the impact of reduced trade and other barriers in the EU