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Case: Wal-mart ’ s global expansion. Largest retailer in the world – Over 4500 stores International expansion in 1991begins with Mexicoin response to market saturation in the US Localization strategy adopted after trial and error Global buying power has allowed it to reap economies of scale

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Case: Wal-mart ’ s global expansion

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Case wal mart s global expansion l.jpg

Case: Wal-mart’s global expansion

  • Largest retailer in the world –Over 4500 stores

  • International expansion in 1991begins with Mexicoin response to market saturation in the US

    • Localization strategy adopted after trial and error

  • Global buying power has allowed it to reap economies of scale

  • Wal-mart faces significant competition from other global retailers, but has the first mover advantage in some markets


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Food retailers going global

Wal-Mart of the United States : 1990 100%, 80% domestic,

by 2001 1,045 stores outside U.S.A, Using acquisition, it entered

Germany & Britain (Asda). Mexico (building)

Carrefour of France : 26 countries, more than 50 percent of its sale

outside France, soon to enter the States

Ahold of Holland – multiple acquisition (Giant Food, 1063 supermarkets)

more than 70% outside Holland

Tesco from the United Kingdom – vivid these days in Southeast Asia

& Eastern Europe (acquisitions & expansions)

  • Drivers fro going global

  • Barriers to cross-border investment fell

  • Domestic market saturation

  • Rush-in effect

  • Economies of scale (buying power)

  • Transfer effect of their core capabilities

  • National differences in tastes

  • & preferences affects firm’s strategy

  • for going global.

Global retailing market


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  • Globalization = The shift toward a more integrated and interdependent world economy

  • global product – car, mobile phone, every day life

  • globally interdependent economy

  • * local jobs depend upon open international markets

  • * From a company point of view – increased opportunities for a firm

  • to expand – the collapse of communism, Deregulation for buz.

  • privatizing state-owned enterprises, deregulating markets, increasing

  • competition, & welcoming investment by foreign businesses

  • global challenge

  • * different tastes and preferences, operating systems, brand

  • The Globalization of Markets = The merging of historically distinct and separate

  • national markets into one huge global marketplace.

    • Tastes and preferences converge onto a global norm

    • Firms offer standardized products worldwide creating a world market

  • Significant differences still exist between national markets on many relevant dimensions

  • These differences require that marketing and operating strategies and product features

  • be customized to best match conditions in a country.

  • Convergence vs. Differences (tastes & preferences), Firm size & global competition,

  • Homogeneity vs. Diversity (market)

  • Countries are different

  • Range of problems are wider and more complex

  • Government intervention in trade and investment creates problems

  • International investment is impacted by different currencies


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The Globalization of Production = The sourcing of goods & services from locations around the

globe to take advantage of national differences in the cost and quality of factors of production

(such as labor, energy, land, & capital).

Quality increase & cost reduction, the 777 (132,500 component parts by 545 suppliers) – global

products

Impediments – barriers to trade bet/w countries, barriers to FDI, transportation costs, & issues

associated with economic & political risk.


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Global Production

Swan Optical

Manufacturing

Example 1

Design

1-5


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  • The emergence of global institutions

  • Globalization has created the need for institutions to help manage, regulate

  • and police the global marketplace

  • GATT (General Agreement on Tariffs and Trade)

  • WTO : Responsibility for policing the world trading systems and making sure nation-

  • states adhere to the rules laid down in trade treaties signed by WTO member states.

  • IMF : 1944, Brentwoods, NH. Maintaing order in the int’l monetary system.

  • World Bank : Promoting economic development

  • UN : 1945 Preserving peace through international cooperation and collective security.

  • Drivers of Globalization

  • Declining Trade & Investment Barriers

  • Trade barriers – the Great Depression of the 1930s

  • GATT (140 countries) & Uruguay Round (December, 1993, services & agricultural

  • goods)

  • removing restrictions to FDI

  • – the globalization of markets & production vs. intense competition

  • Globalization of markets and production has been facilitated by

  • Reduction in trade barriers

  • Removal of restrictions to foreign direct investment


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Pattern of declining tariffs


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Volume of world trade and production, 1950-2002

Fig: 1.1


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The Role of Technological Change

Microprocessors and Telecommunications – Moore’s Law – 18 months – capability

doubled, cost half.

The Internet & World Wide Web – B2B, Shopping Mall.

Transportation Technology – commercial jet aircraft

& containerization

Implications for the Globalization of Production

- GSCM

Implications for the Globalization of Markets

– customer tastes & preferences,

global culture


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The shrinking globe

Fig: 1.2


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The Changing Demographics of the Global Economy

The Changing World Output and World Trade Picture – Relative decline in the share of

of world output and world exports accounted for by the United States and other

long-established developed nations (Table 1.2)

The Changing Foreign Direct Investment Picture (Figure 1.4 & Figure 1.5)

The Changing Nature of the Multinational enterprise

Non-U.S. Multinationals – the emergence of Japanese, & other developing countries

The Rise of Mini-Multinationals – Lubricating Systems, Inc.

The Changing World Order –Communist countries fall, China & Latin America

– democratic politics and free market economics- the opportunities & risks

The Global Economy of the 21st Century – privatization, deregulation, market competition,

removing barrier


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The changing pattern of world output and trade


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Percentage share of total FDI stock

Fig: 1.3


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Volume of FDI inflows, 1994-2002 ($ billions)

Fig: 1.4


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National origin of largest multinational corporations

Fig: 1.5


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The Globalization Debate

Pro

Lower prices for goods and services

Economic growth stimulation

Increase in consumer income

Creates jobs

Countries specialize in production of goods and services that are produced

most efficiently

Con

Destroys manufacturing jobs in wealthy, advanced countries

Wage rates of unskilled workers in advanced countries declines

Companies move to countries with fewer labor and environment regulations

Loss of sovereignty

Antiglobalization Protests -

Globalization, Jobs, & Income

Globalization, Labor Policies, & the Environment

Globalization & National Sovereignty

Globalization & the World’s Poor

Managing in the Global Marketplace


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Environmental performance and income

Fig 1.6


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1.3 The Shrinking Globe


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