external triggers
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External triggersExternal triggersExternal triggers to the External triggers to the
internationalization processinternationalization processMeta-level development in Meta-level development in
the world economythe world economyPEST analysisPEST analysis
Internationalization Internationalization of industries: of industries:
globalisation vs. globalisation vs. localisationlocalisationBi-polarisationBi-polarisation
3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 22
Derivative trendsDerivative trends
FundamentalFundamental PEST headings PEST headings
Political Economic Social Technological
Protectionismv
Liberalisation
Changes inexchange
rates
Labour costsand market
changes
Changing
tastesMulti-
formity
Innovationand
development
Meta trendsMeta trends
Changes toworldwide supply
and demand
Dynamicchanges in
GNP and trade
Changes toconsumerlifestyle
Diffusion ofnew
technology
Figure 3.9. The relationship between PEST and meta trends
3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 33
Worldwide supply and demandWorldwide supply and demand growing number of products, growing number of products, services traded internationallyservices traded internationally
Governments believe they may Governments believe they may persist =>further rapid declinepersist =>further rapid decline
3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 44
Derivative trendsDerivative trends
FundamentalFundamental PEST headings PEST headings
Political Economic Social Technological
Protectionismv
Liberalisation
Changes inexchange
rates
Labour costsand market
changes
Changing
tastesMulti-
formity
Innovationand
development
Meta trendsMeta trends
Changes toworldwide supply
and demand
Dynamicchanges in
GNP and trade
Changes toconsumerlifestyle
Diffusion ofnew
technology
Figure 3.9. The relationship between PEST and meta trends
3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 55
Dynamic change in GNP and Dynamic change in GNP and tradetrade
stagnating, declining stagnating, declining industries supplantedindustries supplanted
vital, growing industries vital, growing industries supportedsupported
long term opportunities for long term opportunities for mutual enrichment: no ‘zero mutual enrichment: no ‘zero sum struggle’ => no absolute sum struggle’ => no absolute losers or winnerslosers or winners
renewal triggered by exchange renewal triggered by exchange rates, labor cost adjustmentrates, labor cost adjustment
3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 66
Derivative trendsDerivative trends
FundamentalFundamental PEST headings PEST headings
Political Economic Social Technological
Protectionismv
Liberalisation
Changes inexchange
rates
Labour costsand market
changes
Changing
tastesMulti-
formity
Innovationand
development
Meta trendsMeta trends
Changes toworldwide supply
and demand
Dynamicchanges in
GNP and trade
Changes toconsumerlifestyle
Diffusion ofnew
technology
Figure 3.9. The relationship between PEST and meta trends
3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 77
Changes to consumer lifestylesChanges to consumer lifestyles Increasing multi-formity, Increasing multi-formity, dynamism of marketsdynamism of markets
shorter life cyclesshorter life cycles
3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 88
Derivative trendsDerivative trends
FundamentalFundamental PEST headings PEST headings
Political Economic Social Technological
Protectionismv
Liberalisation
Changes inexchange
rates
Labour costsand market
changes
Changing
tastesMulti-
formity
Innovationand
development
Meta trendsMeta trends
Changes toworldwide supply
and demand
Dynamicchanges in
GNP and trade
Changes toconsumerlifestyle
Diffusion ofnew
technology
Figure 3.9. The relationship between PEST and meta trends
3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 99
Diffusion of new technologyDiffusion of new technology fast proliferation of know-how fast proliferation of know-how =>=>
generate successful products generate successful products and services =>and services =>
high devl’t costs => large int’l high devl’t costs => large int’l markets neededmarkets needed
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GLOBALISATION LOCALISATION
ConvergenceConvergence
World market structure
World level compet’n
World: single market
DivergenceDivergence
Collection of nat’l industries
Nat’l level compet’n
Many markets: treated separately
Internationalization of industries: Internationalization of industries: globalization vs. localizationglobalization vs. localization
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Assesing the extent of globalisationAssesing the extent of globalisation:
How boundaries to the industry might be drawn?
• including rivals (close substitutes)
• customer’s viewpoint: paramount
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Industry IIndustry ICollection of competitors with similar technologies, processes and skills
Firm A Firm B Firm C
Market segment
(i)
Market segment
(ii)
Market segment
(iii)
Figure 3.10 Industries and markets
Firm X Firm Y Firm Z
Industry IIIndustry II (substitute products) (substitute products)Collection of competitors with similar technologies, processes and skills
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Globalisation v.
Localisation
Figure 3.11. Assessing the extent to which an industry is globalising
Changes at meta level
Four sets of Four sets of industry driversindustry drivers
CostCost-new product
developm.-scale
economic-transport
costs
CountryCountry-trade policies
-technical standards-culture,
regulations
CustomersCustomers-customer
requirements-distribution
-uniform marketing
CompetitionCompetition-competitive
interdependence-new entry compet’n
4 Cs4 Cs
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a) a) Customer driversCustomer drivers
Customer requirementsCustomer requirements– Some products: worldwide acceptance Some products: worldwide acceptance
=> standardized global product=> standardized global product– Within industry: marked variation (rice & Within industry: marked variation (rice &
paste / tomato kechup)paste / tomato kechup) UK: sweetUK: sweet France: spicyFrance: spicy USA: vinegaryUSA: vinegary
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DistributionDistribution– Different channels => to be customiseDifferent channels => to be customise– Customer push or pullCustomer push or pull– Special national distribution system: Special national distribution system:
Japanese electronics companies => Japanese electronics companies => retired employer: ‘pop and mum’ shopsretired employer: ‘pop and mum’ shops
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Uniform marketingUniform marketing– Convergence of lifestyle: selling to Convergence of lifestyle: selling to
different national marketsdifferent national markets Same product (satellite TV)Same product (satellite TV) Same product – variety of brand namesSame product – variety of brand names
Unilever: All, Omo, Persil, Presto, Skip, ViaUnilever: All, Omo, Persil, Presto, Skip, Via
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3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 1818
Globalisation v.
Localisation
Figure 3.11. Assessing the extent to which an industry is globalising
Changes at meta level
Four sets of Four sets of industry driversindustry drivers
CostCost-new product
developm.-scale
economic-transport
costs
CountryCountry-trade policies
-technical standards-culture,
regulations
CustomersCustomers-customer
requirements-distribution
-uniform marketing
CompetitionCompetition-competitive
interdependence-new entry compet’n
4 Cs4 Cs
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b) b) Cost driversCost drivers
New product developmentNew product development– Escalating cost of R&D, huge resource Escalating cost of R&D, huge resource
demanddemand– Only the largest firms => trigger to be Only the largest firms => trigger to be
largelarge Smaller car manufacturers absorbedSmaller car manufacturers absorbed 1994: VW, Fiat, Renault, Peugeot/Citroën, 1994: VW, Fiat, Renault, Peugeot/Citroën,
Ford, GMFord, GM Further rationalization aheadFurther rationalization ahead
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Scale economiesScale economies– Trigger to globalization: achieve high volume Trigger to globalization: achieve high volume
sales => larger plantssales => larger plants– Counterbalancing: Counterbalancing: Flexible Manufacturing Flexible Manufacturing
SystemsSystems (FMS) => sm (FMS) => smaaller plantsller plants– Find relative balanceFind relative balance– Minimum Efficient ScaleMinimum Efficient Scale (MES): (MES): smallest size smallest size
to achive min. cost/unitto achive min. cost/unit– FMS can offset the pressure of scale of FMS can offset the pressure of scale of
economies! (integrated steel plants economies! (integrated steel plants mini mini mills)mills)
World sales MES output Nr. of plants Pressure to glob.
120 $m 10 12 decreased
120 $m 20 6 current position
120 $m 40 3 increased
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Transportation costsTransportation costs– Sometimes: countervailing force to the Sometimes: countervailing force to the
trend of globalizationtrend of globalization Low value/bulky product: remain localizedLow value/bulky product: remain localized High value/small weight: not prevented to High value/small weight: not prevented to
be globalbe global
– GenGeneeral trendral trend: transport costs fall, : transport costs fall, reduce restrictionsreduce restrictions
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3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 2323
Globalisation v.
Localisation
Figure 3.11. Assessing the extent to which an industry is globalising
Changes at meta level
Four sets of Four sets of industry driversindustry drivers
CostCost-new product
developm.-scale
economic-transport
costs
CountryCountry-trade policies
-technical standards-culture,
regulations
CustomersCustomers-customer
requirements-distribution
-uniform marketing
CompetitionCompetition-competitive
interdependence-new entry compet’n
4 Cs4 Cs
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c) c) Country driversCountry drivers
Trade policiesTrade policies– Some countries: individual trade policies (duty Some countries: individual trade policies (duty
on products outside the bloc)on products outside the bloc)
Technical standardsTechnical standards– E,g: electric power supply, food products laws, E,g: electric power supply, food products laws,
measure unitsmeasure units– Converging int’l standards: encouraging Converging int’l standards: encouraging
globalizationglobalization
Cultural and regulatory barriersCultural and regulatory barriers– Forms of advertising, business practices Forms of advertising, business practices
(aggressive)(aggressive)
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3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 2626
Globalisation v.
Localisation
Figure 3.11. Assessing the extent to which an industry is globalising
Changes at meta level
Four sets of Four sets of industry driversindustry drivers
CostCost-new product
developm.-scale
economic-transport
costs
CountryCountry-trade policies
-technical standards-culture,
regulations
CustomersCustomers-customer
requirements-distribution
-uniform marketing
CompetitionCompetition-competitive
interdependence-new entry compet’n
4 Cs4 Cs
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d) d) Competitive driversCompetitive drivers
Competitive interdependenceCompetitive interdependence– Broadening geographical scope => interlinked Broadening geographical scope => interlinked
nat’l markets => competitor: disadvantagenat’l markets => competitor: disadvantage– Competitive dynamics of industry: reflects life Competitive dynamics of industry: reflects life
cycle. toocycle. too
New entry competitionNew entry competition– May have powerful influence on the May have powerful influence on the
global/local balance global/local balance – May reflect liberalization, new tech and May reflect liberalization, new tech and
business practicebusiness practice
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3434 3-Externel triggers-b 34 /3-Externel triggers-b 34 / 2929
External triggersExternal triggersExternal triggers to the External triggers to the
internationalization internationalization processprocess
Meta-level development Meta-level development in the world economyin the world economy
PEST analysisPEST analysisInternationalization of Internationalization of industries: globalisation industries: globalisation
vs. localisationvs. localisationBi-polarisationBi-polarisation
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Bi-polarisationBi-polarisation
Medium-size Medium-size companiescompanies
Giants Small
Close down
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Globalisation Localisation
Industry driversIndustry drivers
Figure 3.12. The pendulum of change: convergence versus divergence
Industry
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GlobalisationGlobalisation LocalisationLocalisationHigh Med Low Industry drivers Low Med High Customer drivers
Customer requirementsCustomer requirementsDistributionDistributionMarketingMarketing
Cost driversNew product developmentNew product development
Scale economiesScale economiesTransport costsTransport costs
Country driversTrade policiesTrade policies
Technical standardsTechnical standardsCultural/regulatory barriersCultural/regulatory barriers
Competitive driversCompetitive interdependenceCompetitive interdependence
Entry of new competitorsEntry of new competitors
High Overall
Figure 3.13. Summary of industry drivers for the consumer electronics industry over the next five years
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NarrowNarrow BroadBroad
(i)
Local or national
regional or national niche
strategy
(ii)
Local or national regional or
national broad-based strategy
(iii)
International niche strategy
(iv)
International broad-based
strategy
Geographical scope
Product scope
Figure 3.14 International competition and bi-polarisation
Restric-Restric-ted nat’lted nat’l
Internat’lInternat’l
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