FPH VŠE – presentationGlobalization and Internationalization
The worldwide process of closer integration of single countries and their citizens, driven by the enormous decrease of transport and communication costs and by the abolishment of barriers of the free flow of goods, services, capital, knowledge and in a certain level of people.
Globalization
Globalization and Internationalization
2005 2007 2009 2011 2014 EU 5,3 5,3 5,3 5,3 5,3 USA 3,5 3,5 3,5 3,5 3,5 Brazil 12 12,2 13,6 13,7 13,5 Russia 12,3 11 10,5 9,4 8,4 India 15,2 14,5 12,9 12,6 13,5 China 10,5 9,9 9,6 9,6 9,6
Average customs import duties (% from the goods value)
Growth of world´s GDP and export %
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Growth rate of world´s export -0,2 3,4 5,7 9,7 6,5 8,6 6,5 2,3 -12,1 14,0 4,9 3,7 5,6
Growth rate of world´s GDP 2,0 2,3 2,9 4,0 3,5 4,0 3,9 1,3 -2,4 3,8 2,4 2,1 2,7
-15,0
-10,0
-5,0
0,0
5,0
10,0
15,0
20,0 Growth rate of world´s export Growth rate of world´s GDP
Source: WTO Source: EY
Competitive drivers copetitors´ global strategies interdependence of markets
Government drivers trade policies abolishment of trade bariers host gevernment policies homogenization of technical standards
Cost drivers economies of scale global seeking for sources diminishing costs of transport country-specific differences development of ICT
International strategies
Diversification drivers fluctuation of demand economy cycle risks other risks
Internationalization and globalization drivers
Organizational factors Environmental factors
Foreign travel and experience abroad Foreign language proficiency The decision-maker background Personal characteristics (risks, ambitions…)
Firm´s decision to internationalize
PUSH PULL
Triggers
Established in 1960 In 1963 Hypermarket concept invented In 2009 55 % of total revenues come from international stores
• effects on international trade
• effects on exchange rates
• effects of wealth distribution
Rank Name Revenue (USD) Rank Name Revenue (USD) Rank Name Revenue (USD) Rank Name Revenue (USD) 1 United States 3336,0 16 China National Petroleum 326,0 31 Norway 214,3 46 General Motors 157,3 2 China 2591,0 17 Korea, South 318,0 32 Samsung Electronics 211,9 47 Ford Motor 156,8 3 Japan 1678,0 18 Royal Dutch Shell 311,9 33 McKesson 208,4 48 China State Construction Enginee 156,1 4 Germany 1598,0 19 Mexico 292,8 34 Glencore 205,5 49 Hon Hai Precision Industry 154,7 5 France 1446,0 20 Sweden 274,8 35 UnitedHealth Group 201,2 50 AmerisourceBergen 153,1 6 United Kingdom 984,4 21 Toyota Motor 265,2 36 Austria 194,8 51 Industrial & Commercial Bank of 153,0 7 Italy 884,4 22 Volkswagen 260,0 37 Saudi Arabia 185,6 52 AXA 149,5 8 Brazil 819,4 23 Russia 253,9 38 Daimler 185,2 53 Total 149,1 9 Canada 623,7 24 Belgium 249,7 39 CVS Health 184,8 54 Ping An Insurance 144,2
10 Walmart 500,3 25 BP 244,6 40 Amazon.com 177,9 55 Honda Motor 138,6 11 Spain 492,4 26 Exxon Mobil 244,4 41 Turkey 173,9 56 China Construction Bank 138,6 12 Australia 461,0 27 Berkshire Hathaway 242,1 42 Indonesia 173,6 57 Trafigura Group 136,4 13 State Grid 348,9 28 India 229,3 43 Denmark 173,5 58 Chevron 134,5 14 Netherlands 344,8 29 Apple 229,2 44 EXOR Group 161,7 59 Cardinal Health 130,0 15 Sinopec Group 327,0 30 Switzerland 223,5 45 AT&T 160,5 60 Costco 129,0
Source: Fortune Global 500 (2017): http://fortune.com/global500/list/ (downloaded 26 July 2018) CIA World Factbook (2017): https://www.cia.gov/library/publications/the-world-factbook/fields/2056.html (downloaded 26 July 2018)
World´s Biggest Economic Entities (2017, in bil USD)
118 Czechia 83,62
370 Slovakia 37,09
Comparison
Rank
Name
153.0
7
Italy
884.4
22
Volkswagen
260.0
37
153.021
52
AXA
149.461
53
Total
149.099
54
71.579
159
59.263
207
47.095
276
44.701
300
Hanwha
44.59
301
434
CHS
435
26,283,000,000
514
24,659,000,000
547
3,238,000,000
623
222,200,000
702
8,342,000
722
153,021,000,000
Corporation
27
AXA
149,461,000,000
Corporation
28
Total
149,099,000,000
Corporation
29
71,579,000,000
Corporation
119
59,263,000,000
Corporation
163
47,095,000,000
Corporation
223
44,701,000,000
Corporation
246
Hanwha
44,590,000,000
Corporation
247
31,942,000,000
Corporation
374
CHS
31,935,000,000
Corporation
375
26,283,000,000
Corporation
451
24,659,000,000
Corporation
484
3,238,000,000
Government
121
222,200,000
Government
200
8,342,000
Government
220
CIA World Factbook (2017): https://www.cia.gov/library/publications/the-world-factbook/fields/2056.html (downloaded 26 July 2018)
Christmas Island
Firm´s competitive advantages
Global Transnational
International Multinational
From International to Transnational
Key assets and processes centralized,
others could be decentralized
Worldwide allocation of production in
places with highest effectiveness, high
level of central management
Worldwide allocation according to
Mainly sales High exploitation of local sources and
opportunities
corporate strategy
compentencies
branches
to effectiveness
Exploitation of local sources
nationality prejudices
Mother company
Global convergence International diversity
Corporate Centre
Differences in market structure
Differences in customer needs
Differences in buying behaviour
Market evaluation
Unilateral analysis Bilateral comparison
Always try to use the tools and and idicators adjusted for given case
In case of need and lack of data, you may used proxies
Market evaluation
Cultural distance Administrative and political distance
Geographycal distance Economic distance Di
st ac
e be
tw ee
n tw
o co
un tr
ie s
in cr
ea se
and naturels
• Absence of common currency
• Physical remoteness • Absence of common
borders • Lack of adequate
transportation or communication infrastructure
• Different costs and quality of natural, financial and human resources
• Insufficient infrastructure • Different information or
knowledge
• With different sizes (cars), standards (el. devices), packaging
• That foreign government sees as strategical or incremental for national security or as for national reputation (energy, telecomunications, aerospace etc.)
• With low value-to-weight ratio (building materials)
• That are fragile or perishable(fruits)
• In which communications are vital (financial services)
• For which demand varies by income(cars)
• In which labor and other cost differences matter (garments)
Market evaluation
Le ve
Franchising
Green field
Home market activities
2. „Born Globals“
Mode of entry decision - frameworks
Unique assets – brand, technology, resources…
…the more OLI advantages a firm possesses the greater the propensity of adopting an entry mode with a high control level such as wholly owned venture.
Economic, Political and Socio-cultural advantages
4. OLI Framework
• Lower market experience and knowledge risk
• Risk of lower acceptance by local customers, partners and governments
• Worse attitude of home government
• Growth limit risk
• Foreign partner selection risks
• Exchange and interest rate risks
• Higher costs
• Investment risks
FACULTY OF BUSINESS ADMINISTRATION, PRAGUE UNIVERSITY OF ECONOMICS AND BUSINESS 21
Faculty of Business Administration Prague University of Economics and Business W. Churchill Sq. 4 130 67 Prague 3, Czech Republic
How to get in touch with me?
Karel Pernica Lecturer
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Market evaluation
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