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External triggers

External triggers. External triggers to the internationalization process Meta-level development in the world economy PEST analysis Internationalization of industries: globalisation vs. localisation Bi-polarisation. Fundamental PEST headings. Political. Economic. Social. Technological.

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External triggers

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  1. External triggers External triggers to the internationalization process Meta-level development in the world economy PEST analysis Internationalization of industries: globalisation vs. localisation Bi-polarisation

  2. Fundamental PEST headings Political Economic Social Technological Derivative trends Protectionism v Liberalisation Changes in exchange rates Labour costs and market changes Changing tastes Multi- formity Innovation and development Meta trends Changes to worldwide supply and demand Dynamic changes in GNP and trade Changes to consumer lifestyle Diffusion of new technology Figure 3.9. The relationship between PEST and meta trends 3-Externel triggers-b 34 /

  3. Worldwide supply and demand growing number of products, services traded internationally Governments believe they may persist =>further rapid decline 3-Externel triggers-b 34 /

  4. Fundamental PEST headings Political Economic Social Technological Derivative trends Protectionism v Liberalisation Changes in exchange rates Labour costs and market changes Changing tastes Multi- formity Innovation and development Meta trends Changes to worldwide supply and demand Dynamic changes in GNP and trade Changes to consumer lifestyle Diffusion of new technology Figure 3.9. The relationship between PEST and meta trends 3-Externel triggers-b 34 /

  5. Dynamic change in GNP and trade • stagnating, declining industries supplanted • vital, growing industries supported • long term opportunities for mutual enrichment: no ‘zero sum struggle’ => no absolute losers or winners • renewal triggered by exchange rates, labor cost adjustment 3-Externel triggers-b 34 /

  6. Fundamental PEST headings Political Economic Social Technological Derivative trends Protectionism v Liberalisation Changes in exchange rates Labour costs and market changes Changing tastes Multi- formity Innovation and development Meta trends Changes to worldwide supply and demand Dynamic changes in GNP and trade Changes to consumer lifestyle Diffusion of new technology Figure 3.9. The relationship between PEST and meta trends 3-Externel triggers-b 34 /

  7. Changes to consumer lifestyles • Increasing multi-formity, dynamism of markets • shorter life cycles 3-Externel triggers-b 34 /

  8. Fundamental PEST headings Political Economic Social Technological Derivative trends Protectionism v Liberalisation Changes in exchange rates Labour costs and market changes Changing tastes Multi- formity Innovation and development Meta trends Changes to worldwide supply and demand Dynamic changes in GNP and trade Changes to consumer lifestyle Diffusion of new technology Figure 3.9. The relationship between PEST and meta trends 3-Externel triggers-b 34 /

  9. Diffusion of new technology • fast proliferation of know-how => • generate successful products and services => • high devl’t costs => large int’l markets needed 3-Externel triggers-b 34 /

  10. Internationalization of industries: globalization vs. localization GLOBALISATION LOCALISATION Convergence World market structure World level compet’n World: single market Divergence Collection of nat’l industries Nat’l level compet’n Many markets: treated separately 3-Externel triggers-b 34 /

  11. Assesing the extent of globalisation: • How boundaries to the industry might be drawn? • including rivals (close substitutes) • customer’s viewpoint: paramount 3-Externel triggers-b 34 /

  12. Industry I Collection of competitors with similar technologies, processes and skills Firm A Firm B Firm C Market segment (i) Market segment (ii) Market segment (iii) Firm X Firm Y Firm Z Industry II (substitute products) Collection of competitors with similar technologies, processes and skills 3-Externel triggers-b 34 / Figure 3.10 Industries and markets

  13. Customers -customer requirements -distribution -uniform marketing Changes at meta level Cost -new product developm. -scale economic -transport costs Country -trade policies -technical standards -culture, regulations Globalisation v. Localisation Competition -competitive interdependence -new entry compet’n Four sets of industry drivers 4 Cs 3-Externel triggers-b 34 / Figure 3.11. Assessing the extent to which an industry is globalising

  14. Customer requirements Some products: worldwide acceptance => standardized global product Within industry: marked variation (rice & paste / tomato kechup) UK: sweet France: spicy USA: vinegary a) Customer drivers 3-Externel triggers-b 34 /

  15. Distribution • Different channels => to be customise • Customer push or pull • Special national distribution system: Japanese electronics companies => retired employer: ‘pop and mum’ shops 3-Externel triggers-b 34 /

  16. Uniform marketing • Convergence of lifestyle: selling to different national markets • Same product (satellite TV) • Same product – variety of brand names Unilever: All, Omo, Persil, Presto, Skip, Via 3-Externel triggers-b 34 /

  17. 3-Externel triggers-b 34 /

  18. Customers -customer requirements -distribution -uniform marketing Changes at meta level Cost -new product developm. -scale economic -transport costs Country -trade policies -technical standards -culture, regulations Globalisation v. Localisation Competition -competitive interdependence -new entry compet’n Four sets of industry drivers 4 Cs 3-Externel triggers-b 34 / Figure 3.11. Assessing the extent to which an industry is globalising

  19. b) Cost drivers New product development • Escalating cost of R&D, huge resource demand • Only the largest firms => trigger to be large • Smaller car manufacturers absorbed • 1994: VW, Fiat, Renault, Peugeot/Citroën, Ford, GM • Further rationalization ahead 3-Externel triggers-b 34 /

  20. 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 Scale economies • Trigger to globalization: achieve high volume sales => larger plants • Counterbalancing: Flexible Manufacturing Systems (FMS) => smaller plants • Find relative balance • Minimum Efficient Scale (MES):smallest size to achive min. cost/unit • FMS can offset the pressure of scale of economies! (integrated steel plants  mini mills) 3-Externel triggers-b 34 /

  21. Transportation costs • Sometimes: countervailing force to the trend of globalization • Low value/bulky product: remain localized • High value/small weight: not prevented to be global • General trend: transport costs fall, reduce restrictions 3-Externel triggers-b 34 /

  22. 3-Externel triggers-b 34 /

  23. Customers -customer requirements -distribution -uniform marketing Changes at meta level Cost -new product developm. -scale economic -transport costs Country -trade policies -technical standards -culture, regulations Globalisation v. Localisation Competition -competitive interdependence -new entry compet’n Four sets of industry drivers 4 Cs 3-Externel triggers-b 34 / Figure 3.11. Assessing the extent to which an industry is globalising

  24. Trade policies Some countries: individual trade policies (duty on products outside the bloc) Technical standards E,g: electric power supply, food products laws, measure units Converging int’l standards: encouraging globalization Cultural and regulatory barriers Forms of advertising, business practices (aggressive) c) Country drivers 3-Externel triggers-b 34 /

  25. 3-Externel triggers-b 34 /

  26. Customers -customer requirements -distribution -uniform marketing Changes at meta level Cost -new product developm. -scale economic -transport costs Country -trade policies -technical standards -culture, regulations Globalisation v. Localisation Competition -competitive interdependence -new entry compet’n Four sets of industry drivers 4 Cs 3-Externel triggers-b 34 / Figure 3.11. Assessing the extent to which an industry is globalising

  27. d) Competitive drivers Competitive interdependence • Broadening geographical scope => interlinked nat’l markets => competitor: disadvantage • Competitive dynamics of industry: reflects life cycle. too New entry competition • May have powerful influence on the global/local balance • May reflect liberalization, new tech and business practice 3-Externel triggers-b 34 /

  28. 3-Externel triggers-b 34 /

  29. 3-Externel triggers-b 34 /

  30. External triggers External triggers to the internationalization process Meta-level development in the world economy PEST analysis Internationalization of industries: globalisation vs. localisation Bi-polarisation

  31. Bi-polarisation Giants Small Medium-size companies Close down 3-Externel triggers-b 34 /

  32. Industry Globalisation Localisation Industry drivers 3-Externel triggers-b 34 / Figure 3.12. The pendulum of change: convergence versus divergence

  33. Globalisation Localisation High Med Low Industry drivers Low Med High Customer drivers Customer requirements Distribution Marketing Cost drivers New product development Scale economies Transport costs Country drivers Trade policies Technical standards Cultural/regulatory barriers Competitive drivers Competitive interdependence Entry of new competitors High Overall Figure 3.13. Summary of industry drivers for the consumer electronics industry over the next five years 3-Externel triggers-b 34 /

  34. Product scope Restric-ted nat’l NarrowBroad (i) Local or national regional or national niche strategy (ii) Local or national regional or national broad-based strategy Geographical scope Internat’l (iii) International niche strategy (iv) International broad-based strategy Figure 3.14 International competition and bi-polarisation 3-Externel triggers-b 34 /

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