"... a social process in which the constraints of geography

1. "... a social process in which the constraints of geography on social and cultural arrangements recede and in which people become increasingly aware that they are receding“ Featuring….. increased transnational flows decline of nation-state world cities as sites of interaction flows of cultural products

2. Encompassing….. internationalization of economic activity (trade & investments) liberalization (freeing markets) universalization (cultural interchange) technological changes Improvements in transportation or possibly even…. Westernization / Yuan’ization

3. reduction in the cost of transportation, decrease or abolition of control over capital / the capital market formation of free zones for carrying out commercial activities, against payment of little or no tariffs at all decrease, abolition or synchronization of subsidies in domestic trades decrease or abolition of every kind of tariffs

4. Stability in emerging markets has seen the rise of international commodity prices -- owing largely to Chinese and Indian demand ……..which has helped raise incomes in Latin America and Africa.

5. The drivers of globalisation

6. What is Globalization? • Globalization is market integration on a world scale. And what does market integration mean? • It means that markets operate according to’the law of one price’, LOOP. • LOOP means that an identical good gets the same price in any market. Well, actually it is more complicated than that.......

7. LOOP and transaction costs • There are transport and other transaction costs involved in bringing a good for one market, say London, to another, say New York, therefore LOOP must be rephrased...... • LOOP means that the (absolute) price difference between an identical good sold in two markets must not exceed the transaction costs involved in bringing the good between the markets.

8. Implications • If transport and transaction costs fall then there is price convergence. • There are additional factors contributing to price convergence: • increased market efficiency reduces excess trading profits

9. Globalization should thus bring in .... price convergence increasing trade / GDP ratio increased capital mobility falling interest rate differentials wage convergence (promoted by mass migration)

10. The Two Schools of Thought • Those who believe that the emerging similarities among nations far outweigh the differences. • Those who believe that unique differences among nations still exist and that firms must recognize and respect these differences as the key to competitiveness and long term success.

11. Globalization The multinational terminology of the 1970’s is obsolete. Global companies are groups of overseas subsidiaries that execute decisions made at headquarters. THE GLOBAL FIRM… • does research wherever necessary, • develops products in several countries, • promotes key executives regardless of nationality and • even has shareholders on three continents.

12. Globalization Example 1) • Otis elevator, a division of United Technologies, developed its new Elevonic 411 in 6 research centers in 5 countries, saving and estimated $ 10 million in design costs and cutting the development time in half. Example 2) • Swedish conglomerate ABB has sales of more than $30 bn. In early 1990’s it acquired Combustion Engineering of USA. Its HQ’s are in cosmopolitan Zurich, Switzerland where business is transacted in English and the books are kept in dollars.

13. Globalization Example 3) - In Asia, HP affiliates working closely together rolled out a new line of graphic terminals in 18 languages, complete with equipment and documentation. The company had previously been beaten to market by competitors in locally oriented new product introductions.

14. The Coco-Cola Experience • The most memorable commercial – 200 people gathered on a hill top in Italy: “I’d like to buy the world a coke”. Post World War II – 64 bottling plants – GOING GLOBAL !!! • Come 1990’s – SERIES OF SETBACK - What went wrong ?? • Over centralized in Atlanta ? • Insensitive antitrust regulations in Eu? • Slow to react on the contamination scare in the Eu ? Rethinking…..laying off 6000 in Atlanta “WE DO NOT DO BUSINESS IN MARKETS, WE DO BUSINESS IN SOCITIES – IN OUR PAST WE SUCCEEDED BECAUSE WE UNDERSTOOD AND APPEALED TO THE GLOBAL COMMONALITIES – IN OUR FUTURE WE WILL SUCCEED BECAUSE WE WILL ALSO UNDERSTAND AND APPEAL TO THE LOCAL DIFFERENCES.”

15. Globalization…. Globalization will shape the global economy over the next 25 years….. The World Bank 'central scenario' report predicts that the global economy could expand from $35 trillion (2005) to $72 trillion in 2030 By 2030, 1.2 billion people in developing countries-15 percent of the world population-will belong to the "global middle class*," up from 400 million today. *[purchasing power between $4000 to $17000 per capita]

16. Globalization…. Developing countries that only two decades ago provided 14 percent of manufactured imports of rich countries, today supply 40 percent, and by 2030 are likely to supply over 65 percent. At the same time, import demand from developing countries is emerging as a locomotive of the global economy. Global trade in goods and services could rise more than threefold to $27 trillion in 2030

17. A Journey called Globalization….Since the dawn of history • Globalization began in the ancient civilizations of China, Greece, Rome and India and continues today with the World Trade Organization and the Doha Round trade talks. Round 1] CROSS BORDER IDEAS….. • Quite a few of these ideas originated in India, China, Greece and Rome. And undoubtedly, there was significant cross-fertilization between these ancient civilizations, alongside the vanished memories of Babylon and Egypt. • Be it the writings of Megasthenes, the 4th century B.C. Greek Ambassador to India, or • The Chinese scholar Hieun Tsang, who visited India's 2,000 tutor-staffed Nalanda University a millennium later. • The Arabs who transferred Indian science, medicine, literature and, above all, mathematics to western Europe. • All At a time when Europe, as we should recall, was only beginning to settle down after the trans-territorial forays of their energetic cousins.

18. A Journey called Globalization….Since the dawn of history Round 2] THE AGE OF COLONIES, EMPIRE and the INDUSTRIAL REVOLUTION…... • An era where Comparative Advantage comes of Age…. • Financial flows went on to fuel the Second Round of Globalization — the age of colonies, Empire and the Industrial Revolution. • The Second Round also turbocharged standards of living in Europe and America — its principal movers and shapers. • Globalization became a business phenomena when the first Multinational was founded in The Netherlands.

19. A Journey called Globalization….Since the dawn of history Round 2] THE AGE OF COLONIES, EMPIRE and the INDUSTRIAL REVOLUTION…... • During this Dutch Golden Age the Dutch East India Company was established as a private owned company. Because of the high risks involved with the international trade, ownership was divided with Shares. The Dutch East India Company was the first company in the world to issue shares, an important driver for globalization. • This also lead to……. • Polarization and the loss of Global Equity. • Ideas had flowed into what had become an ideologically stagnant India and China. Some of these ideas were truly revolutionary — about equality, liberty, earthly justice and the promise of boundless material benefits. • China opted out of this Industrial Revolution, while India was left out.

20. A Journey called Globalization….Since the dawn of history Round 3] U ARE MAKING IT HAPPEN….. THE RISE AND RISE OF INDIA AND CHINA

21. A Journey called Globalization….Since the dawn of history Round 3] THE RISE AND RISE OF INDIA AND CHINA…. • Case in point…..spices — high value, low volume and easily transportable — is not the only reason so many Western adventurers went seeking Mother India. • Steadily empowered and largely youthful populations in the world's demographic hubs are not just suppliers of cheap labour. They are also buyers and providers of goods and services which their aging, consumption-saturated counterparts in the West simply do not need on a similar scale. • India's attainment of the world average per capita income would mean an additional $7 trillion of new economic activity, with a multiplicity of value points for those who care to become engaged with it. [today it is barely a third of the world average.] • In Sum and Substance….The Journey Back to GLOBAL EQUITY…thus globalizing the CURRENT WESTERN WORLD VIEW

22. Globalization…. • Globalization essentially means….opening up of the economy and its integration with the other economies of the world. It implies change in external economic policy as well and involves abandonment by a country of protectionist stance in commercial policies and dismantling of tariff walls and encouragement of free and fair trade between nations. It involves: Pursuit of economic policies which encourage free and fair competition inter se among public enterprises and among private and public enterprises as well. Release of the forces of competition within the economy which promote economic efficiency and result in an optimum allocation of resources. • Deregulation and adoption of the policies of economic liberalization and economic reforms which are calculated to encourage the growth of private enterprise.

23. Globalization….From Statism to Laissez Faire • The Welcome shift in economic Policies of most developed and developing countries….. • The dismantling of the iron curtain and the virtual economic collapse of communist countries including Soviet Russia, • The Shift from Plan to Market or from Statism to Laissez faire. * • Ie. The shift from …From Autocratic, Unaccommodating, State controlled To • Unautocratic, Accommodating, Hands-off, Lax, Lenient, Liberal….. *The doctrine that government should not interfere in commercial affairs * With minimally restricted freedom in commerce

24. Globalization….From Statism to Laissez Faire • As classical economists recommended laissez faire or market economy as an ideal path to follow, • Globalization has now become the order of the day in most developed and developing countries. • ……is essentially based on the cornerstone of • Adam Smith's concept of laissez faire and Ricardian theory of comparative cost advantage, It marks a paradigm shift in economic thinking on the part of economic philosophers and policy-makers and represents an on-going process of change and adaptation which is in no small measure aided by recent advances in means of transport, telecommunications, computerization and the internet .

25. Globalization • Rapid Growth of World Trade and Investment • Rising Economic power of South East Asia • Growing power of Regional Trade Blocks • Gradual opening of major new markets like China, East Europe and Arab countries. • Severe debt problems of countries like Mexico, Brazil • Privatization of public owned companies to make them more efficient. • Increased forming of Strategic Alliances – like GM and Toyota, Ciba-Giegy, Compaq-HP. • Substantial speed up of International Transportation.

26. Globalization – Driving Forces….. • A reduction in official obstacles/barriers for conducting business with foreigners • Fast reduction and convergence of transaction costs associated with doing this business Examples of price decline in transport and communication • Between the early 1980's and 1996 real sea freight costs fell 70%. • Real air freight costs have fallen 3-4% a year over a long period. • Real costs of international phone calls fell 4% a year in the developing countries in the 1990's and 2% a year in the industrial countries.

27. Cost of a 3-Minute Telephone Call, New York to London (Constant 1990, U.S. $) $0.30

28. Globalization The death of distance as a determinant of the cost of communication will probably be the single most important economic force shaping the growth of international business .  A global industry is an industry in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions. GLOBAL FIRM: Fords – World Truck ? Chasis in NAM , Assembly in Brazil, Imported in USA for Sale. Or maybe Versace tee, Levis denims, Godrej Hair Die, L'Oreal paints…….

29. Globalization – Coco Cola……. Taking a company international is one thing, transforming it into a global corporation is another.This process occurs when companies loose their “HOME-MARKET” orientation and become “WORLD ORIENTED ENTERPRISES”. That is they choose markets , manufacturing sites, personnel and raw material sources without regard to national prejudices. Journey started with CEO Robert Woodruff patriotically declaring that he will make Coke available wherever American troops fought. Today – Coke gets more than 80% earnings and 66% sales from markets abroad.

30. Globalization What do we gather from the above ? “ WE ARE CITIZENS NOT OF BOMBAY OR INDIA BUT OF THE WORLD” At times we do tend to think that our global perspective is an unusual response to local problems. But on a planet as small as this one has become, there is simply no room for borders, between nations or even between ideas.

31. Globalization…. For the consumer…. Globalization requires a country to promote consumer welfare and adopt customer-centric polices intended to give him the best deal. • It requires the country's economic statesmanship to pursue a comprehensive reforms programme and set up appropriate administrative machinery to execute a series of economic tasks. • The success of a country's globalization programme depends on how it takes suitable steps to improve the investment climate domestically and is also able to attract foreign capital. • The country has of necessity to build suitable financial architecture which involves banking and insurance sector reforms. Although globalization is no magic wand its success has to be assessed in terms of its impact on the growth of GNP and alleviation of the deep-seated problems of poverty and unemployment.

32. Globalization…. • Lately it has become fashionable to question whether globalization and its benefits have peaked or are even about to reverse themselves. • Exports of merchandise rose by two-thirds from 2000 to 2005, according to the World Trade Organization, as did trade in commercial services. Both types of trade also made up a greater share of the world's gross domestic product in every single year. • The value of global mergers and acquisitions rose 38 percent in 2006 from 2005 and was 11 percent higher than in 2000, its previous peak.

33. Globalization – going global • Research and development facilities are located where there are suitable market conditions and talented personnel. • Financial resources are drawn from countries with the lowest capital costs. • Manufacturing is based where companies obtain optimal cost-quality combinations. • CEO’s play big roles in inculcating this non-nationalistic philosophy into executives and workers. • In a nutshell, operate in more than one country capturing the above in its cost and reputation that are not available to purely domestic competitors.

34. Globalization Another School of thought… GLOBALIZATION = Corner stone of the unending human journey, embracing COOPERATION and COMPETITIVENESS. Cooperation: - Represents a deep understanding of interdependence and joint responsibility at work, across firms and national boundaries. Competitiveness:- Conveys the perception that cooperation without motivation is doomed to fail and that only through practical inducement can continuous improvement and progress be a way of life.

35. Globalization We are corporate citizen of Germany, so we are also a corporate citizen wherever we have major plants and investments……. Jurgen Schrempp - Chairman Daimler Benz. Globalization has a special meaning within P&G. It means that we will continue to change to form a United States based business into a truly world company. A company that thinks of everything it does in terms of the entire world. Edwin Artzt – Chairman and CEO P&G (1990) I don’t find foreign countries foreign Alfred M. Aeien- Chairman Gillette

36. Globalization in the eyes of TED TURNER • CEO’s play big roles in inculcating this non-nationalistic philosophy into executives and workers……. Ted Turned pioneered the above approach in CNN by forbidding use of the word “FOREIGN” within his company. Thanks to his foresight…CNN today….. Reaches more than …. +68 Mn homes in USA +107 Mn customer Internationally + 100 countries. (Ironically most popular in Japanese Banks & Security Companies)

37. The Global Evolution Of a Company… Prof. Jagdish Seth – Emory University. Crux of the Model… • Almost all organizations began initially as domestically oriented REPLCATE/ MIRROR IMAGE OF HOME COUNTRY • As they grow, they tend to evolve from their initial structures and operations on a replicative basis. • With Time and evolution - Metamorphosis's into GLOBAL PLAYERS …wherein they are driven by a number of “Contextual Determinants”

38. Globalization – Contextual Determinants 1) Cultural Context: • Political stability, • Government Policy • Ideology Driven Economy 2) Entry Context: • Fear Of Colonialism • Fear of Imperialism. 3) Operational Context: • Infrastructure Adjustments • Functional Adjustments. • Product Life Cycle Management

39. Globalization The major change for an organization as it moves from a multi-domestic approach to a global system is how it views the creation of values. Seth uses the measure that he calls as share holder value to determine the success of the global - organization. CREATE VALUES THRU: (Respective) Domestic Portfolio Management. i.e. managing successfully, a variety of brands or products or services. Like NESTLE in foods – appealing to global pallets HOWEVER NOW: Drift from multi portfolio management to success in global orientation thru FOCUS ON CORE BUSINESS.

40. Globalization - Factors Evaluating which markets to enter. Indicators such as: • GNP / capita • Prior business dealings • Whether country is a low cost producer • Whether senior management can work comfortably • Risk level of each country – political stability, currency stability and repatriation rules. • ROI ARRIVE AT DECISION BY INDEXING,WEIGHING AND COMBINING THE VARIOUS NUMBERS ALLOTTED TO THE ABOVE PARAMETERS.

41. Globalization - Problems weighing on Management Minds prior to deciding entry into foreign markets. • Huge foreign indebtedness. • Unstable governments – political instability, high unemployment, which expose foreign firms to risks of nationalization, profit repatriation. • Forex Problems • Foreign-Government entry requirements • Tariffs and trade barriers • Corruption and bureaucracy • Technological pirating • High cost of product and communication adaptation.

42. Group Exercise Product level decision for International Markets. Photocopiers…. Advertisement Campaign for Ray Ban….. Watches….. Software for Rocket launchers / launch pads…. Patented Products….. Golf Clubs…. Consumer Goods…..

43. Group Exercise Product level decision for International Markets. Golf Clubs…. • 4 decade old company. 800mn$. Traditionally Eu, MEA. • Segments: Gender Rs. 100 crore industry, 30% growth • Brand Endorsed by / Ambassador: Jeev Milka Singh. (Member PGA) • Retail distribution • Market Segments : Metros + some tier 2 cities. (total = 8) Market Size : 1 lakh Indians (as of date). North India : Special focus • Business model: Successive launches and not parallel. Spread growth story form city to city • 3 brands rule the market. 60% dominated by Taylor • Opportunity : Inferior quality of equipments / kit, impacting inherent skill • Pricing > Premium. • Competition : Cricket (as a Religion). • Catch them young > Watch them grow. • Women Parks. (untapped segment) • MDP’s (Mgmt Development Programs) • Ride on technology .> From steel to graphite.

44. Group Exercise Product level decision for International Markets. Software for Rocket Launchers / Launch Pads…. • MARKET SEGMENTATAION: Segment 1 > Highly developed Fully automated . Segment 2> Developing. Semi automated. Segment 3> Under developed. Basic level electronics only • Industrial products. • Customer Segments> End Users, Decision makers, Gate keepers • MNC Orientation with licensing arrangements in certain markets. • Industry Characteristics> High entry barriers, Skilled labor, High exit barriers, Competition from super power countries. • Retain Skill set, Constantly upgrade technology > Challenges. • HQ in India. Scores high in Global Political Environment • Threat > Track record or the lack of it. • Ring on increased defense budgets world over. • High cost of upgradation.

45. Group Exercise Product level decision for International Markets. Watch • 20bn market worldwide, few thousand bands, 50% turnover from 5% brands. • Me too brands insignificant in global markets. • MARKET SEGMENTATAION: Premium, Luxury, Lifestyle, Sports BRANDS. • Opportunity for launching Premium Sports Brands. • Price pointing > Global USD 1500 + For Sangram & Co > USD 1200 • Target Segment > Sports freak, affluent and arrived people in developing countries. • Features > 300 m water resistant, eco auto functionality, chronograph, studded with gems / jewelery. • Signature collection for first 3 years > Limited Availability in countries of Brand Ambassadors. • Brand personality > Sports • Promotion > Prominent Sport events sponsorship.

46. Group Exercise Product level decision for International Markets. Advertisement campaign for Ray-Ban • Global product. • Aspirational brand, Emotional loyalty. • Glocalization strategy. • US times, UK times, India Times and Asian Times. > Missing feeling (Ray Ban) • I am wearing my attitude > Are u ?

47. Group Exercise Product level decision for International Markets. Photocopiers • Assumption > Standardized Product. • Standardized by function • Differing in features (scanner, printer options etc), prices, • Blue tooth, carry images, internet functions, email gateway with IP address able to send print / edit commands, document bunching, punching, segregation, color option, Fuzzy logic on refilling, divide between aesthetics or functional use, font compatibility. • Features based on country / geographic segmentation • Glocalization strategy. • Partner with DHL, Fed ex for distribution Hub and Spoke model. • Imaging solutions for corporates, home users, neighbourhood stationary centres, • Email yr requirements. • Tie up with E-books, Institutions like HBR, CMR, Stanford etc

48. Augmented product Installation Actual product Packaging Core benefit or service Brand name Features Delivery and credit After- sales service Core product Quality Styling Warranty Three levels of product

49. Globalization – Product Decisions: Standardization v/s Adaptation OBJECTIVES: • Describe drivers for international standardization and off an overview of the international standardization-local adaptation continuum and respective company strategies • Examine country-of-origin effects on brand evaluations in relation to product stereotypes and consumer ethnocentrism • Examine challenges faced by service providers in international markets • Address issues related to brand name protection and the reasons behind widespread international counterfeiting

50. Globalization – Product Decisions: Standardization v/s Adaptation • Standardized Product • Domestic product introduced internationally, with minor or no modification • Efficient but not effective • Localized Product - Domestic product adapted for foreign markets • Product designed specifically for foreign markets • Effective but not efficient