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1. Chapter. INTRODUCTION & OVERVIEW. Largest retailer in the world –Over 4500 stores International expansion in 1991begins with Mexico in response to market saturation in the US Localization strategy adopted after trial and error

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chapter

1

Chapter

INTRODUCTION

&

OVERVIEW

case wal mart s global expansion
Largest retailer in the world –Over 4500 stores

International expansion in 1991begins with Mexico in 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

Case: Wal-mart’s global expansion
what is globalization
The shift towards a more integrated and interdependent world economy

Two components:

The globalization of markets

The globalization of production

What is globalization?
globalization of markets
The merging of distinctly separate national markets into a global marketplace

Tastes and preferences converge onto a global norm

Firms offer standardized products worldwide creating a world market

Globalization of markets
globalization of markets1
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.

Globalization of markets
globalization of markets2
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

Globalization of markets
globalization of production
Refers to sourcing of goods and services from locations around the world to take advantage of

Differences in cost or quality of the factors of production

Labor

Land

Capital

Globalization of production
global production
Global Production

Swan Optical

Manufacturing

Example 1

Design

1-5

emergence of global institutions
Globalization has created the need for institutions to help manage, regulate and police the global marketplace

GATT

WTO

IMF

World bank

United Nations

Emergence of global institutions
global drivers
Macro factors that underlie trend towards greater globalization

Decline in trade barriers

Technological change

Global drivers
declining barriers to trade
Globalization of markets and production has been facilitated by

Reduction in trade barriers

Removal of restrictions to foreign direct investment

Declining barriers to trade
the role of technological change
The role of technological change
  • Microprocessors and telecommunications
  • The internet and world wide web
  • Transportation technology
changing demographics of the world economy
World output and trade

Changing foreign direct investment

Changing nature of multinationals

Mini multinationals

Non US multinationals

Changing demographics of the world economy
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

Globalization debate-Pro
globalization debate 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

Globalization debate-Con