Chapter 2 The Globalization of Companies and Industries “Going global” is often described in incremental terms as a more or less gradual process, starting with increased exports or global sourcing, followed by a modest international presence, growing into a multinational organization, and ultimately evolving into a global posture. This appearance of gradualism, however, is deceptive. It obscures the key changes that globalization requires in a company’s mission, core competencies, structure, processes, and culture. As a consequence, it leads managers to underestimate the enormous differences that exist between managing international operations, a multinational enterprise, and managing a global corporation. Essays - largest database of quality sample essays and research papers on Cost Drivers In Globalisation. Other Drivers. Rock am ring 2016. Aside from market drivers, globalization can be attributed to other causes, including cost drivers, such as innovations in information technology and transportation; government drivers, whereby many governments have reduced trade tariffs and have embraced free trade agreements; and competitive drivers, which have seen. Research by Diana Farrell of McKinsey & Company shows that industries and companies both tend to globalize in stages, and at each stage, there are different opportunities for and challenges associated with creating value. Farrell (2004, December 2). 2.1 The Five Stages of Going Global In the first stage (market entry), companies tend to enter new countries using business models that are very similar to the ones they deploy in their home markets. To gain access to local customers, however, they often need to establish a production presence, either because of the nature of their businesses (as in service industries like food retail or banking) or because of local countries’ regulatory restrictions (as in the auto industry). In the second stage ( The transfer by firms of the full production process of a particular product to a single, low-cost location and the export of the goods to various consumer markets.), companies transfer the full production process of a particular product to a single, low-cost location and export the goods to various consumer markets. Under this scenario, different locations begin to specialize in different products or components and trade in finished goods. The third stage ( The stage in globalization in which firms start to disaggregate the production process and focus each activity in the most advantageous location.) represents the next step in the company’s globalization of the supply-chain infrastructure. Examples Of Cost PoolsIn this stage, companies start to disaggregate the production process and focus each activity in the most advantageous location. Print your own scentsy labels. Individual components of a single product might be manufactured in several different locations and assembled into final products elsewhere. Examples include the PC industry market and the decision by companies to offshore some of their business processes and information technology services. In the fourth stage ( The fourth stage in globalization in which firms seek to increase cost savings by reengineering processes to suit local market conditions.) companies seek to further increase their cost savings by reengineering their processes to suit local market conditions, notably by substituting lower-cost labor for capital. General Electric’s (GE) medical equipment division, for example, has tailored its manufacturing processes abroad to take advantage of low labor costs. Political Drivers Of GlobalizationNot only does it use more labor-intensive production processes—it also designs and builds the capital equipment for its plants locally. Finally, in the fifth stage (the creation of new markets), the focus is on market expansion. The McKinsey Global Institute estimates that the third and fourth stages together have the potential to reduce costs by more than 50% in many industries, which gives companies the opportunity to substantially lower their sticker prices in both old and new markets and to expand demand. Significantly, the value of new revenues generated in this last stage is often greater than the value of cost savings in the other stages. It should be noted that the five stages described above do not define a rigid sequence that all industries follow. As the McKinsey study notes, companies can skip or combine steps.
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