Globalisation and Global industries

Globalisation and Global industries

1. Global market niches

   • Smaller specialised usually high priced segments luxury items to rich groups in emerging nations
   • Advantages
     • Focus on smaller markets of specialised higher priced goods/services
     • Consumer demand is more price inelastic i.e can charge higher price
     • Direct competition reduced
     • Smaller market mean better knowledge of customers wants& better marketing sales strategies
   • Disadvantages
     • Less economies of scale i.e higher average cost
     • Market size limited
     • Niche market may attract competition or takeover bid
     • Successful niche market amy attract competition or takeover quite suddenly
     • Overtime niche expand and become mass losing advantage of a niche product

2. Globalisation Occurring

   • Bigger trade flows driven by increased real incomes specialisation
   • The reduction in trade barriers and falling transportation costs
   • Offshoring: increased outsourcing and FDI by multinational companies
   • The growth of regional integration/trade agreement-trading blocks
   • large scale migration flow
   • Post war period
     • Sea transport costs have risen
     • air transport cost have fallen apart
     • Land transport costs have fallen relative to sea

3. Features of Globalisation

   • Corporate Expansion
     • Multinational or transnational corporations business with a headquarters in one country but with business operations in number of others
   • Diversification
     • Selling more than one product or the same production more than one market
     • If there is a decreasing demand for one product or gernally more than one particular market
   • Ways of Diversifying
     • Investigation in a distribution system in the new market possibility by setting up retail outlet
     • Set up production in the new target market, building factories/joint venture
   • Franchasing
     • a firm pays a fee for rights / the license to use another company's name and operating methods
   • Joint venture
     • A firm operates in a foreign country through co -operation with local partners
   • Strategic alliances
     • each partner hopes to achieve through co operation things they couldn't alone
   • Foreign Subsidiary
     • A local operation complexly owned by a foreign firm
     • all of theses require substantial investments in the capital and time
     • Joint ventures and strategic alliances are the most risky because you do not have complete control
     • Foreign subsidiaries require large investments and may not be allowed depending on the country