When To Globalize Case Study

WHETHER TO GLOBALIZE, and how to globalize, have become two of the most burning strategy issues for managers around the world. Many forces are driving companies around the world to globalize by expanding their participation in foreign markets. Almost every product market in the major world economies—computers, fast food, nuts and bolts—has foreign competitors. Trade barriers are also falling; the recent United States/Canada trade agreement and the impending 1992 harmonization in the European Community are the two most dramatic examples. Japan is gradually opening up its long barricaded markets. Maturity in domestic markets is also driving companies to seek international expansion. This is particularly true of U.S. companies that, nourished

In a global strategy, the ideal is a standardized core product that requires minimal local adaptation. Cost reduction is usually the most important benefit of product standardization. Levitt has made the most extreme case for product standardization. Others stress the need for flexibility, or the need for a broad product portfolio, with many product varieties in order to share technologies and distribution channels.7 In practice, some multinationals have pursued product standardization to a greater or lesser extent.8 Differing worldwide needs can be met by adapting a standardized core product. In the early 1970s, sales of the Boeing 737 began to level off. Boeing turned to developing countries as an attractive new market, but found initially that its product did not fit the new environments. Because of the shortness of runways, their greater softness, and the lower technical expertise of their pilots, the planes tended to bounce a great deal. When the planes bounced on landing, the brakes failed. To fix this problem, Boeing modified the design by adding thrust to the engines, redesigning the wings and landing gear, and installing tires with lower pressure. These adaptations to a standardized core product enabled the 7 3 7 to become the best selling plane in

Location of Value-Added Activities
In a multidomestic strategy, all or most of the value chain is reproduced in every country. In another type of international strategy—exporting—most of the value chain is kept in one country. In a global strategy, costs are reduced by breaking up the value chain so each activity may be conducted in a different country. One value chain strategy is partial concentration and partial duplication. The key feature of a global position on this dimension is the strategic placement of the value chain around the globe.
Many electronics companies now locate part or all of their manufacturing operations in Southeast Asia because of that region 's low-cost, skilled labor. In addition, a key component (the semiconductor chip) is very cheap there. Under the United States-Japan Semiconductor Agreement, the Japanese agreed not to sell chips in the United States below cost. But in an industry plagued by overcapacity, the chips had to go somewhere. The agreement resulted in Japanese chips being sold below cost in Southeast Asia. The lower cost of chips combined with the lower labor cost has attracted many manufacturers of computers and other electronic equipment to Southeast