Globalisation - BUSS4 2015 SUMMARY

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  • Globalisation
    • Key Terms
      • GLOBALISATION: process by which the world is becoming increasingly interconnected as a result of massively increased trade & cultural exchange
      • SUPPLY CHAIN: system of bus, people, activities, info & resources involved in moving product from supplier to customer
        • e.g. globalised supply chains in Primark (source globally)
      • COMPETITIVENESS: ability to provide products & services as/more effectively & efficiently than relevant competitors.
      • FOREIGN DIRECT INVESTMENT (FDI): investment by firm in one country into a firm located in a diff country with a view to long-term ownership
        • the current stock of foreign direct investments in the UK is over £1 trillion, creating over 100,000 jobs
        • e.g. Indian company Tata taking ownership of JLR
        • over 2,000 UK firms acquired by overseas companies in last decant - many more UK firms acquiring bus overseas
    • IMPACT OF GLOBALISATION
      • Growth (& greater market share) of multinationals operating in both developed and emerging economies
      • increasing competition for domestic firms from competitors overseas
      • capital (investment) flowing into locations where manu. yields highest returns (and out of uncompetitive locations)
      • location flexibility - multinationals likely to spread their manu. across many countries rather than rely on one - partly to be close to source of demand
        • e.g. Jaguar Land Rover - opening base in China to be closer to customers
      • economies of scale - operating at a scale across continents and serving global customer base
    • Link between globalisation & offshoring
      • Pace of offshoring declined
        • e.g. Imperial Tobacco, Ford Transit, Caterpillar)
        • OFFSHORING:  the relocation of a bus. process or capacity from home country to another
    • Link to technological change - digitisation of manu. makes it easier to locate production in multiple countries & operate more flexibly
    • globalisation changing the way manu. is managed (multi-locations) & organised (complex supply-chains)
    • BUS. MAIN DRIVER OF GLOBALISATION
      • multinationals want to increase sales, profits & shareholder value
      • barriers to international bus. are lower & falling
      • bus. under pressure to grow, but find it hard without expanding overseas
      • consumers increasingly demand same brands across the world
      • Gov. want to encourage domestic bus to expand (flow of profits into domestic economy)
    • why should multinationals continue global expansion
      • higher profits & stronger position & market access in global markets
      • reduced technological barriers to movement of goods, services & factors of production
      • cost considerations - a desire to shift production to countries with lower unit labour costs
      • forward vertical integration (e.g. establishing production platforms in low cost countries where intermediate products can be made into finished products at lower cost)
        • e.g. Jaguar Land Rover - opening base in China so they can offer their vehicles at lower price as no longer have cost of importing goods into country
      • avoidance of transportation costs & avoidance of tariff/non-tariff barriers
      • extending product life-cycles by producing & marketing products in new countries
        • advantage depends on taste & fashions of consumers in each national market
          • e.g. Starbucks failed in Australia since consumer preference was for local brands (same with Tesco in Japan)
    • e.g. of brands/firms that achieved global sucess
      • Apple; Sony; Starbucks; McDonalds; Google; IBM; Microsoft; Amazon; Samsung; Vodafone; Coca-Cola; Disney; L'Oreal; Gillette; HSBC; Toyotoa; American Express; VISA; Mercedes; Facebook
    • EMERGING ECONOMIES
      • BRIC - Brazil Russia India China
      • China key example of emerging economy built on wave of globalisation now threatening manu. in developed countries
        • However, rising labour costs & other supply chain issues in China have reduced China's competitiveness as manu. location
    • UK manu. cant hide from globalisation
      • e.g. forces of globalisation resulted in sig. decline in several UK manu. sectors such as UK textile industry that's fallen from 800,000 jobs to 100,000 in 30 years
      • Other secotrs have thrived - UK aerospace industry 2nd largest globally, employs 113,000 directly (276,000 indriectly) & annual turnover of £20 billion.
      • Biggest challenge - can UK manu. sectors meet glob challenge. Which ones?
      • Seems to be focus on innovation and quality rather than cost in terms of globalisation competiviness
        • UKs wage costs fallen relative to other competing manu. countries - makes UK labor relatively cheap compared with EU
      • UK's strongest manu. already operating as multinationals & investing in UK + key international markets
        • e.g. JCB - UK, India & Brazil /// AstraZeneca - UK & China
  • OTHER FACTORS
    • rising living standards
    • less protectionism
    • lower transport costs
    • digitial communication
    • market liberalisation
    • diverging consumer cultures
    • Globalisation
      • Key Terms
        • GLOBALISATION: process by which the world is becoming increasingly interconnected as a result of massively increased trade & cultural exchange
        • SUPPLY CHAIN: system of bus, people, activities, info & resources involved in moving product from supplier to customer
          • e.g. globalised supply chains in Primark (source globally)
        • COMPETITIVENESS: ability to provide products & services as/more effectively & efficiently than relevant competitors.
        • FOREIGN DIRECT INVESTMENT (FDI): investment by firm in one country into a firm located in a diff country with a view to long-term ownership
          • the current stock of foreign direct investments in the UK is over £1 trillion, creating over 100,000 jobs
          • e.g. Indian company Tata taking ownership of JLR
          • over 2,000 UK firms acquired by overseas companies in last decant - many more UK firms acquiring bus overseas
      • IMPACT OF GLOBALISATION
        • Growth (& greater market share) of multinationals operating in both developed and emerging economies
        • increasing competition for domestic firms from competitors overseas
        • capital (investment) flowing into locations where manu. yields highest returns (and out of uncompetitive locations)
        • location flexibility - multinationals likely to spread their manu. across many countries rather than rely on one - partly to be close to source of demand
          • e.g. Jaguar Land Rover - opening base in China to be closer to customers
        • economies of scale - operating at a scale across continents and serving global customer base
      • Link between globalisation & offshoring
        • Pace of offshoring declined
          • e.g. Imperial Tobacco, Ford Transit, Caterpillar)
          • OFFSHORING:  the relocation of a bus. process or capacity from home country to another
      • Link to technological change - digitisation of manu. makes it easier to locate production in multiple countries & operate more flexibly
      • globalisation changing the way manu. is managed (multi-locations) & organised (complex supply-chains)
      • BUS. MAIN DRIVER OF GLOBALISATION
        • multinationals want to increase sales, profits & shareholder value
        • barriers to international bus. are lower & falling
        • bus. under pressure to grow, but find it hard without expanding overseas
        • consumers increasingly demand same brands across the world
        • Gov. want to encourage domestic bus to expand (flow of profits into domestic economy)
      • why should multinationals continue global expansion
        • higher profits & stronger position & market access in global markets
        • reduced technological barriers to movement of goods, services & factors of production
        • cost considerations - a desire to shift production to countries with lower unit labour costs
        • forward vertical integration (e.g. establishing production platforms in low cost countries where intermediate products can be made into finished products at lower cost)
          • e.g. Jaguar Land Rover - opening base in China so they can offer their vehicles at lower price as no longer have cost of importing goods into country
        • avoidance of transportation costs & avoidance of tariff/non-tariff barriers
        • extending product life-cycles by producing & marketing products in new countries
          • advantage depends on taste & fashions of consumers in each national market
            • e.g. Starbucks failed in Australia since consumer preference was for local brands (same with Tesco in Japan)
      • e.g. of brands/firms that achieved global sucess
        • Apple; Sony; Starbucks; McDonalds; Google; IBM; Microsoft; Amazon; Samsung; Vodafone; Coca-Cola; Disney; L'Oreal; Gillette; HSBC; Toyotoa; American Express; VISA; Mercedes; Facebook
      • EMERGING ECONOMIES
        • BRIC - Brazil Russia India China
        • China key example of emerging economy built on wave of globalisation now threatening manu. in developed countries
          • However, rising labour costs & other supply chain issues in China have reduced China's competitiveness as manu. location
      • UK manu. cant hide from globalisation
        • e.g. forces of globalisation resulted in sig. decline in several UK manu. sectors such as UK textile industry that's fallen from 800,000 jobs to 100,000 in 30 years
        • Other secotrs have thrived - UK aerospace industry 2nd largest globally, employs 113,000 directly (276,000 indriectly) & annual turnover of £20 billion.
        • Biggest challenge - can UK manu. sectors meet glob challenge. Which ones?
        • Seems to be focus on innovation and quality rather than cost in terms of globalisation competiviness
          • UKs wage costs fallen relative to other competing manu. countries - makes UK labor relatively cheap compared with EU
        • UK's strongest manu. already operating as multinationals & investing in UK + key international markets
          • e.g. JCB - UK, India & Brazil /// AstraZeneca - UK & China

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