Globalisation u7 p28

IT IS INDUSTRIES AND MARKETS THAT GLOBALISE, not countries. Sorry for the emphasis but it is important!

It's true that as a result of the global strategies of organisations which operate in global industries, greater linkages and interdependencies between nations can arise.

In a globalising industry, you may find that your position in one country is affected by your position in another country. That is part of the definition of a global industry. A global industry can be defined as global if there is some competitive advantage to integrating activities on a worldwide basis (Porter, 1986). A market can be defined as global if consumers worldwide can be treated as homgeneous. It's more common for market segments to be global rather than the entire market.

Global industries and organisations can have an effect on the countries in which they operate by creating a strong "interconnectedness" which can have social and political consequences.

What are the drivers of Globalisation? The 5 most powerful are:-

1. Cultural Homogenisation
2. Economies of scale and scope
3. Technological Developments
4. Deregulation and the lowering of trade barriers
5. Strong international competitors

Cultural homogenisation - national cultures are becoming more alike, usually as a result of global media, increased international travel. Brands are part of culture and global brands appear which become recognisable in very different national cultures. Where this hapens, similar products/services can be sold to similar groups of customers around the world. There's an implication of the potential for eventual convergence of markets and the emergence of a global marketplace.

The global village view may be unrealistic, however. National cultural diversity definitely exists.

A| better approach may be to consider global market segments - international groupings of consumers who can be found in all country markets with common needs, eg. the youth market, the business traveller etc. They have more in common with their counterparts in outher nations than with other segments in their own country.

Economies of scale and scope - In more and more industries size matters in determining competitive levels of efficiency. Consider the global car industry. There have been many mergers and acquisitions solely aimed at increasing the size of world car companies to benefit from these factors. Indeed, the ford Mondeo was so named because it was ford's "World Car" - the car they wanted to sell everywhere.

Technological Developments - these have no geographic boundaries and is a very strong globalisation driver. Some entire new industries have been created eg. mobile which could not have existed without their enabling technology.

Deregulation - the removal of tariff and non-tariff barriers to trade. eg 1992 Single Market act in europe, NAFTA in North America.

Strong international competitors - national champions may not be significant in international terms. As soon as one firm globalises in an industry, the availability of potential economies of scale and scope, and comparative advantage giving rise to additional competitive advantage rears its head. Other firms may *have* to globalise too, to compete. Example - selling books in china, p32