global environment 5

7/30/2019 Global Environment 5

1/26

MEANING Globalisation means doing business at global level

without any regards to national or state boundaries.

It is a process of economic integration with globaleconomy .

Globalisation is facilitated by technologicalimprovement,competition,economic growth

interdependence between nations and willingness tointegrate.


2/26

Levels of globalisation Globalisation of a particular company

Globalisation of a particular industry

Globalisation of a particular country level

Globalisation at world level.


3/26

Globalisation of a particular

company Large corporations expand business,earn revenue and

increase asset base across the world,there will be flowof capital,goods & technology know-how acrossdifferent units

Ex. IBM,HP,GE,MICROSOFT etc.


4/26

o a sa on o a par cu ar

industry

The entire industry is dominated by set of companiesand become a global player .

Ex. In case of electronics GE,SIEMENS & PHILIPS arethe companies which have dominated the businessglobally.

In case of software -some of the Indian cos

TCS,INFOSYS,WIPRO,SATYAM ,HCL etc dominatedthe world market.


5/26

o a sa on o a par cu arcountry level

Some of the countries specialize in foreign trade andthrive based on their factor of endowment and exportpotential.

Ex.Singapore as a country thrives as marketintermediary without much manufacturing setup,forthis reason Singapore sea port is very well develpoed


6/26

Globalisation at world level.

As a result of economic interdependence goods,services and capital are flowing across the border .

Service business is taking global shape in order torevive economies of the developed countries.

Developed countries in order to improve operatingmargin ,reduce cost of products and to become

competitive player started outsourcing some of theirwork by taking advantage of labour arbitrage.


7/26

Con.. Cos can improve operating profits and come out with

high quality products at lesser costs.

The money saved could be utilized for othereconomic activities.

Hence developed countries were able to come out ofrecession

S i i


8/26

Stages o g o a isation

ethnocentric Approach

Ethnocentric feels home country is very muchsuitable.It seems similarly in foreign : domesticcompany formulates policy on product,design,HR andmarketing .

Excess capacity or inventory is exported outside India ,

export is viewed as an extension of home market and

handled as separate division at best within marketingdepartment.

The maintenance of domestic approach towardsinternational business is called ethnocentric approach


9/26

Polycentric approach Polycentric approach feels each host country as unique

this may be referred as ethnocentric organisationmatured for next stage of expansion.

Company appoints key personal from the host countrythat in turn will recruit for the vacancy to him.

Policy of host country decisions regarding

design,product and strategy is done by the head of thehost country.

Polycentric approach of the subsidiary focuses on theconditions of the host country.


10/26

Regiocentric approach Regiocentric sees similarities & dissimilarities in a

world.Companies operate in a country for some time.

When host country requirements are met, companydecides to export to nearby country or to anycountry,which share similar economy & culture .

At this stage foreign subsidiary considers regional

approach for formulating strategy & policies.


11/26

Con.. However the same product designed under polycentric

approach is used in other countries of the region,butwith different marketing strategies.


12/26

Geocentric approach Geocentric approach sees similarity and differences in

home and host countries.

In geocentric approach,entire world is a single countryfor the company with multiple subsidiaries.

Company selects people of entire world wherever itssubsidiary functions as independent,autonomous

body in formulating policies,strategy,productdesign,HR,operations,marketing and corporate officeco-ordinates functioning of subsidiaries.


13/26

Factors influencing globalisation History

Economy

Resources & market Production

Political

Industrial organisation

technology


14/26

merits Faster industrialization

Flow of capital

Speed of production Increased standard of living

Flow of technology

Increase in consumption

attitude


15/26

De merits Labour

Rich-poor gap

Depletion of natural resources Commercial exploitation


16/26

Barriers to globalisation Tariffs

Quotas

Voluntary Export Restraint Monetary Barriers

Standards

Local Content Requirements

Investment Restrictions

Bureaucratic Hurdles


17/26

Concepts of globalisationMNC:

companies that maintain significant operations in

two or more countries simultaneously butCONTROL is vested with home country.

TNC:

a company that maintains significant operations in morethan one country simultaneously decentralizes decisionmaking in each operation to the local country.


18/26

Con.. Global village

The concept of a boundary less world; the productionand marketing of goods and services worldwide.

Borderless organization

A management structure in which internalarrangements that impose artificial geographic barriersare broken down


19/26

MNC Advantages Investment,employment and income level increases

consequent to operation of the MNC in the hostcountry

Ancillary industries grow resulting in industrial andeconomic development.

Gets latest technology, managerial techniques and

practices of MNC. Host country gets best & sophisticated management

techniques from the managerial practices of MNCs


20/26

Con Market supplier and intermediaries of the host

country get stimulation of increased business fromMNCs operations.

It creates competitiveness & helps to enhance it.

Host country can take advantage of the foreign culturebrought in by the MNCs

Domestic countrys import will reduce & export getsboost due to the goods produced by MNC,s,this willcreate better favourable balance of trade.


21/26

Control over MNCs activities Department of co affairs.

Ministry of industry & development.

RBI Ministry of finance.


22/26

TNCs characteristics Geocentric orientation

Scanning or information acquisition

Vision & aspiration Geographic scope

Operating style

Adaptation

Extensions

HR policy

purchasing


23/26

Stages of international business Domestic company

International company

Multinational company Global company

Transnational company


24/26

International business risk Legal risk

Country risk - Political risk-financial risk

Regulatory risk Social risk

Environmental risk


25/26

Assessment of Business Risks Check list

Expert based scoring system

Economic methods Rating & ranking system


26/26

Risk Reduction strategies Establish risk assessment system

Developing local economy

Local equity participation Good corporate citizens

Maintaining good political relation

global environment 5

Documents