Globalization of companies and industries Case Study Solution
Factor conditions:
The discussion on the issue of specific attractions between regions and industries is related to the matching endowments of country with the requirements and characteristics of the industry.Therefore, these conditions of factors involves created and natural endowments. As these factors are mobile in nature and not difficult to imitate, the factor conditions solely do not provide the explanation of dominance in regions.However, it is totally opposite. Considering an industry that has the potential to generate significant profit with low entry barriers, indicates the imitation force and cause of diffusion like expansion of industry through international borders.
Likewise, as the competition of organizations of Japan which were originally established in the United States. The imitation of strategies of Japanese organizations by the companies of Korea. The conquering of industries of Central European nations which were originated in the Western Europe. The dependency of industries on such mobile factors tend to be susceptible.
Alternatives:
As an industry is influenced by the impact of factors, competition dynamics and government role in obstruction and stimulation of process of globalization. Therefore, some propositions to assist an industry in evolving based on such influencing factors includes:
Alternative – Fragmented and Competitive industries:
Fragmentation of market is considered great for both business and customers with varying conditions.As it serves as a key determinant in the success of company at global level. In fragmented industry, no single organization dominates the industry and the competition is between all the firms operating in a particular industry.(Schmidt, 2013)
Pros:
- With interventions of government, fragmented industry creates a judicial mix of both non-market and market strategic planning.
- The influence of government is automatically limited by conditions of fragmented industry.
- Small scale firms focusing on distinctive fragments can significantly build their relationship with their customers and can make them feel special.
Cons:
- Market fragmentation can be threat to the leading organization in the industry related to their market share and effect on revenues.
- Success of one organization directly influenced by some abrupt organizations in the market through factors like high capital investment and scale of economy.
- Increase in product personalization, innovation and competition tend to be a challenge for those organization who are un ware of market fragmentation.
Alternative – Oligopoly Competition:
Oligopolistic competitive climate is a condition of restricted competition. It serves as a key driver in the strategy for globalization in concentrated industries where the characteristics of a country is considered an important factor.Considering different structures of market, there are many pros and cons.
Pros:
- It creates an effect of trickle down surrounded by an economy. Prices of products generates high amount of profits which as a result filters down in order to the reason behind the higher employees’ wages.
- Reduction in competition leads to simple options to catch finest product, as it eliminates the need of extensive research.
- Low priced products as there is a need for price balancing to generate profit and stay attractive to their consumers.
Cons:
- In global oligopolies, cross-subsidizing opportunities reduce the importance of production location and export decisions.
- The positions at entry level and employees can be trickled down by profits only when large subsidies allow them.
- Artificial inflation of product prices for generation of excessive products and less competition.
Alternative – Identification of competitive edge:
Awareness about the new market before entrance without leveraging a clear advantage of competition. As competitive advantage allows a firm to gain share in market and significant development of niche and consumer base.
Pros:
- Understanding of competitive advantage clearly distinguishes a firm from its rivals in the industry.
- It significantly is a way of contribution of more consumers, loyalty of brand and higher prices.
- It is an important factor to be considered in the business growth of any particular organization in particular region.
Cons:
- For globalization, use of old methods that lead the success of organization requires modification with respect to new market.
- If the demand of your product is limited, it shrinks the market share and base of customers.
Recommendation:
On the basis of the analysis of the problems faced by the organizations and industries in globalization and considering the theories of comparative advantage and economics cluster, three alternatives for successful expansion of business globally are suggested which includes fragmented industry, oligopoly competition, and identification of competitive edge.
Based on their pros and cons, the best suggested alternative to be implemented is the implementation of oligopoly competition. As in this environment, there will be no restrictions by the government as it naturally eliminates it. There will be a dominant industry which will significantly not pose the threat of losing potential market share.
Conclusion:
In globalization of any company, integration and connection at global level between individual organizations, and nation-states is considered.Comparative advantage and economic cluster was considered for explaining the potential outcomes of free trade and industrial growth as an advantage. The issues related to the reason behind attracting global industries is explained by Porter’s model of national diamond for which some propositions to assist an industry in evolving based on such influencing factors. These include fragmented industry, oligopoly competition, and identification of competitive edge.
Exhibits
Exhibit – Porter’s National Diamond:
Exhibit – Alternatives
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