SEMINAR IN GLOBAL BUSINESS ISSUES GBI 795

REVISIT INTERNAL AND GLOBAL ISSUES (Question 1)

PREPARED FOR: DR.NOORAINI BT MOHAMAD SHERIFF PREPARED BY: MAYZATULAZURA BINTI SARIP 2009988153

DATE: 20TH SEPTEMBER 2011

a) Much has been said about technology being a catalyst for globalization of market. Discuss how technological change has contributed to globalization of markets. Would the globalization of markets have been possible without these technological changes? In your opinion does globalization benefit both developed and developing countries? Explain. Technology enhances globalization. In past two decades, technology burst out like an explosion, definitely, the improvements of technology make our lives much more convenience. And, the advanced technology in microprocessors, Internet, and transportation enable the spreading out of globalization. Hill, C., (2001) stated "Globalization has two main components: the globalization of markets and the globalization of product." In other words, the changing in technology would lead to an influence on globalization of markets and globalization of production. Changes in technology have contributed towards globalization. The improvements of technology make our lives much more convenience. And, the advanced technology in microprocessors, Internet, and transportation enable the spreading out of globalization. Without telephones you couldn't call a company mile away and about ordering their products. People advertise on the internet, Telemarketers, Even transportation. Machines also can speed up manufacturing products so that more of them can be made faster and distribute. Telecommunication is creating a global audience. Transportation is creating a global village. In other words, the changing in technology would lead to an influence on globalization of markets and globalization of production. The widely use in microprocessors and telecommunications increasing the amount of information being transferred, but lower its cost. This is very helpful in merging markets. The opportunities for companies to expend businesses are raised, due to plummeting in global communication cost. the decreasing cost in transportation, many businesses move their manufacturing plants to nations that provide cheaper raw materials and nature resources, in order to diminishing their production cost. The three main changes in technology (microprocessors, Internet, and transportation) have a great supportive to the globalization of markets and production. If the lower cost of communication does not exist, people around the world would not have so many chances to connect with others and business would not be willing to put money to widen their markets....as a result of the technological innovations, the real costs of information processing and communication have fallen dramatically in the past two decades. These developments make it possible for a firm to create and then manage a globally dispersed production system, so without these technologies it's not possible to have such globalization of markets or even production. Globalization compels businesses to adapt to different strategies based on new ideological trends that try to balance rights and interests of both the individual and the community as a whole. This change enables businesses to compete worldwide and also signifies a dramatic change for business leaders, labor and management by legitimately accepting the participation of workers and government in developing and implementing company policies and strategies. Risk reduction via diversification can be accomplished through company involvement with international financial institutions and partnering with both local and multinational businesses. (Investing

overseas begins with a determination of the risk of the country's investment climate, read Evaluating Country Risk For International Investing.) Globalization brings reorganization at the international, national and sub-national levels. In a global economy, power is the ability of a company to command both tangible and intangible assets that create customer loyalty, regardless of location. Independent of size or geographic location, a company can meet global standards and tap into global networks, thrive and act as a world class thinker, maker and trader, by using its greatest assets: its concepts, competence and connections. One of the major potential benefits of globalization is to provide opportunities for reducing macroeconomic volatility on output and consumption via diversification of risk. The overall evidence of the globalization effect on macroeconomic volatility of output indicates that, although in theoretical models the direct effects are ambiguous, financial integration helps in a nation's production base diversification, leads to an increase in specialization of production. However, the specialization of production based on the concept of comparative advantage can also lead to higher volatility in specific industries within an economy and society of a nation. As time passes, successful companies, independent of size, will be the ones that are part of the global economy. Opponents to the process of globalisation indicated that the impact of globalisation on developing and developed countries differed. Brittan (1998:8) indicated that globalisation led to an increase in the wealth of developed countries and also not to bigger poverty in the developing countries. As an example of the improvement in the developing countries Brittan referred to the improvement in the economic situation in the Asian countries. The improvement in economic growth in the Asian countries led to a reduction in the skewed distribution of income between developed and developing countries. Despite these rather positive developments in some developing countries many countries are still in poverty and risks marginalisation if they does not very soon become part of the international trade system. A big number of countries developed serious financial problems, which led to an increase in the income gap between developed, and developing nations

b) In your opinion does globalization creates a homogenization of markets? Homogenization definition is when items or entities in a group are similar. This is the opposite of heterogeneous (When items or entities in a group are different). In light of the relation between culture and markets, an analysis of cultural evolution reveals that globalization will not lead to the homogenization of market. In a number of product markets ranging from watches, perfume, handbags, to soft drinks and fast foods, companies have successfully identified global customer segments, and developed global products and brands targeted to these segments.

These include such stars as Rolex, Omega and Le Baume & Mercier watches, Dior, Patou or Yves St. Laurent perfume. But while these brands are highly visible and widely publicized, they are often, with a few notable exceptions, such as Classic Coke or McDonalds targeted to a relatively restricted upscale international customer segment (Ohmae 1985). Numerous other companies, however, adapt lines to idiosyncratic country preferences, and develop local brands or product variants targeted to local market segments. The Findus frozen food division of Nestle, for example, markets fish cakes and fish fingers in the UK, but beef bourguignon and coq au vin in France, and vitello con funghi and braviola in Italy. Their line of pizzas marketed in the UK includes cheese with ham and pineapple topping on a French bread crust. Similarly, CocaCola in Japan markets Georgia, cold coffee in a can, and Aquarius, a tonic drink, as well as Classic Coke and Hi-C. Growth of Intra-Country Segmentation Furthermore, there is a growing body of evidence which suggests substantial heterogeneity within countries. In the US, for example, the VALS study has identified nine value segments (Mitchell 1983), while other studies have identified major differences in behavior between regions and subcultural segments (Kahle 1986, Garreau 1981, Wallendod and Reilly 1983, Saegert, Moore & Hilger 1985). Lifestyle approaches such as the Yankelovitch Monitor (Beatty 1985) or the customized AIO approach (Wells 1975) have also identified different lifestyle segments both generally, and relative to specific product markets. Many other countries are also characterized by substantial regional differences as well as different lifestyle and value segments. Lifestyle segmentation studies conducted by local research organizations in other countries also reveal a variety of lifestyle profiles (Hakuhodo 1985). Similarly, in industrial markets, while some global segments, often consisting of firms with international operations can be identified, there also is considerable diversity within and between countries. Often local businesses constitute an important market segment and, especially in developing countries, may differ significantly in technological sophistication, business, philosophy and strategy, emphasis on product quality. and service and price, from large multinationals (Hill and Still, 1984, Chakrabarti, Feinman and Fuentivilla, 1982). The evidence thus suggests that the similarities in customer behavior are restricted to a relatively limited number of target segments, or product markets, while for the most part, there are substantial differences between countries. Proponents of standardization counter that the international marketer should focus on similarities among countries rather than differences. This may, however, imply ignoring a major part of a local market, and the potential profits which may be obtained from tapping other market segments.