Internets Impact on Location of Global Firms Assignment

Internets Impact on Location of Global Firms - Assignment Example The problem touches on key issues - globalisation and the Internet - that confront managements of several firms, challenging them to discover how to make the Internet a part of global strategy. What is globalisation and global strategy Micklethwait and Wooldridge (2000, p. xvi) called globalisation "the most important economic, political, and cultural phenomenon of our time" characterised by the "integration of the world economy, reshaping business and reordering the lives of individuals, creating social classes, different jobs, unimaginable wealth and, occasionally, wretched poverty." Stiglitz (2002, p. 9) defined global strategy as "the way firms cope with integration of countries and peoples of the world brought about by the enormous reduction of transportation and communication costs, and the breaking down of artificial barriers to the flow of goods, services, capital, knowledge, and people across borders." In other words, a global strategy is a set of objectives that help a firm deal with globalisation, e.g., what goods to sell to world markets, how to sell these goods, and how to transport these goods from where they are produced to where they are consumed. Globalisation affects firms that sell products like autos and appliances, and service firms in banking and retailing. Porter's Diamond Porter's Diamond refers to a framework (Porter, 1990) that a nation or economy can use to analyse and develop its competitive advantage, a concept he explains (Porter, 1985) as the added benefit that a firm's product or service has over that of its competitors so that customers buy from the firm instead of from its competitors. Porter (1985, p. 3) enumerates three basic types of competitive advantage: cost leadership, differentiation, and focus. A firm attains the first through economies of scale and cost minimisation; the second through brand image, technology, product features, service and support quality; and the third by supplying a particular market or niche very well. Applied to nations, the diamond-shaped framework is a map - of what Porter calls Competitive National Advantage - which consists of four determinants that we describe and show in Figure 1: factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry (1990, p. 72). [Insert Figure 1 here] These determinants are broad attributes existing in a country that shape the environment in which local firms compete and that promote or impede the creation of competitive advantage. They indicate why a nation is globally successful in a particular industry. He cites examples of how competitive national advantage promoted the success of industry clusters in printing equipment in Germany, pharmaceuticals in Switzerland, home appliances in Italy, and robotics in Japan. Porter's thesis is that each country has a unique set of conditions that enable local firms to compete successfully in the global marketplace. Porter states that the diamond is a system (1990, p. 144), with each determinant affecting the others in a dynamic way, either building up or destroying the competitiveness of firms and affecting their ability to compete globally. Yip's Drivers Firms need to develop global strategies and implement