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Going global try this
An organisation can think of going global
only when its products have a demand, in countries around
the world. This prerequisite is the starting point. Thereafter,
a host of factors need to be carefully weighed, and strategies
have to be worked out accordingly for successfully globalisation.
A company can participate in international
business through three basic mechanisms:
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Licensing
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Exporting
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Foreign Direct Investment
The company can first foray into overseas markets by exporting
or licensing. Foreign direct investment is considered only
after it has gained a foothold in international markets.
However, there is no doubt that a company can gain significant
commercial, economic and other advantages, by globalising.
There are number of distinct resources that are required
as well as impediments that have to be overcome, to achieve
globalisation.
SOURCES OF GLOBAL ADVANTAGE
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A country is selected as a base for manufacturing
on the basis of cheap resources available. For example,
raw materials, labour or a vast market. For a company
to go global, such a site possessing comparative advantage
is crucial to its world position.
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If there are economies of scale that
extend beyond the size of the national market, the company
can potentially achieve a cost advantage through centralised
production and global competition. Achieving production
economies necessarily implies movement of exports among
countries.
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The global competitor has a potential
cost advantage, if it has a logistics system by which
fixed costs are spread by supplying in many countries.
Japanese firms have achieved significant cost savings
using specialised carriers to transport raw materials
and finished goods, in steel and in automobiles.
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There may be potential marketing economies
of scale if the company can spread the fixed costs of
a group of highly skilled marketing force, by selling
in more countries. For example industries manufacturing
heavy capital goods such as aircraft, construction machinery,
generators and turbines etc., will have lesser selling
cost/unit if sales are spread globally. Some brand names
develop recognition internationally through media, technical
literature and cultural prominence.
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There are opportunities to achieve economies
of scale in purchasing, as a result of bargaining power
when volumes are large due to global selling.
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In technologically progressive businesses,
global competition can give the company an edge in reputation
and credibility. For example, for a high fashion cosmetics
industry, a presence in Paris, London and New York, would
definitely benefit its image, to sell successfully in
Japan.
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Computers, semiconductors, aircraft and
turbines are industries in which proprietary product technology
is a key factor, which can be leveraged to rake in profits.
Some advances in technology are so costly that it requires
global sales to recoup them.
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Mobility can give special scale of economies
as in heavy construction where firms move their crew from
country to country as in seismic crews, oilrigs etc.,
due to sharing proprietary technology.
Often, the resources mentioned above, for
global advantage may occur alone or in combination. The
significance of each source of global advantage clearly
depends on one of the two things:
IMPEDIMENTS
Impediments to global competition can be grouped
on the basis of the following criteria:
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Economic
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Managerial complexity
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Institutional
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Transportation and storage costs are
prohibitive
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Differing product needs due to culture,
income levels, climate and so on
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Difficulty in penetrating enriched distribution
channel of national products
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Entry barriers for sales personnel from
national product sellers
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Delays in responding to market needs
as well as longer lead time to physically transport products,
can make them obsolete and dated
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Differing market tasks
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Intensive local services
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Rapidly changing technology
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Government impediments
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Resource impediments
ONLY AFTER CAREFULLY ASSESSING RESOURCES AND
IMPEDIMENTS– A STRATEGY CAN BE WORKED OUT, TO EXPAND
GLOBALLY.
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