ANALYSIS OF THE COMPETITIVE ENVIRONMENT 113 Logistics If transport costs are

Analysis of the competitive environment 113 logistics

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ANALYSIS OF THE COMPETITIVE ENVIRONMENT [ 113 ] Logistics If transport costs are low and products are non-urgent and non- perishable, then there are advantages to be gained from global concentration of 117
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production. Country costs, productivity and skills Countries differ considerably in terms of production costs, productivity levels, infrastructure and availability of skilled labour.There are sometimes global cost advantages to be obtained by concentrating activities in countries where productivity is high and costs are relatively low. Product life cycles and product development costs The speed with which new products are required is increasing and, at the same time, the development costs of new products are high.In order to cover these costs it is necessary to sell such products in global markets because national markets are not sufficiently large to provide the necessary returns (again, especially if the business has relatively high fixed costs). Government globalization drivers Government policies, legislation and regulation can also drive an industry toward globalization. Trade policies The increasing liberalization of world trade (with falling barriers to trade) has greatly increased the potential for globalization, even though in some countries there are still substantial government-imposed trade barriers. Technical standards If technical standards for a product are common between countries, then this will drive an industry toward globalization, while incompatible standards will tend to fragment the market.In the 1970s, technical standards for telecommunications tended to be different from country to country, although the digitization of the 1990s increased compatibility.The resultant compatibility was one of the most important stimulants behind global communications media, such as the Internet. Marketing regulations Marketing regulations like those governing advertising tend to vary from country to country, which can sometimes inhibit the use of global advertis- CHAPTER 4 [ 114 ] 118
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ing.Yet, even in this case there is a tendency toward global standards.As a consequence, major companies like Nike and Coca-Cola have been able to design advertising campaigns that meet advertising standards across the world such that the advert’s ability to offend in some cultures is minimized. Government-owned competitors Yip argued that the existence of government-owned competitors in an industry can spur an industry toward globalization.Government subsidies and protection of home markets encourages such businesses to seek foreign customers, and this can increase global competition. Government-owned customers Government-owned customers tend to reduce globalization potential as they often tend to favour domestic suppliers for local political reasons.
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