Globalisation and International Trade

Here’s come to an end of my Business and Management lectures. However, here’s also the most impression topic I have ever had. This week’s topic is Globalisation. When I first heard this word, I will immediately think of the quota of HSBC “Think globally, act locally”. Globalisation has lots of definition. Even, when you ask different people, I believe they would give you different answers. Nevertheless, I believe there’s no a correct answers. In an organisation, they have different strategy, so, they also got different method to think globally. Even though there’s no a correct definition. I believe the following one is the clearest phrase to show how it works. Globalisation refers to a world in which societies, cultures, politics and economies have, in some sense come closer together. (Kiely, 1999)

 
To go international, there are lots of methods. For example, outsource, exporting/ importing, franchising, joint venture and E-commerce, etc. In the following, I would like to describe a bit for some of the elements.
 

Outsource (1/4):

It is a method to go international by lowering their cost, shifting their manufacturing to another place. Since the cost in China or India would be cheaper, most of the firm would like to move to there. For example, call centre, in old days, they are mostly in UK and Europe. However, nowadays, it’s in China and mostly in India. You might except that India has a very cheap cost, their quality might be very bad, and however, you are wrong. Those Indian has a very high education level, they can speak for about 3-4 languages for instance, Chinese, French and English, but of course there mother language. This is because in the above countries, they don’t need to pay for minimum wage, but need for another.

 

Exporting/ importing (2/4):

It has become the most important element nowadays. Selling your products in all over the world can help increase the market share and improve their well-known. This element is to sell oversea to find an agent to help your organisation. Since agent know the local needs.

Franchising (3/4):

Getting McDonald as an example, it has been very successful as it opened all over the world. By franchising, its revenue has increase rapidly every year. It was a well-known brand nowadays. There’s shop everywhere all over the world. Franchising can expand rapidly beyond their home market. The expanding firm sells the right to a company which allows them to use McDonald name to sell their products. And everyone take part of the profits.

 

 

E-commerce (4/4):

Technology has been an important element today. However, it is more useful for some industry. For example banking industry. They can provide online services to do transaction, to transfer money and buy insurance which is very convenient.

 

Globalisation and international trade are good to an organisation. There are some successful example. One of them are Starbucks. Starbucks is a very successful organisation is because it’s revenue amount increase sharply. It’s revenue is about $9.8 billion and profits to almost $900 million. Originally, Starbucks is not a franchising organisation. In 1971, it started its business. In 1981, it just got about 5 stores. However, after franchising, it got about 114 stores in 1987. Nowadays, it has over 16,000 retail stores and about 12,000 in US and 4,000 in more than 50 countries. Starbucks used joint ventures, licensing or wholly owned subsidiaries to enter new markets.

 

Nevertheless, you might think that acting globally or internationally must give benefits to a company, however, that’s not! It’s just a delusion that most of the company are successful. There is also a company which is not, Tesco. Tesco has want to become an international brand too in many years ago. They opened their first shop in China. However, it was not successful. They had used the same method and the taste of local people in UK for Chinese people. This is inappropriate. An organisation should satisfy the local needs and wants. Different countries and places have different needs. We should find more research and find an agent for help.

 

In the following, there will be more details about what are th pros and cons for globalisation. In the video, it also tells us what is TNC stands for. It would also provide you some example which the organisations has been acting globally.

After you have watched the video, I believe you would understand more what is TNC, it stands for Trans National coporation! They operate franchises all around the wrold.

Organisation and strategy

In the past week, our business management taught about organisations and strategy. I feel that it was a difficult topic. This is because strategy is a long term and things which is difficult to handle, you can’t control much things in an external environment. Mintzberg said, a strategy is ‘a pattern in a stream of decisions.’ (Mintzberg 1972)

 

I believe an organisation would feel difficult and complicated when they choose and set up their strategy. It consists myriads of levels, for instance, corporate level, business level and operational level. These levels shows the overall scope, the individual business and the delivery of an organisation. To develop a strategy, lots of elements are needed. At least, you have to know what is your position is in the market. If an organisation has a large market share and a good reputation, they might set up a stronger and a difficult strategy.

 

For example, by using SWOT analysis, a famous brand, Sony. It was a huge brand and successful brand in early 1990’s.

 

Strength (1/4):

The strength of Sony is that it sells high quality product and it has a good reputation for customers. Their product has a guarantee, especially for TV and camera.

 

Weakness (2/4):

In weakness, they got a declined in their profit. Their revenue keep decrease in this few years, due to the exciting competition and lots of substitute.

 

Opportunities (3/4):

In opportunities, Sony has did a well job, they tried to use risk diversification to spread their risk into different electronic device.

 

Threat power (4/4):

In threats power, they face lots of problem. Due to lots of substitution, customers may choose other products, they got big bargaining power. However, they got a back a bigger bargaining power from supplier. For threat of competitive rivalry, the market got lots of sellers which sell similar product and it’s difficult and costly for them to switch the products.

 

As what I have said at the beginning, there are strategic choices at the corporate level. It includes the market and Ansoff’s Matrix. For this corporate level, it includes the generic growth, product development, market development and diversification.

In another company, Samsung. They also did product diversification. They sell no just mobile phone, they also sell computer, TV, high fi and also camera. When they first enter the market, they just sell mobile phone and TV. But they didn’t sell computer at the beginning. But they changed their mind. In order to satisfy different people’s want, they enter different market and sell different products.

The above video would tell you how to develop a great a business strategy!

Pestle Analysis

Before the half term break, I have learnt what Porter’s Five Forces is. It shows the Micro environment of the industry that the company is in. This week, I have learnt what Pestle Analysis is. To start with, let me first kindly introduce you the detail for Pestle analysis.

 

To come out with, Pestle Analysis is an analysis that shows the external environment of an organization. In briefly explain, it shows the Macro environment. Porter’s Five Forces tells us the competition of the industry with how to fight with other’s not just focusing your competitor. It tells us to look and consider the bargaining power of buyers and sellers. Nevertheless, it’s not enough. It can’t show the effect of the Macro environment. There’s also alternative powers which would affect the whole company. In Pestle Analysis, we can consider six factors, for instance, Political, Economic, Social, Legal, Technical and Environment. In the following, I would like to use an example of a company to introduce you more about this analysis which is not difficult to comprehend at all.

In order to have a good explanation, I would like to choose a global company to explain. I have chosen Apple for this analysis.

Political (1/6):

I bet there are not much political factors that will affect the Apple, vice versa. However, it might have some barriers of their apps. As in China, they are not able to use YouTube, Facebook and whatsapp. Therefore, Apple has to consider those factors and change their market and product line. For instance, they need to cancel those apps to enter China market.

 

Economic (2/6):

In the view of global, the whole economic in the world are facing depression and recession. However, in some country, their economic are improving. Using the example of China again, its market is very big, every company wants to enter this huge market. Due to China’s economic growth, the exchange rate between America and China will change. Chinese people can use a cheaper price to buy Apple’s product. The interest rate of the bank will also affect the consumer’s habit and attitude.

 

Apart from that, due to the high demand for Apple’s product, the labour market in China will increase as most of the production line are in China, the effect of the Economic in both country will affect the production and selling of Apple’s product.

 

Social (3/6):

Apple’s product in the society is affecting so much to our life style. It changes many people’s attitude after their iPhone 4 has launched. And also due to the education in the world is increase, they would like to know more about different products, they would buy more their products. Furthermore, the distribution of income will also affect the selling of Apple’s product. The more the people earn, the most they are willing to buy their products.

 

Technological (4/6):

As more and more company enter the mobile phone market, and they are expanding their market share, they focus more on their own product. Due to the technology factor, more and better and high technology phone has been discovered. Apple produces more products which they had their own patents so that Samsung and other main companies cannot copy their products.

Moreover, the speed of people changing their phone increase rapidly. Therefore, Apple has to increase the productivity and to improve their own products by using new technology.

 

Legal (5/6):

In this part, it talks about law. In reality, Apple controversy that Samsung copy their product and need them to pay a certain amount of money due to the patent. This is because law will protect the patents side which is Apple. This could help Apple in developing their product and protect their product to avoid copying their product.

 

Environment (6/6)

Producing a phone need to use lots of raw material and this will affect the environment. It has affected lots of people living standard. In China, due to the production process, many workers in can’t afford the harsh working hour and little time for rest, they commit suicide by jumping out of the building at night and before they work in the morning.

 

Lastly, producing phones will produces lots of waste and part of the component of the phone are not reusable. They can’t reuse it in the phone. This would produce lots of waste and affect the natural environment.

 

To take these into consideration, there are no circumstance should be ignore the role of Pestle Analysis. To survive and grow, the organization must be responsive to these factors. Even though, this analysis can’t show much about their own management, which cannot show the own company structure, but it is quite useful for a company to get used to it and predict the future change. For furthermore information, you may look at the link below, which is the same as what I have written above.