Global or Regional?

LO 7.6 The difference between regional companies and truly global

companies

What is Globalization?-the increase in international

exchange, including trade in goods and services as well as exchange of money, ideas and information.

-Growing similarity of laws rules norms values and ideas across countries.

Measure• Foreign Sales• -------------------• Total Sales

Misleading???Why??

•Factors• Geography

• Culture

• Government

-distance-land area-population

-language-tradition-religion

-economy-legal and political-taxation

Regionalization

• Increasing international exchange of goods, services, money, people ideas, and information; and the increasing similarity of culture, laws, rules, and norms within a region

REGIONAL AND GLOBAL

STRATEGIES OF MULTINATIONAL

ENTERPRISES (2001)

 

Alan M. Rugman and Alain Verbeke

Top 500 largest MNE’s(2001)

• Wal-Mart Stores- 1st

• General Motors- 3rd• Ford Motor-5th• General Electric- 9th

Criteria

The Triad Power ConceptKenichi Ohmae

North America

EuropeAsia

Major Economic Regions @least 20 percent of the total sales in each of the region

Global MNEs

500Rank Company Region

Revenuesin bn U.S.$

NorthAmerica

% of totalsales

Europe% of total

sales

AsiaPacific

% of totalsales

19Intl. Business Machines

North America 85.9 43.5 28.0 20.0

37 Sony Asia Pacific 60.6 29.8 20.2 32.8

143Royal Philips Electronics Europe 29.0 28.7 43.0 21.5

147 Nokia Europe 27.9 25.0 49.0 26.0

162 IntelNorth America 26.5 35.4 24.5 40.2

190 Canon Asia Pacific 23.9 33.8 20.8 28.5

239 Coca-ColaNorth America 20.1 38.4 22.4 24.9

388Flextronics International Asia Pacific 13.1 46.3 30.9 22.4

446 Dior (Christian ) Europe 11.3 26.0 36.0 32.0459 LVMH Europe 11.0 26.0 36.0 32.0

@least 20 percent of the total sales in @least 2 of the 3 regions

25/500 Companies

Most companies are REGIONAL, not GLOBAL ,

even today.

Reasons why only FEW GLOBAL?

GeographyCultureGovernment

distance

“True distance”

Reasons why MORE Regional?

“True distance”Trading Blocs

- Group of countries agreeing to increase - trade between them by lowering trade barriers.

7-14

Entry Modes of International Expansion

Exporting Producing goods in one country to sell to residents of another country.

-Low investment risk

Benefits

-Low investment cost

-Low degree of ownership and control

Risks and Limitations

-relationship between the Multinational company and the local distributor