5. Phases of Globalization
Globalization is Not a New Phenomenon!
• 1st Phase: 1830, peaking around 1880; Aided by
railroads, ocean transport; resulting in the rise of
manufacturing and trading companies
• 2nd Phase: 1900, peaking late 1920s; Fueled by
electricity and steel; early MNEs
• 3rd Phase: 1948, peaking around 1970; GATT,
end of WW II, Marshall Plan; gradual reduction of
barriers to trade
• 4th Phase: 1980, peaking around 1997; Fueled
by Internet and other technologies: rapid
liberalization in Emerging Markets
• Next phase?
8. Acquisition of Do You Recognize These Brands? - 1
Some
American Companies
Date of
Brand Acquirer Country of Origin
Acquisition
New York Stock Euronext acquisition
Netherlands 2007
Exchange Euronext ICE
Deutsche Börse
Germany 2011
(failed)
Godiva
Yildiz Holding
Turkey 2008
(Ulker)
Anheuser-Busch
(Budweiser)
In-Bev Brazil 2008
Burger King Holdings
3G Capital Brazil 2010
Sara Lee
JBS SA Brazil pending
9. Acquisition of Some
Do You Recognize These Brands? - 2
American Companies
Country of Date of
Brand Acquirer
Origin Acquisition
Purina
Nestle Switzerland 2001
7-Eleven
Ito-Yokado Japan 2005
Gerber
Nestle Switzerland 1996
Car & Driver French Hachette
France
Filipacchi Médias, S.A.
Alka_Seltzer
Bayer Schering Pharma Germany 1979
ThinkPad
Lenovo China 2005
15. Examples of Country Risk
Google received over 1,000 requests from
governments to remove objectionable material
• Complied with ~ 54%
“Google’s Censorship Juggle,” WSJ, June 18, 2012
16. Source: Daalen, R. V., Mock, V. and Morris, B. (2013) “UPS quits takeover in Europe” The Wall Street Journal: Deals & Deal Market,
January 14.
17. • Instability
– Ex: Mexico
– Firms limiting investments in
Mexico due to drug-related
violence
– Electrolux chose to build
appliance factory ($190
million) in Memphis, TN.
rather than Mexico
– Whirlpool chose to build
factory in Cleveland, TN.
Rather than Mexico
“Companies Shun Violent Mexico,” WSJ, Dec. 17, 2010
18. Commercial Risk
• Less than optimal formulation and/or implementation of
strategies, tactics or procedures, e.g. partnering
selections, market entry timing, pricing, product
features, and promotional themes
• Ex: Danone (France) & Hangzhou Wahaha Group Co. China
In 2007, Danone’s JV with a local Chinese partner (Wahaha) failed
after the Chinese firm set up a mirror business in which it sold, on
the side, the products that the JV was marketing
• Failures in int’l markets are far more costly than
domestic business blunders
“Danone Pulls Out of Disputed China Venture,” WSJ, Oct. 1, 2009
20. Why Go International?
Seek opportunities for growth (IBM expects to earn
30% of its revenues from EMs by 2015; at Unilever EMs already
make up 56% of business. Aditya Birla Group operates in 40
countries, earns more than ½ of its revenues from outside India)
Earn higher margins and profits
Exploit brand equity on a global scale
Better serve customers abroad
Monitor & learn from competition abroad
Gain from new business partners
Be closer to supply sources, gain
flexibility in the sourcing of products
21. Three Strategic Benefits Accruing to Firms
from Global Operations
Efficiency (configure optimal supply chains)
Flexibility (better cope with diversity and
volatility of countries – diversify risks)
Learning (benefit from ideas, know-how,
partners, etc.; more MNEs have initiated R&D
centers abroad; vast reserves of skills &
knowledge, experience embedded in a global
workforce is a real asset!) (See CKR Ch 12)
22. Is There Such a Thing as ‘Globalization Penalty’?
Global companies scored lower than locally focused ones on:
‘executing on the ground;’ and building relationships with
governments and business partners (McKinsey 2012)
Where Firms struggle:
No single organizational model is best for all companies
Difficult to adapt products & services to local needs, given fairly
standardized business models of MNEs
Four tensions: Managing strategy, people, costs, and risks on a
global scale
Transferring lessons learned in one market to another
Deploying & developing talent in EMs
Global footprint magnifies complexity! Diversity of markets,
customers, and channels…
23. Risk Mitigation Rises to the Top of MNE Agenda
Geographically diverse business portfolio works as a
hedge against the volatility of local growth, country
risk, and currency risk. But…
Pursuing so many markets (including high-risk EMs)
takes global companies into unchartered waters …
Calling for new risk-management infrastructure
and skills …
Which, if they generate excessively risk-aversive
processes, will slow down decision making and
cause the firm to miss out on fast-developing
opportunities!
26. Who Participates in International Business?
• Multinational enterprise (MNE)
• Small and Medium-Sized Enterprise (SME)
• Born global firms
• State agencies & state-owned companies
• Not-for-Profit organizations; NGOs
• Logistics & shipping firms
• Service providers (banks, ad agencies,
research firms, law firms, payment facilitators)
• Investment firms; sovereign wealth funds
28. 2011 2012 Change
China 61 73 +12
EM Firms in Fortune Global 500
(2012)
BRICs 83 96 +13
All EMs 114 125 +11
Russia: 7
Hungary: 1 S. Korea: 13
Poland: 1
Turkey: 1 China: 73
Mexico: 3 Taiwan: 6
India: 8 Thailand: 1
Colombia: 1 Venezuela: 1 Malaysia: 1
Brazil: 8
29. Examples of Born Global Companies
• Groupon
– 2010: Groupon
expanded from one
country to 35
countries
– Groupon has more
than 40 million users
in 300 global markets
“What’s Next for Groupon?,” Advertising Age, Dec. 13, 2010
30. Examples of Born Global Companies - 2
• Groupon
– 40% JV with Gao
Peng in China
– Recently closed more
than 10 offices in
China, laid off
hundreds of
employees
“Groupon Stumbles in China, Closes Some Offices,”
WSJ, August 24, 2011
Notas del editor
In the early 1990’s the Department of Defense launched a tri service combat aircraft recapitalization program called the Joint Strike Fighter (JSF), now designated the F-35.. The intent of the program was to leverage recent major National investments in technology, introduce true service interoperability and achieve economies of Commonality and Scale as legacy combat aircraft fleets were replaced. The ongoing National Security strategy to require coalition based operations had also surfaced significant capability gaps between US and allied air forces equipment. Component Commanders were impacted by these shortfalls and a decision was made to allow participation by selected allied Nations in the development and procurement of the JSF. The United Kingdom enjoyed a unique role in the start up of JSF as they had been part of a cooperative development program with the US Marine Corps called Advanced Short Takeoff and Vertical Landing, a program originally envisioned to replace the aging AV-8 Harrier fleet. The requirement for ASTOVL was one of the several earlier replacement programs included in the Operational Requirement for JSF. Seven additional countries were allowed to participate as Partners in the JSF Program. These countries joined the program following contract award in October of 2001. These relationships were codified in formal bi-lateral Government to Government agreements for the initial stage Additional strategic considerations: In addition to developing the ability to form future allied coalitions, there is a second strategically important aspect of the JSF F-35 program as an extension of US Foreign Policy in strategically important geographic regions. These are dominated by the Far East (Japan< Singapore and the Republic of Korea) and the Middle East (Israel). While these countries are not “Partners” and do not tend to participate in US Coalitions, they represent an extension of US Foreign policy in their regions. These countries will be allowed to participate in the project through the traditional Foreign Military Sales (FMS) processes.
