Economies of scope: the cost savings developed by a group when it shares activities or transfers capabilities and competencies from one part of the group to another – for example, a biotechnology sales team sells more than one product from the total range.
Economies of scale:the extra cost savings that occur when higher volume production allows unit costs to be reduced – for example, an Arcelor Mittal steel mill that delivers lower steel costs per unit as the size of the mill is increased.
Global brand recognition: the benefit that derives from having a brand that is recognized throughout the world – for example, Disney..
Global customer satisfaction: mulitnational customers who demand the same product, service and quality at various locations around the world – for example, customers of the Sheraton Hotel chain expect and receive the same level of service at all its hotels around the world.
Lowest labour and other input costs: these arise by choosing and switching manufacturers with low(er) labour costs – for example, computer assembly from imported parts in Thailand and Malaysia where labour wages are lower than in countries making some sophisticated computer parts (such as high-end computer chips) in countries like the USA
Recovery of research and development (R&D) costs and other development costs across the maximm number of countries – new models, new drugs and other forms of research often amounting to billions of US dollars. The more countries of the world where the goods can be sold means the greater number of countries that can contribute to such costs. For example, the Airbus Jumbo A380 launched in 2008 where development costs have exceeded US$ 10 billion.
Emergence of new markets: means greater sales from essentially the same products.
Note that Professor George Yip argues that the business case for globalization is strengthened by competitive pressures: the fear of some companies that they will be left behind other companies if they fail to globalize.
The Japanese car company, Toyota, has built itself into the world’s largest car company. It has developed this through a global strategy that includes economies of scale and scope, branding, customer recognition and the recovery of its extensive research and development costs in many markets around the world. Yet it has also been cautious in its global strategy.
For example, its strategy in the People’s Republic of China has been through joint ventures with the local car companies FAW and Guangzhou Auto. Whereas, its main strategies in Europe have been partly through wholly-owned ventures and partly through co-operation with other European car companies on some joint production.
For other models like the Lexus, Toyota still exports directly from its major production plant in Japan. The reason is that it is able to gain the economies of scale for theup-market low-volume Lexus brand that wouldnot be present if it was to produce in smaller quantities in each world region, like the USA and European Union.
Economies of scope: the cost savings developed by a group when it shares activities or transfers capabilities and competencies from one part of the group to another – for example, a biotechnology sales team sells more than one product from the total range.
Economies of scale:the extra cost savings that occur when higher volume production allows unit costs to be reduced – for example, an Arcelor Mittal steel mill that delivers lower steel costs per unit as the size of the mill is increased.
Global brand recognition: the benefit that derives from having a brand that is recognized throughout the world – for example, Disney..
Global customer satisfaction: mulitnational customers who demand the same product, service and quality at various locations around the world – for example, customers of the Sheraton Hotel chain expect and receive the same level of service at all its hotels around the world.
Lowest labour and other input costs: these arise by choosing and switching manufacturers with low(er) labour costs – for example, computer assembly from imported parts in Thailand and Malaysia where labour wages are lower than in countries making some sophisticated computer parts (such as high-end computer chips) in countries like the USA
Recovery of research and development (R&D) costs and other development costs across the maximm number of countries – new models, new drugs and other forms of research often amounting to billions of US dollars. The more countries of the world where the goods can be sold means the greater number of countries that can contribute to such costs. For example, the Airbus Jumbo A380 launched in 2008 where development costs have exceeded US$ 10 billion.
Emergence of new markets: means greater sales from essentially the same products.
Note that Professor George Yip argues that the business case for globalization is strengthened by competitive pressures: the fear of some companies that they will be left behind other companies if they fail to globalize.
The Japanese car company, Toyota, has built itself into the world’s largest car company. It has developed this through a global strategy that includes economies of scale and scope, branding, customer recognition and the recovery of its extensive research and development costs in many markets around the world. Yet it has also been cautious in its global strategy.
For example, its strategy in the People’s Republic of China has been through joint ventures with the local car companies FAW and Guangzhou Auto. Whereas, its main strategies in Europe have been partly through wholly-owned ventures and partly through co-operation with other European car companies on some joint production.
For other models like the Lexus, Toyota still exports directly from its major production plant in Japan. The reason is that it is able to gain the economies of scale for theup-market low-volume Lexus brand that wouldnot be present if it was to produce in smaller quantities in each world region, like the USA and European Union.
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