What Drives Globalization? Part 2/4

Globalization is driven by four factors:

  1. Cost
  2. Market
  3. Environment
  4. Competition

Market:

Consumers in advanced economies are becoming more similar in terms of education, income, lifestyles, aspirations, and their use of leisure time. Marketers of certain products find ready buyers in countries with high purchasing power and well-developed infrastructures. Still other products might fare best in markets that are less sophisticated.

Having a global strategy does not mean that a company should serve the entire globe. Critical choices include deciding where to spend resources and where to hang back. The usual approach is to start by picking regions and then countries within them. Regional groupings might follow the organizational structure of existing multinational management or export offices, such as splitting Europe into northern, central, and southern regions that have similar demographic and behavioral traits. Market data might be more readily available in situations where the firm is grouping markets according to existing structures and frameworks.

This is an excerpt from Dr. Czinkota’s book Global Business: Positioning Ventures Ahead, co-authored by Dr. Ilkka Ronkainen.

Michael R Czinkota and Ilkka A Ronkainen, Global Business: Positioning Ventures Ahead (New York: Routledge, 2011), pg.91.

Planning Your Global Success

Global strategy planning starts with a multi-functional team led by the executive with the most experience in global or regional markets. Team members should include managers from marketing, production, finance, distribution, and procurement. Their first task involves working to understand the success factors that are common to the company’s various markets. Identify the profitability and competitive drivers by analyzing the structure of the global industry. Add the common features of customer requirements and choice factors. Avoid planning global strategy on a country-by-country basis  – it can result in spotty performance. Success tends to come from a portfolio-based planning process that focuses simultaneously across a broad range of markets to help balance risks, resource requirements, competitive economies of scale, and profitability.

Every company gets a reality check when it examines its resources for global expansion. While industrial giants with deep pockets might be able to establish a presence wherever they want, others with shallow pockets will have fewer options. And money is not the only issue – a survey of multinational corporations revealed that people with certain types of knowledge or skills were particularly difficult to find. The shortage is even worse when looking for people with cross-cultural experience to run regional operations.