Chapter 3 – The Global Marketplace
* Although today’s growth continues to rely on significant U.S. economic prosperity the next few decades will see a significant shift in this regard as China, India, Brazil, and other economies mature and benefit from the significant foreign direct investment (FDI) currently under way within these countries, and from the overall development of their monetary banking systems, inter-modal transportation facilities, and competitive business models and operating platforms * Whether it is through operational growth strategic alliances, formal partnerships, mergers and/or acquisitions, the global marketplace is becoming home to an increasing number of businesses seeking to operate via an international-based business model. * G7 nations = U.S., Japan, Germany, Great Britain, France, Italy, and Canada Why Go Global?
* Companies look to move beyond their domestic markets for a number of reasons such as: 1. New market opportunities
2. Cost-reduction opportunity
3. Resource base control
4. Closeness to market
1. New Market Opportunities
* As domestic markets become saturated, organizations will begin to look beyond their current countries and markets in an effort to discover and leverage new markets for the products and services which they offer. * For many Canadian companies, the natural tendency is to look firs to the U.S. (close proximity) for potential growth opportunities, and then, internationally, although this is not always the case * The ability to assess global needs, manufacture products and/or develop services in response to it, and then to engage in global trade to gain access to these markets has been fundamental to the development of today’s global marketplace
2. Cost-Reduction Opportunities
* In terms of global competitiveness, organizations will locate in, and purchase from, countries where the costs of productive resources enable them to generate a competitive advantage. * They are attracted to countries where labour costs are relatively low and occupational skills are relatively high. * This enables the organization to lower its overall cost base, thereby allowing the organization to maintain a competitive price in today’s ever-demanding competitive markets. Examples: China and India provide companies’ with a lower cost base * In order to be effective with a price-focused strategy, organizations must, in turn, reduce their cost base in order to protect their operating margins, and, ultimately, their profit. * The ability to significantly impact the cost base lies with the ability of firms to reduce such labour costs
3. Resource Base Control
* This discussion is not meant to imply that Canada is at the mercy of foreign companies * Canadian companies, as an example, have been viewed as a “quiet powerhouse” and some of the biggest players in the development of the African mining sector * The key fundamental in resource base acquisition strategies lies in seeking to control supply sources and/or influence the use of such sources, as well as being able to generate lower costs and/or better value by having more control over resource-based factors of production
4. Closeness to Market
* Companies also look to expand their business operations across the globe for “closeness to market” reasons. Emerging developing economies in Asia, Eastern Europe, the Middle East, and South America all represent new opportunities for growth for international players. * For Example: Canada’s CAE Inc., which designs, develops, and manufactures flight simulators and related equipment, has expanded its training sites globally in order to bring its product and training service offerings directly to its ever-expanding client base. * Engaging an organization into new markets often returns the added benefits of identifying new ideas, as markets become better understood, developing new products/ and services in...
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