Globalization

In the previous blog, I have talked about the globalization; and this blog will discuss about its advantages and disadvantages. Globalization made our life more and more convenience, and we can easily collect information about the other countries. In my opinion, globalization is good to company and customer, but it also has some drawbacks.

About advantage of globalization, it globalizes the human resource. If a company hire different nation employee, it can increase the creativity, because different culture have different idea. Moreover, those employee can provide the information about his or her country, if the company willing to access that market. Know well about the background and culture in target countries helps company easily enter into the market and being success, because the company already has some general idea of that market, they can nearly meet the customer needs. For example, McDonald has located in more than 1000 countries. Although McDonald has a standard menu, the price in each country is different. Also, each country has different eating culture and habit, McDonald should made little change in each country, such as ‘Dinner Rice’ is a products in Hong Kong McDonald. Furthermore, hire local employee to work and manage overseas business can easily to communication with supplier and customers, using the local language to serve customer can decrease the gap between customers and the company and become closer. https://www.youtube.com/watch?v=h-HZINQ_I9E

The other advantage of globalization is the international trade, free trade is exchanging goods and service across international borders or territories, and it increases the company market share and profit. Samsung are the good example, it is a Korean company, but we can buy their phone in our countries. Samsung have well known the needs in the world and expand the market to the world. At the result, Samsung has gain a lot of market share and being the biggest competitor in Apple. Also, international trade enable customers buy many products which are global brand in their country and it is more convenience to customers. The global brand enter the market will increase competitiveness; therefore, companies will enhance their product to compete with international brand. For example, Zara is a clothing store; it is a big competitor to the small independent clothing store, so the small store will focus on the quality of cloth and service to protect their market share. https://www.youtube.com/watch?v=XIGpuL-Kkyk

The disadvantage of the globalization is loss of culture. Nowadays, we can receive any information in the world; we can collect it through internet and media. These all information will affect to our knowledge and culture, decrease the uniqueness of each country. Some traditional and local culture is losing, such as Hong Kong people are supporting overseas music but scorn local music. Globalization increase the music culture competitive, there are huge amount of different nation music compete to local music, and people will separately focus on other countries music culture and ignore theirs. I think culture is the soul of a country and it represents the country, so we should protect and develop our country culture.

In conclusion, globalization can be positive or negative, it makes company more profitable and encourages the global economy, but it influences our country soul. We should balance both side and not intensify the loss of culture.

Business methods - external strategies

In this blog, I will talk about the external strategies, which are the company should concern to being global success. In external strategies, there are five methods which are joint venture, strategic alliance, franchise, merger and acquisition.

Joint venture is two or more company sharing the investment risk and cost by creating a new company in another country. Sony Ericsson is an example of joint venture. Sony is a Japanese electronics company and Ericsson is a Swedish telecommunication company, they built a new company called ’Sony Ericsson’ and focus on mobile phone industry. Although both companies should share the profit in ’Sony Ericsson’, it decrease the risk and cost in both company. It is the advantage of joint venture for the companies. https://www.youtube.com/watch?v=uIlSPyZt3hM

Strategic alliance is sharing human resource and financial resource on a project. For example, Hong Kong Disneyland has strategies alliance with Honda. Honda sponsors the cars for the new attraction in Disneyland, and Honda can use the image in Disneyland to promote their cars, motorbike or other products. In this example, Hong Kong Disneyland provide their brand image to Honda for promotion, and Honda provide their product to Disneyland for their new attraction. https://www.youtube.com/watch?v=HgfwzPRyVvw

Franchise is selling the brand, name, image and product to others to run their business. McDonald is a franchisor, and everyone can become a franchisee to run the McDonald for his or her own business. McDonald will provide training, equipment, food material or other things are related to the operation. It is a good strategy to develop the business globally, but the company should focus on quality control on each franchisee to ensure they provide the product or service are consist with your business, because their business are related to your company image. https://www.youtube.com/watch?v=EmjA6O2HIus

Merger is combine two or more company into a single company. If you would like to develop your business in other countries, merger a local company helps you look inside the local market and gain more knowledge in the market, at the result, you can enter the market more successfully. Tesco have decided enter the China market, but it fail to enter, because the company did not recognize the market and cannot meet the customer needs. Then, Tesco merger a Chinese company and being more successful, because the Chinese company provide the knowledge in the China Market, thus, Tesco can provide the services and goods, which are customer needs. https://www.youtube.com/watch?v=J-t6zD5G4bk

Acquisition has the same advantage as merger, but the firm will purchases the major equity interest of the other company. The Heng Seng Bank in Hong Kong and HSBC are an example of acquisition. Heng Seng Bank is a biggest bank in Hong Kong and it is the biggest competitor for HSBC. However, Heng Seng Bank is facing the financial problem, and they sold 62.14% of shares to HSBC to solve the issue. Heng Seng Bank is success, because the management level is Chinese people and they know the need of Hong Kong citizen, so HSBC did not change their management team. At the end, HSBC gain the market share of Heng Seng Bank and deduct one biggest competitor.

In conclusion, There are no strategies ensure the company must be successful in global by using this strategy, it is depend on which business are you in and based on your business needs.

Business method - internal strategies

Globalization may affect many aspects, which include economy, environment, culture and politics. Economic globalization is the international integration of goods, technology, labour, information, capital or other process of making this happen. It encourage many companies expand their business to other countries, because it can increase their market share and decrease some material cost or labour cost, at the result, the company can gains more profit. Company should consider the internal strategies and external strategies to become global business successfully. Below I will discuss about the internal strategies. In internal strategies, Company can choose exporting, direct investment and e-commerce to develop their business to overseas.

Exporting is selling the products to another country. Some business will choose this method because it is low cost and they do not need to set up an operation in that country. E-bay is an example about exporting, people can sell their good to overseas countries, such as a seller in UK can sell his or her products to Hong Kong. The seller does not set up a business in Hong Kong, but he or she can sell the products to Hong Kong. https://www.youtube.com/watch?v=YyW4pvYYjV4

Direct investment is established an operation in another country and manage by themselves, this is a high risk and high cost method. A German luxury car brand BMW has established a manufacture in India and China. Although the labor cost in those countries are low, company should invests on land cost, material cost, quality control and equipment, and it totally cost BMW about £18,624,000. https://www.youtube.com/watch?v=6l1S1LXC9aE

E-commerce is selling or buying goods through the internet, it has same advantage as exporting, which is cheaper way to build up the business in other countries without operate a business in overseas. Amazon and E-bay are the good example for e-commerce, it is convenience to the buyer to buy good from other country and seller can sell products to another country. https://www.youtube.com/watch?v=AhgtoQIfuQ4

In conclusion, these three methods are the internal strategies for company, it has advantage and disadvantage of the business, therefore, company should choose the based on their situation to find the suitable one. About the external strategies, I will talk about it in the next blog.

PESTLE analysis

PESTLE is a tool which through six ways to analysis the external (Macro) environment most related to a company and how they influence the company in the future. It includes political, economic, social, technology, legal and environment. http://www.youtube.com/watch?v=4mkVc6ZZtJw Link with the nearest post, I will use the smartphone industry (Samsung) for an example:

Political

Samsung is a global company born in Korea. there are  different regulations and taxation policy in different countries, it will affect to the manager decision making.

Economic

This factor influence company cost and consumer spending, such as interest rate, inflation rate and labour cost.

Social

There are huge numbers of people in the world, they change from using mobile phone into smartphone. Also, each people have at least one smartphone, this is a big market to Smartphone Company. However, the sense of protecting environment are increasing. The green issue, which is electronic waste, affect to the company. The reason that people buy a new phone is not because their old phone had broken, it is because a new smartphone launch. As the result, they will throw or sell their old phone, it increase the electronic waste and influence to our environment.

Technology

Nowadays, people are focus on technology and quality of life. Technology improve their life, such as access information and communication technology instantly no matter where they are. Therefore, crate a new technology and develop existing technology are more important to company. The Android system is a good example, Samsung using Android system on their phone, and they are keeping improve it. Smartphone company not only enhance the quality of software, but also the hardware to improve the battery life and faster response to meet customer’s needs.

Legal

Smartphone is very popular all over the world. Samsung sells their phone to many countries, such as UK, USA, Hong Kong and China. These countries have their own law, and they affect to Samsung operation.

Environmental

I have talk a little about green issue in social factor; the electronic waste is a problem in the world. Although some component in the phone can reuse, the other parts are going to landfill. It does not mean it is disappear, it cannot be decomposition and it will be under the landfill forever. The landfill will be full in the future, so it will affect to the company.

Porter’s 5 forces

A company should analysis the micro and macro environment to understand it situation. Porter’s 5 forces is a tool to analysis the micro environment and identify the profitability of a company. It analysis on 5 ways, threat of substitute products, threat of new entrants, bargaining power of buyers, bargaining power of suppliers and intensity of rivalry within the industry. http://www.youtube.com/watch?v=9CHZ44_at6I This video is using sports wear for an example, and below I will use Smartphone industry for an example :

Threat of substitute products (+ +)

Smartphone is a useful thing for everyone, most people have own at least one of it. A smartphone not only can call or text to someone else, but also playing games, listening music or watching video.  http://www.youtube.com/watch?v=2LHv1FPd1EcThere are no substitutes can replace it in any other industry.

Threat of new entrants (+ +)

There are high barriers to entry this industry, high cost, high switching cost and hard to separate market share from other company. If a company would like to enter this industry, they should invest a lot of money on technology, engineering, development and design, and this increase the switching cost. Apple and Samsung are the market leader in this industry; they own a large percentage of market shares and have a lot of loyal customers. Thus, a new entrance is very difficult to own many market shares.

Bargaining power of buyers (+)

Customers have low bargaining power in this market. Although there are a lot of different brand of smartphone on the market, they cannot affect to the price because smartphone is high-technology products, it has its market price. The bargaining power is on the company.

Bargaining power of suppliers (-)

A high bargaining power of suppliers influences the company profit. There are few suppliers and the products are distinctive, so the company cannot argues on the price.

Intensity of rivalry within the industry (-)

It is a high intensity of rivalry within the industry; there are many brands such as Apple, Samsung, Google, Blackberry, Sony and HTC provide similar products in the market. They all and fight for market share, therefore, company should focus on development on the phone become more different to other brand to attract customers buy their products.

Organization structure

Organization structure is important in any organization, even it is a small company. It describes how organization divide, supervise and co- ordinate work to achieve company objective. It clearly shows the employee title, responsibility, whom to report and whom report to him. Also, it identify the relationship between employees and how they communicate to each other e.g. Operatives → Supervisor → Team leader. We can see clearly on the figure below.

There are different types of structure shows below: 

http://education-portal.com/academy/lesson/types-of-organizational-structures-functional-divisional-matrix-team-network.html#lesson

In this video, it introduces the functional structure and the divisional structure.

Functional structure

Functional structure is division similar skills and expertise into a department, for example, Marketing, HR, Accounting and Financial department. This structure has clear career path and professional development, high standard and efficiency and good internal relation because of common professional interest.

Divisional structure

Divisional structure is division work by product or service, it focus on customer needs, and meet customer quality. Also, they have the same objective, so it has a good influence to the internal relationship between employees. For example, Car company division the group by car model.

The link below is a video about Matrix structure:

http://education-portal.com/academy/lesson/types-of-contemporary-organizational-designs-matrix-team-network-designs.html#lesson

Matrix structure

This structure combines above two structures, which are functional and divisional structure. For example, a cloths company want to creates a new product; they would take some employees from each relevant department, employees from accounting to calculate the cost, marketing employees think about the promotion and advertisement and designer for new design. Using matrix structure is more flexibility and lower costs, because company could gather employee as soon as possible, and all employee will back to their own department after the project. Employees are focusing on the projects; it can increase the productivity and have faster response.

Which company should use which structure? Are there any BEST structure?

There are no standard answers for which company should use which structure or which the best is. Choosing which structure is based on the company needs.

Introduction to Organizations and Management

In this week, we have got some idea about an organization and management. There are five basic components of an organization: the operational core, operational support, organizational support, top-management and middle management. Let’s use McDonald for example.

Operational core is the people who directly deliver the product or service to customers. For instance, cleaner cleans the table and floor as well as cashier takes order, collects money and packs the meal.

Operational support does not directly server or deliver goods to customers, but it support the operational core. For example, people working in quality control, shop maintenance and staff development.

Organizational support is a part to support the whole organization. For example, human resource hire employee and train them some basic skills, account department and office service.

Top management is setting the organization objective and policy, making strategic decision and links the external environment with the whole organization together. For example, chief executives and management team.

Middle management is an important part in an organization; it is because it links these four components together. When top management decides a new policy or strategy, this team will arrange the message and tell to all staff. For example, top management decided to change their brand color from red to black. Middle management will told the operational core that there is some people will come to the shop to change a new signboard. To the operational support, they need to make a lot of new signboards. And the organizational support, they need to plan the changing sequence, and when will it started and ended.

Each component is important to run the organization fluently and achieve the objective. Therefore the quality in each component will affect to the fluency and achievement.