Global Business Strategy Introduction

Types of Business Business National-Business within the nation’s boundaries Global-Business across borders Differ in terms of boundary, type of competition and currency

Reasons for global business Slow growth of the domestic market Intense competition in the home market Saturation of demand in the home country Advantages of economies of scale Earning foreign exchange

Strategy “Strategy is…..a firm’s theory about how to compete successfully” (Jay B.Berney) Developing a strategy is a creative act A firm must make its choice taking into account the fact that it is in a competitive environment

Types of industries in global business Michael Porter Industries in global business can be classified into two:- Global Industry & Multidomestic Industry

Global Industry An industry in which firms must compete in all world markets of that product in order to survive An industry in which a firm’s competitive advantage depends on economies of scale and economies of scope gained across markets. In global markets products are standardized. Adopt global strategy Example of firm :Sony

Multidomestic Industry Firms compete in each national market independently of other national markets. Products are tailored to individual countries by responding to local needs. Adopt a multidomestic strategy Example of firm-Mc Donald

Drivers of globalisation Four drivers determine the extent and nature of globalization in an industry Market drivers Cost drivers Government drivers Competitive drivers

Market Drivers Degree of homogeneity of customer need Existence of global distribution networks Transferable marketing

Cost drivers Potential for economies of scale Transportation cost Product development costs Economies of scope

Government Drivers Favor trade policies e.g. liberalization Compatible technical standards and common marketing regulations Privatization

Competitive drivers Greater the strength of the competitive drivers the greater the tendency for an industry to globalize