International Business - Yip's

25 May 09 Globalisation Drivers 1

Yip’s Globalisation
Drivers

Team 6
Sachin
Arun KA
Balaji
Swapnil
Arobinda
International Business Terms
 International companies : Importers and exporters ; have no investment
outside of their home country.

 Multinational companies : Have investment in other countries ; More

focused on adapting their products and service to each local market.

 Global companies : Have invested and are present in many countries ;

They market their products through the use of the same coordinated
image/brand in all markets.

 Transnational companies : More complex organizations. They have invested

in foreign operations ; have Decentralized decision-making, R&D and
marketing powers to each individual foreign market.

25 May 09 International Business - Yip's Globalisation Drivers 3

Introduction

• George Yip (1992)

• To know the degree of Globalisation within an industry, analyse

• 4 Main Categories of Drivers
1. Market Globalisation Drivers
2. Cost Globalisation Drivers
3. Government Globalisation Drivers
4. Competitive Globalisation Drivers

Low High

(Domestic) (Global)

25 May 09 International Business - Yip's Globalisation Drivers 4

Yip’s Framework

Social &
Technological
Demographic
Factor
Factor

Economic &
Financial Political &
Factor Legal Factor

25 May 09 International Business - Yip's Globalisation Drivers 5

Market Drivers…

Market Globalisation Drivers Govt. Globalisation Drivers

• Customer needs
• Customers & channels
• Marketing
• Leading Countries

Cost Globalisation Drivers Competitive Globalisation

Drivers

25 May 09 International Business - Yip's Globalisation Drivers 6

Market Globalisation Driver - Strength

Airlines
Computers
Automobile
Soft Drinks
FMCG
Retail Banking
Book Publishing
Baked Foods

Low High

(Domestic) (Global)

25 May 09 International Business - Yip's Globalisation Drivers 7

Government Drivers…

Govt. Globalisation Drivers

Market Globalisation Drivers
• Trade Policies
• Customer needs • Technical Standards
• Customers & channels • Marketing Regulations
• Marketing • Govt. Owned Competitors
• Leading Countries • Govt. Owned Customers
• Legal protection

Cost Globalisation Drivers Competitive Globalisation

Drivers

25 May 09 International Business - Yip's Globalisation Drivers 8

Govt. Globalisation Driver : Strength

FMCG
Baked Foods
Soft Drinks
Computers
Automobile
Pharma
Airlines
Retail Banking

Low High

(Domestic) (Global)

25 May 09 International Business - Yip's Globalisation Drivers 9

Cost Drivers…

Govt. Globalisation Drivers

Market Globalisation Drivers
• Trade Policies
• Customer needs • Technical Standards
• Customers & channels • Marketing Regulations
• Marketing • Govt. Owned Competitors
• Leading Countries • Govt. Owned Customers
• Host Govt. Concerns

Cost Globalisation Drivers

Competitive Globalisation
• Economies of Scale & slope Drivers
• Experience Curve
• Sourcing & Logistics
• Country Costs, Productivity
& Skills
• Product Life Cycle &
Product Development Costs

25 May 09 International Business - Yip's Globalisation Drivers 10

Cost Globalisation Driver : Strength

Pharma
Airlines
Computers
Automobile
FMCG
Retail Banking
Baked Foods
Soft Drinks

Low High

(Domestic) (Global)

25 May 09 International Business - Yip's Globalisation Drivers 11

Competitive Drivers…

Govt. Globalisation Drivers

Market Globalisation Drivers
• Trade Policies
• Customer needs • Technical Standards
• Customers & channels • Marketing Regulations
• Marketing • Govt. Owned Competitors
• Leading Countries • Govt. Owned Customers
• Host Govt. Concerns

Cost Globalisation Drivers

Competitive Globalisation
• Economies of Scale & slope Drivers
• Experience Curve
• Sourcing & Logistics • Exports & Imports
• Country Costs, Productivity • Competitors
& Skills • Interdependence of
• Product Life Cycle & countries
Product Development Costs

25 May 09 International Business - Yip's Globalisation Drivers 12

Competitive Globalisation Driver - Strength

Airlines
Pharma
Computers
FMCG
Automobiles
Soft Drinks
Retail Banking
Baked Foods

Low High

(Domestic) (Global)

25 May 09 International Business - Yip's Globalisation Drivers 13

Advantages

• Identifies the drivers that are global and those that are local

• Used to analyse both industry and market

• Can be mapped onto Porter's Five Forces

• Changes in drivers indicated by macro environmental analysis

• Assists in identifying critical success factors for industry and market

25 May 09 International Business - Yip's Globalisation Drivers 14

Case Study – Europe 1992

Govt. Globalisation Drivers Market Globalisation Drivers

• Trade Policies
• Customer needs become
• Eliminate all tariff and non
more common
tariff barriers
• Birth of large ‘Euro mass’
• ‘Mutual Recognition’
Segment
• Subsidies outlawed
• Customers and channels
• Technical standards compatible
increase
for all industries
• Transferable marketing to
• Government owned Customers to
become the norm
lose their ability to favor national
suppliers

25 May 09 International Business - Yip's Globalisation Drivers 15

Case Study – Europe 1992

Cost Globalisation Drivers Competitive Globalisation

•Economic Scale of Europe to Drivers
increase 1. Exports and imports within
• Experience curve strategies EC to increase
to be more viable 2. More competitors from
• ‘Favorable Logistics’ different continent
• Sourcing efficiency to 3. Interdependence of
improve countries to improve
• ‘Difference in country cost’ 4. ‘Pan European’ Strategy
will become more significant
• More investment on high cost
Product Development

25 May 09 International Business - Yip's Globalisation Drivers 16

Case Study – Volkswagen

Market Globalisation Drivers Govt. Globalisation Drivers

• Growing middle class in • Exchange rate variations

developing countries • Interdependence of countries
• Tie-up with Porsche to help in subsiding competitors

Cost Globalisation Drivers Competitive Globalisation

Drivers
• Relocation of production
facility • Threat of Entry to increase
• Taking advantage of • Increase Rivalry among
difference in country costs existing competitors
• Huge cost savings

25 May 09 International Business - Yip's Globalisation Drivers 17

Yip’s Framework & Porter’s Five Force Model
Five Forces Model Globalisation Drivers
Threat of Entry • Common Customers – Increase
• Global economies of scale – reduce
Government Drivers
Government Drivers • Global Marketing – Reduces
Market
Market Drivers
Drivers • High Production Cost – Reduces

Threat of Substitutes • Lead Nations – Increases

• R&D, Innovation – Increases
Government
Government
Drivers
Drivers
Market
Market Drivers
Drivers

Power of Buyers / Suppliers • Existence of global customers –

Weaken
Market
Market Drivers
Drivers • Existence of global suppliers –
Cost
Cost Drivers
Drivers Counteract

Competitive Rivalry • Global Customers – Increase

• Economies of Scale – Increase
Competitive
Competitive • Global Sourcing – Increase
Drivers
Drivers • Compatible TS & Favorable Policies -
Cost
Cost drivers
drivers Increase

25 May 09 International Business - Yip's Globalisation Drivers 18

 Conclusion

Industries and markets differ vastly in the extent to which they are
globalized
- Paint industry is largely globalized;
- Advertising and brand names- localized for linguistic and cultural reasons

Countries with the most favorable combination of drivers are likely to be

chosen as markets and as base by global business

Baked Foods Automobile Pharma

Thank You 25 May 09 International Business - Yip's Globalisation Drivers 19