GLOBALIZATION GLOBALIZATION

Our World is a System of Systems

Source: IBM
Our World is a System of Systems
Source: IBM
Globalization
Defined as
Theinternational integrationof economic political andcultural systems The international integration of economic, political and cultural systems
across the globe.
A force for economic growth, prosperity and democratic freedom.
A forcefor environmental devastationandexploitationof thedeveloping A force for environmental devastation and exploitation of the developing
world.
Represents one of the most influential forces in determining the
f t f th l t future course of the planet.
Benefits
Remarkable growth in trade and exchanges (including tech transfer)
Greater openness in the international economy
Growth of foreign direct investment (FDI)
Technological innovation Technological innovation
Areas affected by
globalization
Outcomes of Outcomes of
Gl b li ti Gl b li ti
globalization
W ldt d & d l t
Increased interconnectedness of
i i
Globalization Globalization
World trade & development
Investment
Technology
various economies
Global sourcing & global supply
chain
Increasedefficiency
Extent
Cost
Culture
Increased efficiency,
competitiveness & agility
Global strategies of organizations
Cultural marketing
Culture
Migration
Human rights
I t ll t l t
Cultural marketing
Increased accessibility to
technology
Complex vendor qualification
Intellectual property
p q
criteria
WorldTrade&Development World Trade & Development
27 fold increase in last 6 decades
($296Billionto$8Trillion) ($296 Billion to $8 Trillion)
Can result in economic growth but could also bring about social
disruptions.
Extent of poverty has decreased (% of people living on <$1/day)
Results in development which is defined as The need and means by
which to provide better lives for people in less developed countries.
Wider selection of products for markets in different countries.
Interconnectedness of various economies.
Investment
International investment is the most powerful force in propelling the
world toward closer economic integration. g
International investment can alter methods of production and
thereby initiate much more change than the simple trading of goods.
FDI Yearly Total
1982 $57 Billion
2007 $1.5 Trillion
FDI just in China was $106 Billion in 2010.
L d i h l b d d ki di i h l h
2008 $ 1.4 Trillion
Led to issues such as labor standards, working conditions, health,
safety & sustainability.
Technology Technology
IT revolution reshaping economies and societies around the globe
Newideas& increasedaccesstoinformation New ideas & increased access to information
Increased productivity
Computers
C ll Ph Cell Phones
Fiber optics led to widespread use of the internet
Rapidly reducing cost of technology
$400 laptop
$100 laptop in India
Leadstoincreasedconnectivity& knowledgebasedsociety Leads to increased connectivity & knowledge based society
Shorter life cycle of products increases criticality of time to
market
Culture&Migration Culture & Migration
Has led to the widespread
expansion of the capitalist p p
model
Opens minds to new ideas and
experiences changes the way p g y
people think
A few consider this new
culture as a breach of their
values
Cultural Effect could be
+ve, -veor neutral ,
More migration now than ever
before
Led to increasing health issues due g
to people traveling more
internationally
Human Rights Human Rights
Human Rights recognize the Varying IP laws
Intellectual Property Intellectual Property
dignity inherent in every person
as a human being regardless of
any affiliation or characteristic
Level of implementation
Losses incurred due to IP
infringement
Era of globalization is also called
the era of the individual
Increasing degree of self
g
$500 Billion lost every year due to
counterfeit goods
Considered a major risk when
expression
Think of what is happening in
the middle east
outsourcing technology to
countries where IP laws are
loosely defined
Global Strategies of
O i ti Organizations
Phasesinimplementingglobal strategies Phases in implementing global strategies
Problem Identification & Strategy formulation
Feasibility (Economic & Social) y( )
Preparation (selecting vendors)
Evaluation
Commitment / Investment
Business Transition/ Business Continuity
O i t On going management
ExpansionStrategies Expansion Strategies
Single Service Multiservice
Focused service: Clustered service:
Single * Dental practice * Stanford University
Location * Retail Store * Mayo Clinic
* Family restaurant
Focused network: Diversified network:
M lti it * F d l E Multisite * Federal Express
* McDonalds * American Express
* Red Roof Inns * Accenture
Franchising Franchising
Benefits to the Franchisee
Management Training
Brand Name
National Ad ertising National Advertising
Acquisition of Proven Business
Economics of Scale
Issues for the Franchisor
Franchisee Autonomy
F hi C t t Franchise Contract
Conflict Resolution
Thi k f l f F hi ? Thi k f l f F hi ? Think of some examples of Franchises? Think of some examples of Franchises?
Generic International
Strategies
Transnational
Strategy
Global
Strategy
High
Strategy
Strategy
Force
Towards
Global
I i
Multi-domestic
Strategy
No
International
Strategy
Integration
Low
Low High
Force Towards Local Responsiveness
Multinational Development Multinational Development
The Nature of the Borderless World (The 5Cs) ( )
Customers - information has empowered
Competitors - nothing stays proprietary
Compan fi d t i l k t Company - fixed costs require large markets
Currency - become currency neutral
Country - deprive competitor of home market y p p
Planning Transnational Operations
Cultural Transferability
W k N Worker Norms
Host Government Policy
International Strategic Service Vision
Service Delivery
System
Operating Strategy Service Concept Target Market
Segments
Available
technology?
Infrastructure?
Utility service?
Appropriate
managerial practice?
Participative?
Autocratic?
What are customer
expectations?
Perception of value?
Service ethic?
What are the market
segments?
Domestic?
Multinational? y
Labor market norms
and customs?
Labor market
institutions?
Government
Service encounter?
Language?
Acceptance of self-
Tourist?
What are important
cultural differences?
Space availability?
Interaction with
suppliers?
regulations?
Unions?
Host government
p
serve?
What are the usage
patterns?
Language?
Life style?
Disposable income?
pp
Educating
customers?
g
policies?
Language?
Front office?
p
Cultural
transferability?
What are the
workforce
demographics?
Skills?
Back office? Age distribution?
Attitudes?
Work ethic?
Considerations in Selecting a
Gl b l S i St t Global Service Strategy
Globalization Global Service Strategies g
Factors
Multicountry Importing Follow Your Service Beating the
Expansion Customers Customers Offshoring Clock
Customer Train local Develop foreign Develop Specialize in Provide p g p p
Contact workers language & foreign back- office extended
cultural sensitivity customers office service hours of
skills components service
Customization Usually a Strategic Re-prototype Quality and More need for
standard opportunity locally coordination reliability &
service coordination
Complexity Usually Strategic Modify Opportunity for Time
routine opportunity operations focus compression
Information Satellite On site advantage Move Training Exploit
Intensity network experienced investments opportunity
managers managers
Cultural Modify Accommodate Could be Cultural Common
Adaptation service foreign guests necessary to understanding language
achieve scale necessary
Labor Intensity Reduced Increased labor Hire local Reduced labor Reduced labor
labor costs costs personnel costs costs p
Other Government Logistics Inadequate Home office Capital
restrictions management infrastructure employee investments
morale
Exercise Exercise
Recall that service operations can be classified as
processing people, goods, or information. What
challenges are faced in each category when
globalization is undertaken?