Английский язык. Практический курс для решения бизнес-задач

Production, regulatory, and organizational forces evolve over time, and the full potential of globalization for companies and industries changes with the geopolitical and macroeconomic environment. The development of GATT and WTO has enabled rapid growth in global trade for most manufacturing products and, more recently, for services. The decline in cargo costs due to standardization of containers and more efficient transport service has encouraged more companies to ship bulky products globally. GPS technology has allowed some companies to closely monitor their road freight and achieve better logistics control, enabling them to disaggregate their value chains. And the improved quality and radically reduced costs of international telecommunications have created the offshoring opportunities.

Escalating competition, steady trade liberalization, and the continual introduction of new technologies will increase the pressure on companies to globalize. Businesses that view the status quo as fixed and neglect to capitalize on emerging global opportunities will be blindsided; those that find ways around the obstacles and prepare for the next stages in their industries will win out. IKEA has pushed the envelope by creating a new business around low transportation costs. The modular design of its furniture (customer assembly is required for nearly all items) means IKEA can transport its goods worldwide much more cost-effectively than traditional furniture manufacturers can.

Standardization is a critical part of globalization in many industries, but it has been resisted by some. Standards can penetrate an industry in two ways – companies can voluntarily adopt them, or governments can impose them. Consumer electronics was transformed when a critical mass of companies voluntarily embraced standards. By contrast, it’s been hard for manufacturers in the wireless handset business to achieve global economies of scale: Europe mandated the GSM standard, while Japan chose the PDC standard.

Source: Diana Farrel, «Beyond Offshoring:

Assess Your Company’s Global Potential»,

Harvard Business Review,

Vol. 82, No.12, December 2004 (excerpt)

Automotive MNCs in Russia

FDI in Russia by the automotive companies requires both the right business opportunities and economic conditions. Some of the right conditions required to attract FDI can be best expressed by the following formula:

FDIt = f (GRP(t-1), Wage(t-1), Education(t-1), Paved Roads(t-1), Openness to trade(t-1), Investment rating(t-1), Crime(t-1), Voter Participation(t-1))

MNCs need to weigh the risks of making substantial FDI versus the potential business returns. Hence, a country’s economic policies, political stability, legal system, infrastructure, and human resources all factor into the decision of if, when, and how an MNC should engage in FDI. Since opening its borders to foreign investment, Russia attracted FDI at a growing pace until its financial crisis in 1998. Inflows of FDI did not recover until mid 2002, at which point Russia’s FDI exceeded $20 billion, indicating foreign MNCs regained confidence in investing in Russia.

Initially, FDI in Russia had been focused on accessing natural resources; more recently investments are focused on both accessing new markets and seeking efficiencies through employing low-cost highly educated workers. FDI focused on developing new markets for products in Russia is limited by the growth of the economy and the low purchasing power of the Russian population. Efficiency-seeking FDI will be limited more by the availability of low-cost educated workers, supply chain capability, and infrastructure robustness.

Ford’s approach

Ford initially announced plans in 1997 to establish car production in Russia. A lengthy negotiation period and the 1998 financial crisis put Ford’s plans on hold until the opening of its St. Petersburg assembly plant in 2002. The St. Petersburg plant was to be wholly owned, a first for a foreign company in Russia. A key advantage of being wholly owned is having complete management control over all aspects of the assembly plants operation. Investing in state-of-the-art facilities, and hiring new workers permit Ford to more easily overcome quality and productivity issues that have been notoriously bad in Russian state-run companies.