3. Globalisation
• At political and economic level, globalization is
the process of denationalization of markets,
politics and legal systems, i.e. the rise of Global
Economy.
• At business level, Globalisation is when
companies decide to take part in global economy
and establish themselves in foreign markets, by
most cost effective way of production and selling
in a profitable manner in a world without barriers.
6. Globalisation Challenge
• Creating a strategy to address the entire
spectrum of product, process, and resource
challenges faced by the organizations as they
introduce their products or services into global
markets.
• Review the domestic strategy to retain and
improve the competitive position
7. Globalisation Strategic
Challenges
1. Look at the world as one market.
2. Make Global-minded decisions on strategic issues
such as technology, product and capital resources.
3. Make Local-minded market decisions in packaging,
advertising, distribution and management.
4. Give local management freedom for marketing and
human resources.
5. Develop multi-cultural skills across the organisation.
6. Establish co-operative business dealings with supply
chain partners.
8. Global Strategy Alternatives
• Exporting – direct and indirect
• Counter Trade
• Turnkey projects
• Licensing
• Franchising
• Joint Ventures
• Direct Foreign Investment
9. The New Competitive Strategy of Global
Alliances and Manufacturing Outsourcing
• Larger firms acquiring small competitors to form a global
operating network that delivers:
• Economies of scale
• Outsourcing manufacturing process
• Global distribution
• Technology pooling including managerial talent
• Global sourcing
• Flex, not fixed, manufacturing
• Outsourcing to free-lance manufacturing companies
• Joint ventures to utilise excess idle capacity
• Co-marketing
10. Geo-political and Geo-economic Strategy
• Global trade integration: a process in which nations
economically and politically interdependent
reciprocate on trade policy.
• Regional FTAs pull nations together to economically
and politically to form a “virtual” nation.
• Weak manufacturers are exposed and become prey for
takeovers and mergers.
• Global Rationalisation
• Invention and Innovation – foundations for global
growth
11. Global Industry Structure
• High tech nations – Japan, USA, Western Europe –
must excel at invention, innovation and marketing
• Low tech (labour intensive) nations – China, India,
Indonesia, Mexico – offer a large affordable labour
supply, strong work ethic and raising consumerism
• Economies of scale manufacturing (capital
intensive) – Germany, Korea, Japan – Large size
corporations
• Outsourced (flex) manufacturing – USA, Western
Europe – Lead the world in FDI
12. Examples of recent International Mergers
and Joint Ventures
• LaFarge (French building materials & cement supplier)
bought Blue Circle Industries (UK’s largest cement firm)
to form the world’s largest cement company
• Time Warner (USA) bought EMI (Britain)
to become the world’s record company
• Toyota + GM JV to produce GM’s Onstar in-car
communications system
13. Examples of recent International Mergers
and Joint Ventures
• Glaxo Wellcome bought SmithKline Beecham (USA co.
that now form the world’s largest drug company)
• Pfizer bought Warner-Lambert and American Home
Products (all USA) to form the world’s second largest
drug company
• Sears (USA) + Carrefour (France) JV to form
the GlobalNetXchange, an internet system to link
retailers and suppliers
15. Global Economic Activity – 2005
Country GDP
$billion
US 12410
China 8182
Japan 3914
India 3699
Germany 2454
UK 1869
France 1822
Italy 1651
Brazil 1568
Russia 1539
Mexico 1068
GDP adjusted for PPP
16. Global Economic Activity – 2005
Country GDP Agriculture Industry Service
$billion % % %
US 12410 1.0 20.7 78.3
China 8182 14.4 53.1 32.5
Japan 3914 1.3 25.3 73.4
India 3699 20.6 28.1 51.4
Germany 2454 1.1 28.6 70.3
UK 1869 1.1 26.0 72.9
France 1822 2.5 21.4 76.1
Italy 1651 2.1 28.8 69.1
Brazil 1568 10.0 39.4 50.6
Russia 1539 5.0 65.0 60.0
Mexico 1068 4.0 26.5 69.5
GDP adjusted for PPP
17. Global Economic Activity – 2005
Country GDP POP
$billion Million
US 12410 298
China 8182 1314
Japan 3914 127
India 3699 1095
Germany 2454 82
UK 1869 61
France 1822 61
Italy 1651 58
Brazil 1568 188
Russia 1539 143
Mexico 1068 107
GDP adjusted for PPP
18. Global Economic Activity – 2005
Country GDP POP GDP per
$billion Million capita $
US 12410 298 41644
China 8182 1314 6227
Japan 3914 127 30784
India 3699 1095 3378
Germany 2454 82 29782
UK 1869 61 30639
France 1822 61 29869
Italy 1651 58 28466
Brazil 1568 188 8340
Russia 1539 143 10762
Mexico 1068 107 9981
GDP adjusted for PPP
19. Global Economic Activity – 2005
Country GDP POP GDP per Export %Exp
$billion Million capita $ $billion to GDP
US 12410 298 41644 928 7.48
China 8182 1314 6227 752 9.19
Japan 3914 127 30784 551 14.08
India 3699 1095 3378 100 2.70
Germany 2454 82 29782 1016 41.40
UK 1869 61 30639 694 37.13
France 1822 61 29869 443 24.31
Italy 1651 58 28466 372 22.53
Brazil 1568 188 8340 115 7.33
Russia 1539 143 10762 245 15.92
Mexico 1068 107 9981 214 20.04
GDP adjusted for PPP
20. World Trade Merchandise - 2004
$billions
E xp o rts Im p o rts
V a lu e V a lu e
World 8907 9250
N o rth A m e ric a 13 2 4 2 0 13
La tin A m e ric a 276 237
We s te rn E u ro p e 4031 4 14 0
C ./ E . E u ro p e / B a ltic S ta te s / C IS 449 268
A fric a 232 2 12
M id d le E a s t 390 252
A s ia 2388 2224
21. Merchandise Trade 2004
Country Export $ billion Import $ billion
United States 819 1536
UK 347 464
Germany 912 717
France 449 466
Japan 566 455
Italy 349 351
China 593 561
India 76 97
Russia 184 96
Mexico 189 206
Brazil 97 66
22. World Trade Services - 2004
$billions
E xp o rts Im p o rts
V a lu e V a lu e
World 2125 2095
N o rth A m e ric a 379 335
La tin A m e ric a 56 58
E u ro p e 112 6 10 2 5
A fric a 48 55
M id d le E a s t 36 41
A s ia 450 5 12
Ref: WTO
23. Services Trade 2004
Country Export $ billion Import $ billion
United States 318 260
UK 172 136
Germany 134 193
France 110 96
Japan 95 134
Italy 82 81
China 62 72
India 40 41
Russia 20 33
Mexico 14 19
Brazil 12 16
24. Regional Trade - 2005
Region Trade in Population Trade per
$billions millions capita in $
APEC 2200 2500 840
EU 1600 600 2667
NAFTA 700 450 1520
ASEAN 120 290 385
SAARC 5 1380 3.50
25. India – 04-05 Merchandise
$billions
Category World India %
Agricultural 783 8.00 1.02
Mining 1281 11.00 0.86
Iron & steel 266 1.62 0.61
Chemicals 976 8.65 0.89
Engineering 3474 10.28 0.30
Textiles 195 10.64 5.46
Others 1932 25.81 1.34
Total 8907 76.00 0.85
26. India – Trade 04-05 by Region
$billions
Region Exports Imports Trade
Americas 16.18 8.95 25.13
Europe & Russia 20.14 56.51 76.65
Asia& Oceania 37.57 37.90 75.47
Africa 5.36 3.67 9.03
Total 79.25 107.10 186.35
27. India – Trade 04-05 Merchandise
Category Exports Imports
Agri/Com m oditie s 6.65 8.00
M ining 11.00 36.30
Iron & s te e l 3.63 2.60
Che m icals 12.68 8.50
Engine e ring 14.59 23.60
Te xtile s 12.02 1.00
Ge m s & Je w e lle ry 13.70 9.42
Othe rs 5.03 17.65
Total 79.25 107.07
29. Emerging Markets Growth Factors
Political Stability
Economic, Political, and Legal Reforms
Entrepreneurship
Central Planning with Outward Orientation
Factors of Production
Industries Targeted for Growth
Financial Incentives
Privatized State-Owned Enterprises
Large, Accessible Markets
Low Tariffs
30. Common Traits of Emerging Markets
Are physically large.
Have significant populations.
Represent considerable markets for a wide
range of products.
Have strong rates or the potential for significant growth.
Have undertaken significant programs or economic
reform.
Are of major political importance within their regions.
Are "Regional Economic Drivers".
Will engender further expansion in neighboring markets
as they grow.
33. China
Oldest continuous civilization
Chinese society is founded on Confucianism
ideology:
Honesty
Reciprocal honesty
Trust in others
Between the two world wars and China came
under the influence of Japan
After WW II, followed socialistic & communist
principles
After 1980, opened up the barrier and
encouraged globalisaton
35. India & China
Competing giants India China
Population in billion 1.09 1.31
Population growth rate 1.38% 0.59%
GDP growth rate 1993-2004 8.4% 8.4%
FDI $ billion 4.3 53.5
Foreign exchange reserve 160 795
$b
Fixed & mobile phones /1000 150 645
36. India & China
India China
Liberalisation began 1990 1980
Per capita GDP $ PPP 1991 1090 1138
3400 6300
2005
Trade $ billion 2004 190 1383
Trade relative to GDP 3.78% 11.95%
Hiring & Firing:
Difficulty of Hiring Index 33 11
Difficulty of Firing Index 90 40
37. FDI Attractiveness
Description India China
Educated workforce 78% 22%
Rule of law 73% 27%
Cultural barriers 66% 34%
Economic reform 40% 60%
Political & social stability 41% 59%
Production & labour costs 35% 65%
Market size 6% 94%
38. China’s Reform Agenda
Restructure state enterprises. SOEs account for about
two-fifths of the industrial output but soak up four-fifths of
investment.
Sell state assets. Sell off all but 1,000 of China’s 305,000
state enterprises and allow some to go bankrupt.
Build social services. Create housing, pension programs,
and other services to relieve burdens on SOEs and to care
for millions who may lose jobs.
Slash tariffs. Reduce average tariffs to 17 percent in 1997
and to 15 percent by 2000 as part of China’s bid to join the
World Trade Organization.
41. Russia
Russia represents a complex and mysterious
environment
During 17th & 18th century Czars encouraged
Western European influence including orthodox
religion and culture, but resisted market forces and
modernisation
After Bolshevik Revolution and WW I, in 1917,
Czars lost control and power rested with
Communist party
Lenin strengthened economy by concentrating on
oil, steel and textile industries
42. RUSSIA - Rebuilding of a Super Power
• High price recovery for Russian oil, gas and
commodities
• Import substitution efforts after 1998 devaluation
• Market oriented restructuring
• Decline in real wages resulting in cost reduction
• Sound fiscal and monetary policies
• 1999-2002 GDP growth rate was 6.4, 10, 5 and 4.3 %
• Ruble has remained stable since 2001 (29.2-31.45/$)
• Real disposable income has risen by 9% every year
since 1999
43. RUSSIA - Rebuilding of a Super Power
• High price recovery for Russian oil, gas and
commodities
• Import substitution efforts after 1998 devaluation
• Market oriented restructuring
• Decline in real wages resulting in cost reduction
• Sound fiscal and monetary policies
• 1999-2002 GDP growth rate was 6.4, 10, 5 and 4.3 %
• Ruble has remained stable since 2001 (29.2-31.45/$)
• Real disposable income has risen by 9% every year
since 1999
46. Brazil
Discovered by Portuguese in 1500 and remained in their
possession till 1822 when it became an independent
monarchy
Brazil has been a Republic since 1889
Brazil is distinct in Latin America, in that it draws from
Portuguese heritage unlike the other Spanish speaking
countries
Industrially, it is well advanced
Leading producers of coffee, rubber, oranges and lumber
Its ethanol for automobiles has reduced the dependence
on oil
47. BRAZIL - Economic Progression
• The average tariff has come down from 32% in
1990 to 14%
• No quantitative restrictions to imports
• Exports has touched $59 billion with trade surplus
of $4 billion. 50% Trade with US and EU
• GDP contributions - Industry 20%, Agriculture 20%
and Services 60%
• FDI has grown from $6 billion in 1995 to $30 billion
• FDI directed to massive privatisation of state owned
enterprises
49. Infrastructure of Selected Countries
Highways* Railways Trucks Electricity
(km) (km) and Buses Production
Country (000) (000) in Use (000) (million kwh)
United States 6,407 228 42,298 3,892,200
Brazil 1,725 29 2,450 387,500
Japan 1,177 24 22,694 1,017,273
Colombia 110 3 4,154 50,430
Germany 232 46 4,145 558,100
Kenya 64 3 110 4,342
Mexico 349 17 3,679 209,200
Spain 666 15 2,959 247,300
India 3,851 63 1,839 556,800
South Africa 362 21 1,597 215,900
China 1,810 71.9 4,927 2,190,000
*Includes unpaved and paved.
50. Living Standards in Selected Countries
Percent of Households
Households Persons per Piped Flush Electric
(000) Household Water Toilers Lighting
Brazil 38,434 4.05 73% 76% 69%
Chile 3,216 4.35 70% 59% 88%
China 357,064 3.40 90% NA NA
Colombia 8,482 4.14 76% 64% 87%
Ecuador 2,626 4.36 52% 33% 62%
Hong Kong 1,797 3.44 98% 80% 93%
India 185,048 5.00 10% 5% 16%
Indonesia 43,065 4.50 12% 15% 30%
Japan 40,548 3.09 93% 65% 98%
Peru 5,057 4.65 49% 43% 48%
Philippines 12,750 5.37 NA NA NA
Singapore 815 3.67 48% 42% 37%
South Africa 13,300 3.37 96% 35% 90%
United States 100,308 2.62 99% 99% 99%
52. Emerging Market Companies
Country Company Industry
Embraer Aerospace
Brazil
CVRD Mining
Sadia Food & beverages
Petrobras Oil & Gas
Techtronics Industries Power Tools
China
Huawei & ZTE Telecom Services
Haier & Hisense Electronic Appliances
Lenovo Computers
CNOOC Oil & Gas
China Mobile Telecom Service
Shanghai Bao Steell Steel
53. Emerging Market Companies
Country Company Industry
SabMiller Beer
South Africa
Orascom Telecom Services
Egypt
America Movil Telecom Services
Mexico
Cemex Cement
Gazprom Oil & Gas
Russia
Vist Computers
Severstal Steel
MMC Norilsk Nickel Non-ferrous metals
