The Global Corporation

1. The Rise of Global
Corporation

2. •Globalization is a business initiative
based on the belief that the world is
becoming more homogenous and that
distinctions between national markets
are not only fading but for some
products, will eventually disappear.As a
result, companies need to globalize their
international strategy by formulating it
across markets to take advantage of
underlying market, cost, environmental,
and competitive factors.

3. •Once a firm has made the decision to compete in the
global environment, it subjects itself to pressures
single-country firms often do not experience. Single-
country firms normally operate in a relatively
homogenous market for their products and service.
Consequently, product design and production can
often fairly standardized, allowing the firm to achieve
economies of scale in production, and deliver a product
that appeal to its entire market. Furthermore, strictly
domestic firms typically don’t have to concern
themselves with differences in industry and trade
regulations from other countries.

4. •Global corporations, in contrast, often faces a
trade-off between seeking competitive advantage
through the lower production cost that global
economies of scale allow, and seeking competitive
advantage by tailoring the products to specific
national marketsforgoing economies of scale but
providing a product more tailored to local taste.
Furthermore, the global firm must determine how
to balance the demands and practices of other
countries.

5. Presence in Key Global Market
•The United States, Japan, andWestern
Europe account for about half of the
world’s total consumption.They share
certain important economic and
demographic conditions such as high
income levels and high GNP values. It has
been argued (Ohmae, 1990) that a firm
cannot truly compete on a Global Scale if
it is not present in this “triad.”

6. •If a firm does not have operations in all three
areas of the triad, it may not be able to
achieve maximum economies of scale.
Furthermore, since the three areas are often
source of technological and product
innovations, a firm not present in all triad
areas would have difficulty keeping abreast
of technological developments in its industry.

7. Competitive Strategies of Global
Corporations

8. 1. Cost leadership
•In cost leadership, a firm sets out to become the low
cost producer in its industry.The sources of cost
advantage are varied and depend on the structure of
the industry.They may include the pursuit of
economies of scale, proprietary technology,
preferential access to raw materials and other factors.
A low cost producer must find and exploit all sources of
cost advantage. if a firm can achieve and sustain overall
cost leadership, then it will be an above average
performer in its industry, provided it can command
prices at or near the industry average.

9. 2. Differentiation
•In a differentiation strategy a firm seeks
to be unique in its industry along some
dimensions that are widely valued by
buyers. It selects one or more attributes
that many buyers in an industry perceive
as important, and uniquely positions
itself to meet those needs. It is rewarded
for its uniqueness with a premium price.

10. 3. Focus
• The generic strategy of focus rests on the choice of a narrow competitive scope
within an industry.The focuser selects a segment or group of segments in the
industry and tailors its strategy to serving them to the exclusion of others.
• The focus strategy has two variants.
• (a) In cost focus a firm seeks a cost advantage in its target segment, while in ;
• (b) differentiation focus a firm seeks differentiation in its target segment. Both
variants of the focus strategy rest on differences between a focuser's target
segment and other segments in the industry.The target segments must either
have buyers with unusual needs or else the production and delivery system that
best serves the target segment must differ from that of other industry segments.
Cost focus exploits differences in cost behaviour in some segments, while
differentiation focus exploits the special needs of buyers in certain segments.

11. Globalization Drivers

12. Market Factors
•The world Customer today identified by Ernst
Dichter more than 30 years ago has gained
new meaning today. For example Kinichi
Ohmae has identified a new group of
consumers emerging in the triad of North
America, Europe and Japan whom marketers
can treat as a single market with the same
spending habits.

13. •Approximately over 600 million
consumers have similar educational
backgrounds, income levels, lifestyles,
use of leisure time and aspirations. One
reason given for the income levels in their
demand is a level of purchasing power
(10 times greater than that of LDCs or
NICs) that translates into higher diffusion
rates (for certain product).

14. Cost Factors
•Avoiding cost inefficiencies and duplication
of effort are two of the most powerful
globalization drivers. A single-country
approach may not be large enough for the
local business to achieve all possible
economies of scale and scope as well as
synergies, especially given the dramatic
changes in the marketplace.

15. •For example, pharmaceuticals, in the 1970s,
developing a new drug cost about 16 million
dollars and took 4 years to develop.The drug
could be produced in UK or United States and
eventually exported. Now, developing a drug
cost from 250 to 500 million dollars and takes
as long as 12 years, with competitive efforts
close behind. Only a global product for a
global market can support that risk (TheWall
Street Journal, 1993).

16. Environmental
•As the world market is going global,
government barriers have fallen dramatically
in the last years to further facilitate the
globalization of markets and the activities of
global corporations with them.

17. Competitive Factors
•Many global corporations are already dominated
by global competitors that are trying to take
advantage of the three sets of factors mentioned
earlier.To remain competitive, the company may
have be able to be the first to do something or to
be able to match or preempt competitor’s moves.

18. Functions of Global Corporations
• •International companies are importers and exporters, typically without
investment outside of their home country;
• •Multinational companies have investment in other countries, but do not
have coordinated product offerings in each country. They are more focused
on adapting their products and services to each individual local market.
• •Global companies have invested in and are present in many countries.
They typically market their products and services to each individual local
market.
• •Transnational companies are more complex organizations which have
invested in foreign operations, have a central corporate facility but give
decision-making, research and develop (R&D) and marketing powers to
each individual foreign market.

19. Structural Periods of Global Corporations

20. Investment-based Globalization
(1950-1970)
•The investment-based period was dominated by
producer-driven commodity or value chains,
which in turn tended to be dominated by firms
characterized by large amount of concentrated
capital focused on large-scale or capital-intensive
manufacturing or extractive industries.

21. Trade-based Globalization
(1970-1995)
• The trade-based was due to the emergence of Japan as a
major producer nation, especially of automobiles and
consumer electronics from the 1970s onward.This brought
to the scene new models of effective production focused
especially on quality and regimes of flexible production
which prompted the European firms to rejoin the global
commodity chains.

22. Digital Globalization
(1995-Present)
• Digital Globalization has affected the entire structure of how
global corporations operate.The integration of corporate
structure reducing the effects of time and distance especially
for services performed within the corporate structures such
as design, finance and accounting, advertising and brand
development, legal services, inventory controls, etc.

23. Emerging Global Corporations

24. Basic Element
(Russia)
•Is a world
leader in
alumina
products

25. Bharat Forge
(India)
•Is one of the
world’s largest
forging
companies.

26. BYD Company
(China)
•Is the world’s
manufacturer of
nickel-cadmium
batteries.

27. CEMEX
(Mexico)
•Has developed
into one of the
world’s largest
cement products.

28. China International Marine Containers Group
(CIMC)
(China)
•Is the world’s
largest
manufacturing of
shipping
containers.

29. COSCO Group
(China)
•Is one of the
largest shipping
companies in
the world.

30. Embraer
(Brazil)
•Has surpassed
Canada’s
Bombardier as
market leader in
regional jets.

31. Galanz Group
(China)
•Has a 45 percent
share of the
European and a 25
percent of the US
Microwave market.

32. Hisense
(China)
•Is the number
one supplier of
flat-panelTVs
to France.

33. Johnson Electric
(China)
•Is the world’s
leading
manufacturer of
small electric
motors.

34. Nemak
(Mexico)
•Is one of the world’s
leading suppliers of
cylinder head and
block casings for
automotive
industry.

35. Sistema
(Russia)
•Is a conglomerate
with a focus on
telecommunicatio
ns.

36. Tata Chemicals
(India)
•Is and inorganic
chemical producer
wit ha significant
global market
share for soda ash.

37. Wipro
(India)
•Is the world’s
largest third-party
engineering
services company.