The Economic Dimension of Globalization

1
The Economic Dimension of Globalization

• Steven Globerman
• Western Washington University

2
Characteristics of a Global Firm

• Locates value chain activities in most economical
  location
• Standardizes value chain activities to gain
  economies of scale and scope when possible
• Enhances/leverages brand names/trademarks on a
  global basis
• Sometimes masks national (home country)
  identity
• Multidomestic vs. global firms

3
Characteristics of Global Competition

• Customers can and will substitute away from goods
  produced domestically or by domestically owned
  companies
• Producers can shift supply capabilities across
  geographic markets
• Competitive performance depends upon
  country-specific advantages and firm-specific
  advantages

4
Market Drivers of Globalization

• Common customer needs
• Global customers
• Global channels
• Transferable marketing
• Lead countries

5
Cost Drivers of Globalization

• Global scale economies
• Steep experience curve
• Sourcing efficiencies
• Favorable logistics
• Differences in country costs (including exchange
  rates)
• High product development costs
• Fast-changing technology

6
Government Drivers of Globalization

• Favorable trade policies
• Compatible technical standards
• Common marketing regulations
• Government-owned competitors and customers

7
Competitive Drivers of Globalization

• Other main competitors pursuing global strategies
• Openness of home economy
• Instability of cooperative arrangements in
  individual national markets

8
The European Union as a Driver of Globalization

• Elimination of tariff and non-tariff barriers to
  trade
• Harmonization of regulations/technical standards
• Liberalization of barriers to foreign direct
  investment
• Adoption of a common currency
• Liberalization of barriers to labor mobility