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Globalisation - Introduction
Author: Jim Riley Last updated: Sunday 23 September, 2012
Globalisation is arguably the most important factor currently shaping the world
economy. Although it is not a new phenomenon (waves of globalisation can be traced
back to the 1800s) the changes it is bringing about now occur far more rapidly, spread
more widely and have a much greater business, economic and social impact than ever
before.
There are several definitions of globalisation. Here are two official examples:
“The geographic dispersion of industrial and service activities, for example research and
development, sourcing of inputs, production and distribution, and the cross-border
networking of companies, for example through joint ventures and the sharing of assets”
“The process through which an increasingly free flow of ideas, people, goods, services
and capital leads to the integration of economies and societies”
Most of the world’s countries are dependent on each other for their
macroeconomic health
Many of the newly industrialising countries are winning a growing share of world
trade and their economies are growing faster than in richer developed nations
All countries have been affected by the credit crunch and decline in world trade,
but many emerging market countries have slowed down rather than fall into a
full-blown recession
Globalisation - International
Competitiveness
Author: Jim Riley Last updated: Sunday 23 September, 2012
International competitiveness
This refers to the ability of a country (or firm) to provide goods and services which
provide better value than their overseas rivals.
As there is constant threat from foreign competition it is essential for business to strive
to improve competitiveness.
Increasing competitiveness
Firms can increase their international competitiveness by:
A 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
Global markets are international markets where products are largely standardised.
Global industries: competition is global. The same firms compete with each other
everywhere.
Global strategy
Companies such as Sony and Panasonic pursue a global strategy which involves:
Competing everywhere
Appreciating that success demands a presence in almost every part of the world
in order to compete effectively
Making the product the same for each market
Centralised control
Taking advantage of customer needs and wants across international borders
Locating their value adding activities where they can achieve the greatest
competitive advantage
Integrating and co-ordinating activities across borders
A global strategy is effective when differences between countries are small and
competition is global. It has advantages in terms of
o Economies of scale
Lower costs
Co-ordination of activities
Faster product development
However, many regret the growing standardisation across the world.
The greater the strength of the competitive drivers the greater the tendency for
an industry to globalise
Stakeholders - Introduction
Author: Jim Riley Last updated: Sunday 23 September, 2012
Groups / individuals that are affected by and/or have an interest in the operations and
objectives of the business
Most businesses have a variety of stakeholder groups which can be broadly categorised
as follows:
Stakeholder groups vary both in terms of their interest in the business activities and
also their power to influence business decisions. Here is a useful summary:
Banks & other Interest and principal to be Can enforce loan covenants
Lenders repaid, maintain credit rating Can withdraw banking facilities
Directors and Salary ,share options, job Make decisions, have detailed
managers satisfaction, status information
Employees Salaries & wages, job security, job Staff turnover, industrial action, service
satisfaction & motivation quality
Community Environment, local jobs, local Indirect via local planning and opinion
impact leaders
Government Operate legally, tax receipts, jobs Regulation, subsidies, taxation, planning
Stakeholder power is an important factor to consider whenever you are asked to write
about the relationship between a business and its stakeholders. In the context of
strategy, what is important is thepower and influence that a stakeholder has over the
business objectives.
For stakeholders to have power and influence, their desire to exert influence must be
combined with theirability to exert influence on the business. The power a stakeholder
can exert will reflect the extent to which:
The reality is that stakeholders do not have equality in terms of their power and
influence. For example:
In handling its stakeholders, a business also has to accept that it will have to
make choices. It is rare that “win-win” solutions can be found for key business
decisions. Almost certainly the business cannot meet the needs of every stakeholder
group and most decisions will end up being “win-lose”: i.e. supporting one stakeholder
means another misses out.
There are often areas where stakeholder interests are aligned (in agreement) – where a
decision can benefit more than one stakeholder group. In other cases, there is a clear
conflict of interest. Here are some common examples:
There are two main approaches to handling the often conflicting needs of stakeholders:
Over the years various techniques and organisational models have been developed
which help businesses handle their relationships with key stakeholder groups. Some of
the most important are summarised below:
Approach Description