World Midterms

market integration

s a term that is used to identify a phenomenon in which markets of goods and services that are somehow related to one another being to experience similar patterns of increase or decrease in terms of the prices of those products

market integration

refer to a situation in which the prices of related goods and services sold in a defined geographical location also begin to move in some sort of similar pattern to one another.

direction of the economy

market integration may be intentional, with a government implementing certain strategies as a way to control the

market integration

may be due to factor such as shifts in supply and demand that have a spillover effect on several markets

market integration

the events occurring within two or more markets are exerting effects that also prompt similar changes or shifts in other markets that focus on related goods.

Agricultural Revolution

It was the first big economic change

Agricultural Revolution

When people learned how to domesticate plants and animals, they realized that it was much more productive than hunter-gatherer societies.

Agricultural Revolution

Farming helped societies build surpluses, meaning, not everyone had to spend their time producing food. Thus, it led to major developments.

Industrial Revolution

It was the second major economic revolution in1800s

Industrial Revolution

With the rise of industry came new economic tools, factories popped up and changed how work functioned

Industrial Revolution

Instead of working at home, people began working as wage laborers and then becoming more specialized in their skills. Thus productivity went up, standards of living rose, and people had access to wider variety of goods due to mass production.

Economic casualties Industrial Revolution

The workers in factories worked in dangerous conditions for low wages.

Economic casualties Industrial Revolution

More productivity came with greater wealth, but also greater economic inequality.

Economic casualties Industrial Revolution

Because of it, in the late 19th century, labor unions began to form that sought to improve wages and working conditions.

Capitalism

A system in which all natural resources and means of production are privately owned.

Capitalism

It emphasizes profit maximization and competition as the main drivers of efficiency

invisible hands

The idea is that if one leaves a capitalist economy alone, consumers will regulate things themselves by selecting goods and services that provide the best value

Adam Smith

invisible hands

Market failures

the reasons most countries are not purely capitalist societies

Monopoly

In practice, an economy does not work well if it is left completely on autopilot. It would lead to market failure such as

Government

plays an even larger role in socialism

Socialism

The means of production are under collective ownership – property is owned by the government and allocated to all citizens, not only those with the money to afford it

Karl Marx

socialism is a stepping stone to communism

Information Revolution

Computers and other technologies are beginning to replace many jobs because of automation or outsourcing jobs offshore

second half of the 20th century

Development of technologies in the

Technologies

have reduced the use of human labor and shifted from a manufacturing-based economy to one that is based on service work and the production of ideas rather than goods.

Globalization

a business initiative based on the belief that the world is becoming more homogenous and that distinctions between national markets are not only fading but for some products, will eventually disappear

market, cost, environmental, and competitive factors

As a result, companies need to globalize their international strategy by formulating it across markets to take advantage of underlying

Single- country firms

e. Single- country firms normally operate in a relatively what for their products and service

product design and production

can often fairly standardized, allowing the firm to achieve economies of scale in production, and deliver a product that appeal to its entire market.

Global corporations

often faces a trade-off between seeking competitive advantage through the lower production cost that global economies of scale allow, and seeking competitive advantage by tailoring the products to specific national markets forgoing economies of scale but providing a product more tailored to local taste

demands and practices

he global firm must determine how to balance the of other countries.

United States, Japan, and Western Europe

triad countries

United States, Japan, and Western Europe

account for about half of the world’s total consumption

Northern America, Japan, and Western Europe

They share certain important economic and demographic conditions such as high income levels and high GNP values

Ohmae, 1990

It has been argued that a firm cannot truly compete on a Global Scale if it is not present in this “triad.”

maximum economies of scale

If a firm does not have operations in all three areas of the triad, it may not be able to achieve

Triads

often source of technological and product innovations

cost advantage

a firm sets out to become the low cost producer in its industry

cost advantage

are varied and depend on the structure of the industry

Cost leadership

They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors

low cost producer

must find and exploit all sources of cost advantage

Cost leadership

it will be an above average performer in its industry, provided it can command prices at or near the industry average.

Differentiation

seeks to be unique in its industry along some dimensions that are widely valued by buyers

Differentiation

It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs

Differentiation

It is rewarded for its uniqueness with a premium price.

Focus

rests on the choice of a narrow competitive scope within an industry

Focus or focuser

selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others

y Ernst Dichter more than 30 years ago

The world customer today identified by

Kinichi Ohmae

has identified a new group of consumers emerging in the triad of North America, Europe and Japan whom marketers can treat as a single market with the same spending habits.

600 million consumers

Approximately over have similar educational backgrounds, income levels, lifestyles, use of leisure time and aspirations.

level of purchasing power

One reason given for the income levels in their demand is a that translates into higher diffusion rates

Market Factors
Cost Factors
Environmental Factor
Competitive Factors

GLOBALIZATION DRIVERS

Environmental Factor

As the world market is going global, government barriers have fallen dramatically in the last years to further facilitate the globalization of markets and the activities of global corporations with them.

Competitive Factors

Many global corporations are already dominated by global competitors that are trying to take advantage of the three sets of factors mentioned earlier. To remain competitive, the company may have to be the first to do something or to be able to match or preempt competitors moves.

International companies Functions of Global Corporation

are importers and exporters, typically without investment outside of their home country

Multinational companies

have investment in other countries, but do not have coordinated product offerings in each country

Multinational companies

They are more focused on adapting their products and services to each individual local market.

Transnational companies

are more complex organizations which have invested in foreign operations, and have a central corporate facility but give decision-making, research development (R&D), and marketing powers to each individual foreign market.

Global companies

have invested in and are present in many countries.

Global companies

They typically market their products and services to each individual local market.

Transnational companies

Pharmacy drugs medicine being created in different countries

Global companies

phones, change minor things in product

Multinational companies

fastfood change menu to fit local taste

International companies

shipping and supply lang deliver no other company in other country

Investment-based Globalization 1950-1970

dominated by producer-driven commodity or value chains, which in turn tended to be dominated by firms characterized by large amount of concentrated capital focused on large-scale or capital-intensive manufacturing or extractive industries.

Trade-based Globalization 1970-1995

due to the emergence of Japan as a major producer nation, especially of automobiles and consumer electronics from the 1970s onward. This brought to the scene new models of effective production focused especially on quality and regimes of flexible production which prompted the European firms to rejoin the global commodity chains.

Digital Globalization 1995-Present

has affected the entire structure of how global corporations operate. The integration of corporate structure reducing the effects of time and distance especially for services performed within the corporate structures such as design, finance and accounting, advertising and brand development, legal services, inventory controls, etc.

procurement, production, and delivery

There are three primary issues that concern global managers

Procurement

involves decisions about the source, timing, and means of obtaining needed inputs

Production

involves the location, type, and coordination of facilities, as well as total quality management

Delivery

involves getting the finished product to the customer and logistical networks as they apply to the entire operational system

Procurement Issues

In order to provide a product, a firm needs certain inputs, including raw materials, labor, and energy

Procurement Issues

Managers have to select the best source for these inputs, decide on the most effective means of obtaining them, and determine the timing for acquiring them

Procurement Issues

The firm's overall objective is to obtain the best inputs from around the world in order to produce components and products efficiently

degree of vertical integration

depends on the degree to which a firm is its own supplier and market

supplier

The focus on the procurement is in the

backward integration

At one extreme, a firm can seek to make all of its own inputs which is also known as and be its own supplier

Forward integration

it can choose to buy virtually all the inputs it needs and rely on others as suppliers.

political and social implications

National origin of suppliers can have

National Origin

Certain countries may be looked on unfavorably, and any association with suppliers in those countries can have negative repercussions in other locations

National Origin

Consumer boycotts have often been organized against a company's products because the company uses inputs originating in a foreign location viewed negatively by consumers.

Timing Issues

This is essentially an inventory and stock issue, companies can choose to maintain varying quantities of needed inputs.

Timing Issues

The trade-offs are among shipping costs, carrying costs, and the risks of being out of stock of needed items

Timing Issues

These are issues faced by all companies particularly with those global corporations. International managers find that the situation is more complex, however, because of border crossings.

Timing Issues

These can lead to unanticipated delays in transporting products, and such delays cannot always be factored into the inventory equation.

Production

involves the location, type, and coordination of facilities, as well as total quality management and coordinating facilities.

MARKET GLOBALISM

is a term used to describe a perspective that emphasizes the role of free markets, globalization, and the global economy in shaping the world.

neoliberal economic policies

Market globalism often associated with proponents of

Economic Efficiency, Wealth Creation, Consumer Choice, Global Competition, . Investment and Growth, Reduced Poverty

While there are variations in the specific claims made by proponents of market globalism, here are six core claims that are often associated with

Economic Efficiency

Market globalism argues that free markets and globalization lead to greater

Economic Efficiency

It contends that when governments reduce regulations, tariffs, and trade barriers, markets can allocate resources more efficiently, leading to increased productivity and economic growth

Wealth Creation

Proponents of market globalism assert that freemarket capitalism has the potential to create wealth and reduce poverty on a global scale.

Wealth Creation

They argue that when markets are allowed to function without significant interference, innovation and entrepreneurship thrive, creating opportunities for economic advancement

Consumer Choice

Market globalism emphasizes the importance of and the benefits of a diverse range of goods and services available in a globalized market

Consumer Choice

It suggests that consumers benefit from access to a wider array of products at competitive prices.

Global Competition

Advocates of market globalism argue that global competition incentivizes companies to become more efficient and innovative

Global Competition

This competition is seen as driving businesses to continually improve their products and services to stay competitive on a global scale.

Investment and Growth

Market globalism contends that foreign direct investment (FDI) and global capital flows can stimulate economic growth in both developed and developing countries

Investment and Growth

It suggests that open markets attract investment, which can lead to infrastructure development and job creation.