By Dr Suresh Vidyasagar Menon-Chief Consultant & Business Advisory for Six Sigma, Operations, Strategic Management and Information Security
As for the globalization of markets, it has been argued that the worlds economic system is moving from one in which national markets are distinct entities, isolated from each other by trade barriers and barriers of distance, time and culture, toward a system in which national markets are merging into one huge, global market place. The trend towards the globalization of production and markets has several important implications within an industry. First industry boundaries do not stop at national borders. Because many industries are becoming global in scope, competitors and potential future competitors exist not only in a company’s home market but also in international markets. Managers who analyze only their home market can be caught unprepared by entry of foreign competitors. The globalization of markets and production implies that companies around the globe are finding their home markets under attack from foreign competitors.
Second, the shift from national to global markets has intensified competitive rivalry in many industries. Despite the globalization of production and markets, many of the most successful companies in certain industries are still clustered in a small number of countries. For example, many of the world’s most successful biotechnology and computer companies are based in united states and many of the most successful consumer electronics are based in Japan and Germany is the base of many successful chemical and engineering companies.
A company can increase its growth rate by taking goods or services developed at home and selling them internationally almost all multinationals are doing this. The success of many multinational companies that expand in this manner is based not just on goods or services that they sell in foreign nations, but also upon the distinctive competencies that underlie the production and marketing of those goods or services.
Global expansion is a way of generating higher returns from the organization’s resources. In addition to growing profits more rapidly, a company can realize cost savings from economies of scale, thereby boosting profitability, by expanding its sales volume through international expansion. Such scale economies come from several sources, first by spreading the fixed costs associated with developing a product and setting up production facilities over its global sales volume, a company can lower its average unit cost. Second by serving a global market, a company can potentially utilize its production facilities more intensively, which leads to higher productivity, lower costs and greater profitability.
Global Standardization Strategy
Companies that pursue a global standardization strategy focus on increasing profitability by reaping the cost reductions that come from economies of scale and location, this strategy makes the most sense when there are strong pressures for cost reductions and demand for local responsiveness is minimal.
Research states that in today’s global environment, competitive conditions are so intense that to survive companies must do all they can do respond to pressures for both cost reductions and local responsiveness. They must try to realize location economies and economies of scales from global volume, transfer distinctive competencies and skills within the company and simultaneously pay attention to pressures from local responsiveness.
Dr Suresh Vidyasagar Menon has 31 years plus of overall experience in IT, around 3 Years in Auditing of ISO 27001-Information Security Standard, has executed 25 plus projects in IT and two turnkey projects for eastern railways (Liluah) and has to his credit 14 publications in International Journals of Science, Engineering & Technology and is also a awarded reviewer for 6 International Journals.