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Drivers for globalisation - Coggle Diagram
Drivers for globalisation
Organisations may decide to develop a globalised strategy for a number of reasons
Two factors to consider are drivers that propel the industry within which the organisation operates to globalise and the advantages that specific foreign countries may have over the home country of a particular organisation
Market drivers
The potential to pursue a global strategy will be enhanced if there is an international demand for a product that satisfies similar customer needs outside of the home country, that is a global customer base for the product
The potential for transferable marketing and the creation of global brands
Similar customer needs, global customers, transferable marketing
Cost drivers
Operating internationally can reduce costs especially where there are advantages to be gained from economies of scale
Produing volumes in excess of demand on a national scale can reduce both input and output costs - this can be an advantage when domestic production number numbers are small or where the costs associated with R&D must be spread across as wide a range of possible markets as possible
Some countries have specific cost advantages over others such as cheaper raw materials or labour
Some products have logistic advantages
Light and high value items are easy to move around and so are easy to source internationally
Heavy and low value items incur proportionality greater logistics charges and so are often better sourced close to consumption
National advantages, logistical advantages, economies of scale
Government drivers
The role of governments in both the host and the home nation can either facilitate or inhibit international operations
Government policies regarding tariffs affect the attractiveness of global trade and profit margins
Non-tariff barriers such as employment and intellectual property laws also impact globalisation
Trade policies, technological standardisation, home & host policy
Competitive drivers
Applies to the competitive advantages that can be achieved by an integrated global strategy
The pressure for an integrated global strategy will be highest where there is a strong interdependence between countries
Whee manufacture in one country requires sourcing of components in another the pressure for a global strategy will increase
The push towards operating internationally will increase when an organisation has global competition
Global rivalry, interdependence between countries, competitors global
Location and country specific advantages
Organisations have the option to locate their operations in such countries in response to these potential business advantages
Accessing resources, human or otherwise can provide one motivation for globalisation
A country's resources and conditions can also be a source of national advantage for incumbents who may the seek to offer their goods and services overseas providing a driver to export knowledge or goods internationally
When a foreign competitor enters new markets, it must compete with already established incumbent organisations
Incumbent organisations have advantages of market knowldge, existing relationships with suppliers and customer loyalty
An organisation wishing to enter a foreign market must have significant competitive advantages if they are going to be successful - they must have strategic capabilities, unique resources and competencies that provide sufficient sustained competitive advantage over rivals - these international advantages are first acquired in a local, national setting
The nature of the domestic market may provide strategic capabilities for an organisation seeking to operate internationally