Globalization,Globalization (Thomas Friedman: Understanding Globalization: The Lexus and the Olive Tree) One overarching featureintegration, the world has become an increasingly interwoven place Defining technologies: computerization, miniaturization, digitization, satellite communications, fiber optics and the Internet Revolving around Moores law German Political theorist Carl Schmidt, the Cold War was a world of “friends” and “enemies”. The globalization world, by contrast, tends to turn all friends and enemies into “competitors”.,Globalization,Built around three balances: The traditional balance between nation-states Between nation-states and global markets (consists of Electrical Herd and Supermarkets) Between individuals and nation-states Everyone now is in everyone elses business Joining the global economy and plugging into EH is the equivalent of taking your country public. Globalization is largely a technology-driven phenomenon, not a trade-driven one.,Globalization,Globalization is more than just Westernization (Frank Griffel): Islamic fundamentalism Globalization and History by Jeffrey Williamson and Kevin ORourke Globalization also flourished in the 19th c and then faltered. Railroad and steamships, submarine telegraph cables and Suez Canal (1869) all encouraged a huge expansion of trade, global investment and migration. “By 1914, there was hardly a village or town anywhere on the globe whose prices were not influenced by distant foreign markets, whose infrastructure was not financed by foreign capital, whose engineering, manufacturing, and even business skills were not imported from abroad.” Governments powerless in face of illegal trade in drugs, arms, intellectual property, people and money.,Globalization,NA intra-regional trade volume 421 billion USD, 6.8% of the global total,European intra-regional trade volume 1,624 billion USD, 26.7% of the global total,Asia-Pacific Intra-regional Trade volume 807 billion USD, 13% of the global total,Trade between EU and Asia-Pacific region 477 billion USD, 7.7% Of the global total,Trade between NA and Asia-Pacific region 652 billion USD, 10.5% of the global total,Trade between EU and NA 469 billion USD, 7.4% of the global total,Balance between Globalization and Regionalization,Strategy,Economic Logic,Staging,Arenas,Vehicles,Differentiators,Where will we be active? Which product categories? Which market segments? Which geographic areas? Which core technologies? Which value-creation stages?,What will be our speed and Sequence of moves? Speed of expansion? Sequence of initiatives?,How will we obtain our returns? Lowest costs through scale advantages? Lowest costs through scope and replication advantages? Premium prices due to unmatchable service? Premium prices due to proprietary product features?,How will we get there? Internal development? Joint ventures? Licensing/franchising? Acquisitions?,How will we win? Image? Customization? Price? Styling? Product reliability?,The Five Major Elements of Strategy,Strategy,Economic Logic,Staging,Arenas,Vehicles,Differentiators,Arenas Inexpensive contemporary furniture Young, white-collar customers Worldwide,Staging Rapid international expansion, by region Early footholds in each country; fill in later,Vehicles Organic expansion Wholly owned stores,Economic Logic Economies of scale (global, regional, and individual-store scale) Efficiencies from replication,Differentiators Very reliable quality Low price Fun, nonthreatening shopping experience Instant fulfillment,IKEA Strategy,IKEA is not only a retailer, but also Maintains control of product design to Ensure the integrity of its unique image And to accumulate unrivaled expertise in Designing for efficient manufacturing An emphasis on low price, fun, contemporary Styling, and instant fulfillment is well suited to The companys focus on young, first-time Furniture buyers.,Key Definitions,Multinational Mentality Management regards overseas operations as a portfolio of independent business,Decentralized Federation Many key assets, responsibilities, and decisions decentralized,Personal Control Informal HQ-sub relationships overlaid with simple financial controls,Multinational Organization Model,Build strong local presence through sensitivity and responsiveness to national differences Unilever and Philips,Key Definitions,International Mentality Management regards overseas operations as appendages to a central domestic corporation,Coordinated Federation Many assets, resources, responsibilities, and decisions still decentralized, but controlled from headquarters,Administrative Control Formal management planning and control systems allow tighter HQ-sub linkage,International Organization Model,Build cost advantages through centralized global scale operations P&G and Ericsson,Key Definitions,Global Mentality Management treats overseas operations as delivery pipelines to a unified global market,Centralized Hub Most strate