ON GLOBALIZATION
‫על גלובליזציה‬
Corporations without roots.
‫תאגידים חסרי שורשים‬
Prof. E. Jaffe
1
GLOBALIZATION IS CHANGE
‫גלובליזציה מסמלת שינוי‬
Forces that impel individuals,
groups, and institutions to
engage in similar forms of
behavior.
‫גורמים אשר דוחפים אנשים קבוצות‬
‫ומוסדות לצורות התנהגות זהות‬.
(Rosenau, Current History, 1997)
Prof. E. Jaffe
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FOUR TYPES OF CHANGE
‫ארבע סוגים של שינויים‬
Stretching of social, political & economic
activities across political frontiers.
- ‫ פוליטיות ו‬,‫פרישה של פעולות חברתיות‬
.‫כלכליות מעבר גבולות‬
Growing magnitude of interconnectedness
of flows of trade, investment, etc.
,‫הקף גובר של זרימות מתוקשרות של סחר‬
Prof. E. Jaffe
’.‫וכו‬, ‫השקעות‬


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Evolution of world-wide systems of 
transport and communication.
‫ תקשורת‬-‫ התפתחות של מערכות תחבורה ו‬
.‫בכל העולם‬
Increasing intensity and velocity of global 
interactions.
.‫ גידול בעוצמה ובמהירות של פעולות הדדיות‬
Prof. E. Jaffe
4
TYPES OF GLOBALIZATION
‫סוגי גלובליזציה‬
 ECONOMIC
-Integration of economies,
through trade and financial flows.
Movement of labor and knowledge across
international borders.
‫ אינטגרציה של משקים באמצאות‬- ‫ כלכלית‬
‫ידע מעבר‬-‫ תנועות של כוח אדם ו‬.‫סחר ומימון‬
.‫גבולות‬
Prof. E. Jaffe
5
 POLITICAL -
Participation in international
governmental organizations (IGOs);
integration with regional IG networks (e.g.,
EU, Organization of American States).
‫ אינטגרציה עם‬IGOs ; ‫ שיתוף עם‬- ‫ פוליטית‬
IG.‫מרקמי‬
- Organization of American ‫ וה‬- EU ‫כמו ה‬
States.
Prof. E. Jaffe
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 CULTURAL -
Flows of science, concepts
of liberalism, socialism, capitalism, etc.
,‫ מוסגים כגון ליבראליזם‬,‫ זרמי מדע‬- ‫ תרבותית‬
’.‫וכו‬, ‫ קפיטליזם‬,‫סוציאליזם‬
 ENVIRONMENTAL -
Global warming;
ozone depletion; production and reception
of cross-border pollutants (e.g. acid rain).
‫ סביבתית‬
Prof. E. Jaffe
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GROWTH OF TRADE
‫גידול במסחר‬
CAPITAL FLOWS
‫זרימות הון‬
GLOBALIZATION
MIGRATION
‫גלובליזציה‬
)‫הגירה (ניידות‬
IT and the WEB
DIFFUSION OF TECHNOLOGY
‫נפיצות של טכנולוגיה‬
Prof. E. Jaffe
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BENEFIT versus COST
‫תועלת לעומת מחיר‬
BENEFITS
 Economic Growth
 Reduction of Poverty
 Improved Health, Life
Expectancy
 Spread of Knowledge
 Flexibility of
Production
Prof. E. Jaffe
COSTS
 Inequality
 Worker Displacement
 Risks of Banking &
Currency Crises
 Domination of Trade
& Production by
TNCs
 Degradation of the
Environment
 Loss of Authority
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CONCEPTS OF
GLOBALIZATION

GLOBAL INFRASTRUCTURE
‫תשתית גלובלית‬

GLOBAL HARMONIZATION
‫הרמוניזציה גלובלית‬

BORDERLESSNESS
‫בלי גבולות‬

GLOBAL DIFFUSION

‫נפיצות גלובלית‬
DISPERSION OF CORE COMPETENCIES
‫פיזור של יכולות תווך‬
Prof. E. Jaffe


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ENGINES OF
GLOBALIZATION
 TRANSNATIONAL CORPORATIONS
 TRANSNATIONAL MEDIA ORGANIZATIONS
 INTERGOVERNMENTAL ORGANIZATIONS
 NON-GOVERNMENTAL ORGANIZATIONS
Prof. E. Jaffe
11
INTERNATIONAL ACCOUNTING
STANDARDS
‫כללים חשבונאיים‬
 International Accounting
Standards Comm.
 ‫ועדת הסטנדרטים החשבונאיים הבינלאומית‬

‫קובץ כללים חשבונאיים בינלאומיים אחיד‬
 Financial Accounting
Standards Board
(FASB)
 ‫מועצת הסטנדרטים החשבונאיים הפיננסיים‬
Prof. E. Jaffe
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EXAMPLE
 Smith
Kline Beecham (1993) $1.5 Billion
Profits according to British Accounting
Standards
 $1.2
Billion Profits according to United
States Accounting Standards
Prof. E. Jaffe
13
HARMONY OF VISION?
?‫הרמוניה של חזון‬
The Leaders of the world’s great
business enterprises continue to
differ in their most fundamental
strategic visions.
(Keller & Pauly, Current History, 1997)
Prof. E. Jaffe
14
MULTINATIONAL
STRATEGIES
 AMERICAN
- SHORT-TERM
PAYOFFS
 GERMAN - FOCUS ON A NARROW
BAND OF INDUSTRIES IN WHICH
THE BENEFITS OF NEW
TECHNOLOGIES TEND TO BE
DIFFUSED WIDELY.
 JAPANESE - LONG-STANDING
CORPORATE NETWORKS.
Prof. E. Jaffe
15
GLOBALIZATION - THEN AND NOW
“The World is a City”
Karl Meyer Rothschild (1875)
 The Workforce is less mobile today then in the 19th
century.
Example: There was no need for passports and most people
moved freely from one country to another. 60 million
Europeans migrated to North and South America,
Australia. In 1900, 14% of the American population were
immigrants, compared to 8% today.
 In the 1860s and 1870s, many goods were traded freely.
Example: 95% of German imports were customs free.
According to the “Capital Mobility Index” of the IMF, the
volume of capital movements in relation to GNP is less
today than in the 1880s.
Prof. E. Jaffe
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YES, BUT...
 19th
Century trade was primarily in
commodities, today it is primarily in goods and
services.
 19th Century capital movements were
concentrated in the hands of small groups of
wealthy people for long term investment.
 Capital movements today are faster, but shorter
term.
Prof. E. Jaffe
17
WHAT IS A GLOBAL INDUSTRY?
‫?מה היא תעשייה גלובלית‬
“An industry in which there is some
competitive advantage to integrated
activities on a worldwide basis.”
‫כאשר פעילות משולבת‬
‫במישור הבינלאומי תתרום‬
‫ליתרון תחרותי‬
Prof. E. Jaffe
Michael Porter
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THE MULTINATIONAL
CORPORATION
 A company
with significant operations and
market interests outside its home country.
 Affiliated firms are linked by ties of
common ownership.
 The MNC draws on a common pool of
resources.
 Its affiliates are linked by a common
strategic vision.
Prof. E. Jaffe
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GLOBAL INDUSTRY
 One
MNC’s entire worldwide system of
product and market is positioned against a
competing MNC(s).
 Strategy is centralized.
 Response to local market needs where and
when necessary.
Prof. E. Jaffe
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TWO INDUSTRIES: TWO
STRATEGIES
MULTIDOMESTIC INDUSTRY
 The MNC pursues separate strategies in
each of its foreign markets.
 Each overseas subsidiary is strategically
independent.
 MNC headquarters coordinates financial
controls and marketing worldwide.
 Each subsidiary is a profit center.
Prof. E. Jaffe
21
SOME INDUSTRY
EXAMPLES:
GLOBAL INDUSTRIES
 Caterpillar & Komatsu
(heavy construction
equipment)
 Timex, Seiko &
Citizen (watches)
 GE, Siemens &
Mitsubishi (heavy
electrical equipment)
Prof. E. Jaffe
MULTIDOMESTIC
INDUSTRIES
 P & G (household
products)
 Honeywell (controls)
 Alcoa (aluminum)
 General Foods
(branded foods)
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GLOBAL STRATEGY
LEVERS
Prof. E. Jaffe
Lever
Multidomestic
Strategy
Global Strategy
Market Participation
No Particular Pattern
Significant Share in Major
Markets
Product Offering
Fully Customized
Fully Standardized
Location of Value-Added
Activities
All Activities in Each
Country
Concentrated
Marketing Approach
Local
Uniform
Competitive Moves
Stand-alone by
Country
Integrated
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ORGANIZATION FEATURES FOR TYPES OF
GEOGRAPHIC BUSINESSES
GEOGRAPHIC
SCOPE
ORGANIZATION
STRUCTURE
GLOBAL
CENTRALIZED GLOBAL
AUTHORITY.
NO
DOMESTIC-INTERNATIONAL
SPLIT.
STRONG BUSINESS
DIMENSION RELATIVE TO
GEOGRAPHY AND FUNCTION.
MULTILOCAL
DISPERSED NATIONAL
AUTHORITY.
NO
DOMESTIC-INTERNATIONAL
SPLIT.
STRONG GEOGRAPHIC
DIMENSION RELATIVE TO
BUSINESS AND FUNCTION.
EXPORTBASED
CENTRALIZED HOME
COUNTRY CONTROL.
SEPARATE DOMESTIC AND
INTERNATIONAL DIVISIONS.
MAY HAVE STRONG
FUNCTIONAL DIMENSIONS.
Prof. E. Jaffe
MANAGEMENT PEOPLE
PROCESSES
CULTURE
EXTENSIVE
COORDINATION
PROCESSES.
GLOBAL SHARING OF
TECHNOLOGY.
GLOBAL STRATEGY
INFORMATION
SYSTEM.
GLOBAL STRATEGIC
PLANNING AND
CONTROL.
TRANSFER OF
TECHNOLOGY FROM
HEADQUARTERS OUT.
NATIONAL
INFORMATION
SYSTEMS.
NATIONAL STRATEGIC
PLANNING AND
CONTROL.
DIRECTION NOT
COORDINATION.
ONE-WAY
INFORMATION FLOW
TO HEADQUARTERS.
NO TECHNOLOGY
TRANSFER.
MULTICOUNTRY
CAREERS.
FOREIGN
NATIONALS IN
HOME AND THIRD
COUNTRIES.
EXTENSIVE
TRAVEL.
GLOBAL IDENTITY.
INTERDEPENDENCE.
PROFESSIONAL
EXPATRIATES.
NATIONALS RUN
LOCAL
BUSINESSES.
LIMITED TRAVEL.
MULTINATIONAL
IDENTITY.
AUTONOMY.
HOME COUNTRY
NATIONALS RUN
LOCAL
MARKETING
SUBSIDIARIES.
HOME COUNTRY
CULTURE.
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INTEGRATION RESPONSIVENESS GRID
High

Integrated Product Strategy,
Worldwide Business Management
Need for
Integration
Product Emphasis
Multifocal Strategy,
and Organization
Area Emphasis
Prof. E. Jaffe
Low
Low
Locally Responsive
Strategy, Autonomous
National Subsidiaries
High
Need for Responsiveness
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Sales
increased market reach
broadens volume base
Prof. E. Jaffe
increasing sales
falling costs and prices,
as a result of globalization, improve sales
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Margins
decreasing
costs
+
increasing
sales
higher
margins
expansion into “virgin markets” allows firms
to set higher margins to take advantage of
the imbalance in supply and demand
Prof. E. Jaffe
27
How Globalization Affects
Costs, Sales and Margins
Costs
competitive pressure
drives firms to cut costs
synergetic gains result from the
consolidation of acquired businesses
exposure to best
overseas in a globalization initiative
practices improves
productivity
catering for demanding
clients in different
jurisdictions
Prof. E. Jaffe
productivity gains and
decreasing the capture of R&D
costs
spillover result from
operating in “lead country”
scale economies via global participation
spread R&D costs over large volume base
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ANALYSIS FOR STRATEGY
DEVELOPMENT
High
Global Businesses
Electronic Components, Medical
Multifocal Businesses
Global
TV, Ophthalmic Products
Locally Responsive
Businessses
Low
Corningware, labware
Low
Prof. E. Jaffe
Local
High
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