External triggers

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External triggers

• External triggers to the internationalization
  process
• Meta-level development in the world economy
• PEST analysis
• Internationalization of industries globalisation
  vs. localisation
• Bi-polarisation

2
Fundamental PEST headings
Political
Economic
Social
Technological
Derivative trends
Protectionism v Liberalisation
Changes in exchange rates
Labour costs and market changes
Changing tastes
Multi- formity
Innovation and development
Meta trends
Changes to worldwide supply and demand
Dynamic changes in GNP and trade
Changes to consumer lifestyle
Diffusion of new technology
Figure 3.9. The relationship between PEST and
meta trends
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• Worldwide supply and demand
• growing number of products, services traded
  internationally
• Governments believe they may persist gtfurther
  rapid decline

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Fundamental PEST headings
Political
Economic
Social
Technological
Derivative trends
Protectionism v Liberalisation
Changes in exchange rates
Labour costs and market changes
Changing tastes
Multi- formity
Innovation and development
Meta trends
Changes to worldwide supply and demand
Dynamic changes in GNP and trade
Changes to consumer lifestyle
Diffusion of new technology
Figure 3.9. The relationship between PEST and
meta trends
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• Dynamic change in GNP and trade
• stagnating, declining industries supplanted
• vital, growing industries supported
• long term opportunities for mutual enrichment no
  zero sum struggle gt no absolute losers or
  winners
• renewal triggered by exchange rates, labor cost
  adjustment

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Fundamental PEST headings
Political
Economic
Social
Technological
Derivative trends
Protectionism v Liberalisation
Changes in exchange rates
Labour costs and market changes
Changing tastes
Multi- formity
Innovation and development
Meta trends
Changes to worldwide supply and demand
Dynamic changes in GNP and trade
Changes to consumer lifestyle
Diffusion of new technology
Figure 3.9. The relationship between PEST and
meta trends
7

• Changes to consumer lifestyles
• Increasing multi-formity, dynamism of markets
• shorter life cycles

8
Fundamental PEST headings
Political
Economic
Social
Technological
Derivative trends
Protectionism v Liberalisation
Changes in exchange rates
Labour costs and market changes
Changing tastes
Multi- formity
Innovation and development
Meta trends
Changes to worldwide supply and demand
Dynamic changes in GNP and trade
Changes to consumer lifestyle
Diffusion of new technology
Figure 3.9. The relationship between PEST and
meta trends
9

• Diffusion of new technology
• fast proliferation of know-how gt
• generate successful products and services gt
• high devlt costs gt large intl markets needed

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Internationalization of industries
globalization vs. localization
GLOBALISATION
LOCALISATION
Convergence World market structure World level
competn World single market
Divergence Collection of natl industries Natl
level competn Many markets treated separately
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• Assesing the extent of globalisation
• How boundaries to the industry might be drawn?
• including rivals (close substitutes)
• customers viewpoint paramount

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Industry I
Collection of competitors with similar
technologies, processes and skills
Firm A
Firm B
Firm C
Market segment (i)
Market segment (ii)
Market segment (iii)
Firm X
Firm Y
Firm Z
Industry II (substitute products)
Collection of competitors with similar
technologies, processes and skills
Figure 3.10 Industries and markets
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Customers -customer requirements -distribution -un
iform marketing
Changes at meta level
Cost -new product developm. -scale
economic -transport costs
Country -trade policies -technical
standards -culture, regulations
Globalisation v. Localisation
Competition -competitive interdependence -new
entry competn
Four sets of industry drivers
4 Cs
Figure 3.11. Assessing the extent to which an
industry is globalising
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a) Customer drivers

• Customer requirements
• Some products worldwide acceptance gt
  standardized global product
• Within industry marked variation (rice paste /
  tomato kechup)
• UK sweet
• France spicy
• USA vinegary

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• Distribution
• Different channels gt to be customise
• Customer push or pull
• Special national distribution system Japanese
  electronics companies gt retired employer pop
  and mum shops

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• Uniform marketing
• Convergence of lifestyle selling to different
  national markets
• Same product (satellite TV)
• Same product variety of brand names
• Unilever All, Omo, Persil, Presto, Skip, Via

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Customers -customer requirements -distribution -un
iform marketing
Changes at meta level
Cost -new product developm. -scale
economic -transport costs
Country -trade policies -technical
standards -culture, regulations
Globalisation v. Localisation
Competition -competitive interdependence -new
entry competn
Four sets of industry drivers
4 Cs
Figure 3.11. Assessing the extent to which an
industry is globalising
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b) Cost drivers

• New product development
• Escalating cost of RD, huge resource demand
• Only the largest firms gt trigger to be large
• Smaller car manufacturers absorbed
• 1994 VW, Fiat, Renault, Peugeot/Citroën, Ford,
  GM
• Further rationalization ahead

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World sales MES output Nr. of plants Pressure to
glob. 120 m 10 12 decreased 120 m
20 6 current position 120 m
40 3 increased

• Scale economies
• Trigger to globalization achieve high volume
  sales gt larger plants
• Counterbalancing Flexible Manufacturing Systems
  (FMS) gt smaller plants
• Find relative balance
• Minimum Efficient Scale (MES) smallest size to
  achive min. cost/unit
• FMS can offset the pressure of scale of
  economies! (integrated steel plants ? mini mills)

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• Transportation costs
• Sometimes countervailing force to the trend of
  globalization
• Low value/bulky product remain localized
• High value/small weight not prevented to be
  global
• General trend transport costs fall, reduce
  restrictions

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Customers -customer requirements -distribution -un
iform marketing
Changes at meta level
Cost -new product developm. -scale
economic -transport costs
Country -trade policies -technical
standards -culture, regulations
Globalisation v. Localisation
Competition -competitive interdependence -new
entry competn
Four sets of industry drivers
4 Cs
Figure 3.11. Assessing the extent to which an
industry is globalising
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c) Country drivers

• Trade policies
• Some countries individual trade policies (duty
  on products outside the bloc)
• Technical standards
• E,g electric power supply, food products laws,
  measure units
• Converging intl standards encouraging
  globalization
• Cultural and regulatory barriers
• Forms of advertising, business practices
  (aggressive)

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Customers -customer requirements -distribution -un
iform marketing
Changes at meta level
Cost -new product developm. -scale
economic -transport costs
Country -trade policies -technical
standards -culture, regulations
Globalisation v. Localisation
Competition -competitive interdependence -new
entry competn
Four sets of industry drivers
4 Cs
Figure 3.11. Assessing the extent to which an
industry is globalising
27
d) Competitive drivers

• Competitive interdependence
• Broadening geographical scope gt interlinked
  natl markets gt competitor disadvantage
• Competitive dynamics of industry reflects life
  cycle. too
• New entry competition
• May have powerful influence on the global/local
  balance
• May reflect liberalization, new tech and business
  practice

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External triggers

• External triggers to the internationalization
  process
• Meta-level development in the world economy
• PEST analysis
• Internationalization of industries globalisation
  vs. localisation
• Bi-polarisation

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Bi-polarisation
Giants
Small
Medium-size companies
Close down
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Industry
Globalisation
Localisation
Industry drivers
Figure 3.12. The pendulum of change convergence
versus divergence
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Globalisation
Localisation
High Med Low Industry
drivers Low Med High
Customer drivers Customer requirements Distributio
n Marketing Cost drivers New product
development Scale economies Transport
costs Country drivers Trade policies Technical
standards Cultural/regulatory barriers Competitive
drivers Competitive interdependence Entry of new
competitors
High
Overall
Figure 3.13. Summary of industry drivers for the
consumer electronics industry over the next five
years
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Product scope
Narrow
Broad
Restric-ted natl
(i) Local or national regional or national niche
strategy
(ii) Local or national regional or national
broad-based strategy
Geographical scope
Internatl
(iii) International niche strategy
(iv) International broad-based strategy
Figure 3.14 International competition and
bi-polarisation