External triggers
External
triggers to the
internationalization process
Meta-level development in the
world economy
PEST analysis
Internationalization of
industries: globalisation
vs. localisation

Bi-polarisation
Fundamental PEST headings
Political
Economic
Social
Technological
Derivative trends
Protectionism
v
Liberalisation
Changes in
exchange
rates
Labour costs
and market
changes
Changing
tastes
Multiformity
Innovation
and
development
Meta trends
Changes to
worldwide supply
and demand
Dynamic
changes in
GNP and trade
Changes to
consumer
lifestyle
Diffusion of
new
technology
Figure 3.9. The relationship between PEST and meta trends
34
3-Externel triggers-b 34 /
2
Worldwide supply and demand
 growing number of products, services
traded internationally
 Governments believe they may persist
=>further rapid decline
34
3-Externel triggers-b 34 /
3
Fundamental PEST headings
Political
Economic
Social
Technological
Derivative trends
Protectionism
v
Liberalisation
Changes in
exchange
rates
Labour costs
and market
changes
Changing
tastes
Multiformity
Innovation
and
development
Meta trends
Changes to
worldwide supply
and demand
Dynamic
changes in
GNP and trade
Changes to
consumer
lifestyle
Diffusion of
new
technology
Figure 3.9. The relationship between PEST and meta trends
34
3-Externel triggers-b 34 /
4
Dynamic change in GNP and trade
 stagnating, declining industries
supplanted
 vital, growing industries
supported
 long term opportunities for
mutual enrichment: no ‘zero sum
struggle’ => no absolute losers
or winners
 renewal triggered by exchange
rates, labor cost adjustment
34
3-Externel triggers-b 34 /
5
Fundamental PEST headings
Political
Economic
Social
Technological
Derivative trends
Protectionism
v
Liberalisation
Changes in
exchange
rates
Labour costs
and market
changes
Changing
tastes
Multiformity
Innovation
and
development
Meta trends
Changes to
worldwide supply
and demand
Dynamic
changes in
GNP and trade
Changes to
consumer
lifestyle
Diffusion of
new
technology
Figure 3.9. The relationship between PEST and meta trends
34
3-Externel triggers-b 34 /
6
Changes to consumer lifestyles
 Increasing multi-formity, dynamism
of markets
 shorter life cycles
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7
Fundamental PEST headings
Political
Economic
Social
Technological
Derivative trends
Protectionism
v
Liberalisation
Changes in
exchange
rates
Labour costs
and market
changes
Changing
tastes
Multiformity
Innovation
and
development
Meta trends
Changes to
worldwide supply
and demand
Dynamic
changes in
GNP and trade
Changes to
consumer
lifestyle
Diffusion of
new
technology
Figure 3.9. The relationship between PEST and meta trends
34
3-Externel triggers-b 34 /
8
Diffusion of new technology
 fast proliferation of know-how =>
 generate successful products and
services =>
 high devl’t costs => large int’l
markets needed
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9
Internationalization of industries:
globalization vs. localization
GLOBALISATION
LOCALISATION
Convergence
Divergence
World market structure
Collection of nat’l industries
World level compet’n
Nat’l level compet’n
World: single market
Many markets: treated
separately
10
34
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Assesing the extent of globalisation:
How boundaries to the industry might be drawn?
• including rivals (close substitutes)
• customer’s viewpoint: paramount
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11
Industry I
Collection of competitors with similar technologies, processes and skills
Firm A
Firm B
Firm C
Market
segment
(i)
Market
segment
(ii)
Market
segment
(iii)
Firm X
Firm Y
Firm Z
Industry II (substitute products)
Collection of competitors with similar technologies, processes and skills
34
3-Externel triggers-b 34 /
Figure 3.10 Industries and markets
12
Changes at meta level
Customers
-customer
requirements
-distribution
-uniform
marketing
Cost
-new product
developm.
-scale
economic
-transport
costs
Four sets of
industry drivers
34
Globalisation
v.
Localisation
Competition
-competitive
interdependence
-new entry
compet’n
3-Externel triggers-b 34 /
Country
-trade policies
-technical
standards
-culture,
regulations
4 Cs
Figure 3.11. Assessing the extent to which an industry is globalising
13
a) Customer drivers

Customer requirements
– Some products: worldwide acceptance =>
standardized global product
– Within industry: marked variation (rice &
paste / tomato kechup)
 UK: sweet
 France: spicy
 USA: vinegary
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14

Distribution
– Different channels => to be customise
– Customer push or pull
– Special national distribution system: Japanese
electronics companies => retired employer:
‘pop and mum’ shops
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15

Uniform marketing
– Convergence of lifestyle: selling to different
national markets
 Same product (satellite TV)
 Same product – variety of brand names
Unilever: All, Omo, Persil, Presto, Skip, Via
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16
34
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17
Changes at meta level
Customers
-customer
requirements
-distribution
-uniform
marketing
Cost
-new product
developm.
-scale
economic
-transport
costs
Four sets of
industry drivers
34
Globalisation
v.
Localisation
Competition
-competitive
interdependence
-new entry
compet’n
3-Externel triggers-b 34 /
Country
-trade policies
-technical
standards
-culture,
regulations
4 Cs
Figure 3.11. Assessing the extent to which an industry is globalising
18
b) Cost drivers
New product development
– Escalating cost of R&D, huge resource
demand
– Only the largest firms => trigger to be large
 Smaller car manufacturers absorbed
 1994: VW, Fiat, Renault, Peugeot/Citroën, Ford,
GM
 Further rationalization ahead
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19
World sales
MES output
Nr. of plants
Pressure to glob.
120 $m
10
12
decreased
120 $m
20
6
current position
120 $m
40
3
increased
Scale economies
– Trigger to globalization: achieve high volume sales
=> larger plants
– Counterbalancing: Flexible Manufacturing
Systems (FMS) => smaller plants
– Find relative balance
– Minimum Efficient Scale (MES): smallest size to
achive min. cost/unit
– FMS can offset the pressure of scale of economies!
(integrated steel plants  mini mills)
34
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20
Transportation costs
– Sometimes: countervailing force to the trend
of globalization
 Low value/bulky product: remain localized
 High value/small weight: not prevented to be
global
– General trend: transport costs fall, reduce
restrictions
34
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21
34
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22
Changes at meta level
Customers
-customer
requirements
-distribution
-uniform
marketing
Cost
-new product
developm.
-scale
economic
-transport
costs
Four sets of
industry drivers
34
Globalisation
v.
Localisation
Competition
-competitive
interdependence
-new entry
compet’n
3-Externel triggers-b 34 /
Country
-trade policies
-technical
standards
-culture,
regulations
4 Cs
Figure 3.11. Assessing the extent to which an industry is globalising
23
c) Country drivers
Trade policies
– Some countries: individual trade policies (duty on
products outside the bloc)
Technical standards
– E,g: electric power supply, food products laws,
measure units
– Converging int’l standards: encouraging globalization
Cultural and regulatory barriers
– Forms of advertising, business practices (aggressive)
34
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24
34
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25
Changes at meta level
Customers
-customer
requirements
-distribution
-uniform
marketing
Cost
-new product
developm.
-scale
economic
-transport
costs
Four sets of
industry drivers
34
Globalisation
v.
Localisation
Competition
-competitive
interdependence
-new entry
compet’n
3-Externel triggers-b 34 /
Country
-trade policies
-technical
standards
-culture,
regulations
4 Cs
Figure 3.11. Assessing the extent to which an industry is globalising
26
d) Competitive drivers
Competitive interdependence
– Broadening geographical scope => interlinked nat’l
markets => competitor: disadvantage
– Competitive dynamics of industry: reflects life cycle.
too
New entry competition
– May have powerful influence on the global/local
balance
– May reflect liberalization, new tech and business
practice
34
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27
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28
34
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29
External triggers
External
triggers to the
internationalization process
Meta-level development in
the world economy
PEST analysis
Internationalization of
industries: globalisation vs.
localisation

Bi-polarisation
Bi-polarisation
Giants
Small
Medium-size
companies
Close down
34
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31
Industry
Globalisation
Localisation
Industry drivers
34
3-Externel triggers-b 34 /
Figure 3.12. The pendulum of change: convergence versus divergence
32
Globalisation
High
Med
Low
Localisation
Industry drivers
Low
Med
High
Customer drivers
Customer requirements
Distribution
Marketing
Cost drivers
New product development
Scale economies
Transport costs
Country drivers
Trade policies
Technical standards
Cultural/regulatory barriers
Competitive drivers
Competitive interdependence
Entry of new competitors
High
34
Overall
Figure 3.13. Summary of industry drivers for the consumer electronics industry over
3-Externel triggers-b 34 /
33
the next five years
Product scope
Narrow
Restricted nat’l
Geographical
scope
Internat’l
34
Broad
(i)
(ii)
Local or
national
regional or
national niche
strategy
Local or national
regional or
national broadbased strategy
(iii)
(iv)
International
niche strategy
International
broad-based
strategy
Figure 3.14 International competition and bi-polarisation
3-Externel triggers-b 34 /
34