1. Case: Wal-mart’s global expansion
Largest retailer in the world –Over 4500 stores
International expansion in 1991begins with Mexico in response to market saturation in the US
Localization strategy adopted after trial and error
Global buying power has allowed it to reap economies of scale
Wal-mart faces significant competition from other global retailers, but has the first mover advantage in some markets

2. Food retailers going global
Wal-Mart of the United States : %, 80% domestic,
by ,045 stores outside U.S.A, Using acquisition, it entered
Germany & Britain (Asda). Mexico (building)
Carrefour of France : 26 countries, more than 50 percent of its sale
outside France, soon to enter the States
Ahold of Holland – multiple acquisition (Giant Food, 1063 supermarkets)
more than 70% outside Holland
Tesco from the United Kingdom – vivid these days in Southeast Asia
& Eastern Europe (acquisitions & expansions)
Drivers fro going global
Barriers to cross-border investment fell
Domestic market saturation
Rush-in effect
Economies of scale (buying power)
Transfer effect of their core capabilities
National differences in tastes
& preferences affects firm’s strategy
for going global.
Global retailing market

3. Globalization = The shift toward a more integrated and interdependent world economy
global product – car, mobile phone, every day life
globally interdependent economy
* local jobs depend upon open international markets
* From a company point of view – increased opportunities for a firm
to expand – the collapse of communism, Deregulation for buz.
privatizing state-owned enterprises, deregulating markets, increasing
competition, & welcoming investment by foreign businesses
global challenge
* different tastes and preferences, operating systems, brand
The Globalization of Markets = The merging of historically distinct and separate
national markets into one huge global marketplace.
Tastes and preferences converge onto a global norm
Firms offer standardized products worldwide creating a world market
Significant differences still exist between national markets on many relevant dimensions
These differences require that marketing and operating strategies and product features
be customized to best match conditions in a country.
Convergence vs. Differences (tastes & preferences), Firm size & global competition,
Homogeneity vs. Diversity (market)
Countries are different
Range of problems are wider and more complex
Government intervention in trade and investment creates problems
International investment is impacted by different currencies

4. The Globalization of Production = The sourcing of goods & services from locations around the
globe to take advantage of national differences in the cost and quality of factors of production
(such as labor, energy, land, & capital).
Quality increase & cost reduction, the 777 (132,500 component parts by 545 suppliers) – global
products
Impediments – barriers to trade bet/w countries, barriers to FDI, transportation costs, & issues
associated with economic & political risk.

5. Global Production
Swan Optical
Manufacturing
Example 1
Design
1-5

6. The emergence of global institutions
Globalization has created the need for institutions to help manage, regulate
and police the global marketplace
GATT (General Agreement on Tariffs and Trade)
WTO : Responsibility for policing the world trading systems and making sure nation-
states adhere to the rules laid down in trade treaties signed by WTO member states.
IMF : 1944, Brentwoods, NH. Maintaing order in the int’l monetary system.
World Bank : Promoting economic development
UN : 1945 Preserving peace through international cooperation and collective security.
Drivers of Globalization
Declining Trade & Investment Barriers
Trade barriers – the Great Depression of the 1930s
GATT (140 countries) & Uruguay Round (December, 1993, services & agricultural
goods)
removing restrictions to FDI
– the globalization of markets & production vs. intense competition
Globalization of markets and production has been facilitated by
Reduction in trade barriers
Removal of restrictions to foreign direct investment

7. Pattern of declining tariffs

8. Volume of world trade and production, 1950-2002
Fig: 1.1

9. The Role of Technological Change
Microprocessors and Telecommunications – Moore’s Law – 18 months – capability
doubled, cost half.
The Internet & World Wide Web – B2B, Shopping Mall.
Transportation Technology – commercial jet aircraft
& containerization
Implications for the Globalization of Production
- GSCM
Implications for the Globalization of Markets
– customer tastes & preferences,
global culture

10. The shrinking globe
Fig: 1.2

11. The Changing Demographics of the Global Economy
The Changing World Output and World Trade Picture – Relative decline in the share of
of world output and world exports accounted for by the United States and other
long-established developed nations (Table 1.2)
The Changing Foreign Direct Investment Picture (Figure 1.4 & Figure 1.5)
The Changing Nature of the Multinational enterprise
Non-U.S. Multinationals – the emergence of Japanese, & other developing countries
The Rise of Mini-Multinationals – Lubricating Systems, Inc.
The Changing World Order –Communist countries fall, China & Latin America
– democratic politics and free market economics- the opportunities & risks
The Global Economy of the 21st Century – privatization, deregulation, market competition,
removing barrier

12. The changing pattern of world output and trade

13. Percentage share of total FDI stock
Fig: 1.3

14. Volume of FDI inflows, 1994-2002 ($ billions)
Fig: 1.4

15. National origin of largest multinational corporations
Fig: 1.5

16. The Globalization Debate
Pro
Lower prices for goods and services
Economic growth stimulation
Increase in consumer income
Creates jobs
Countries specialize in production of goods and services that are produced
most efficiently
Con
Destroys manufacturing jobs in wealthy, advanced countries
Wage rates of unskilled workers in advanced countries declines
Companies move to countries with fewer labor and environment regulations
Loss of sovereignty
Antiglobalization Protests -
Globalization, Jobs, & Income
Globalization, Labor Policies, & the Environment
Globalization & National Sovereignty
Globalization & the World’s Poor
Managing in the Global Marketplace

17. Environmental performance and income
Fig 1.6

18. 1.3 The Shrinking Globe