Page 298 - DMGT401Business Environment

Unit 14: Changes in Business Environment

Companies are vertically integrating themselves. Recently, Videocon acquired the picture tube Notes
manufacturing capacities of Thomson and got access to picture tube manufacturing in many
countries, including Europe. Asian Paints also has its operations in more than 27 nations. Ranbaxy
and Dr. Reddy's Lab are also taking locational advantage with horizontal integration like
acquiring generic pharmaceutical organizations in the US, Europe, Israel and other nations.
Product Strategy: It was a Coke's CEO, the late Roberto Goizueta, who declared in 1996: "The
labels 'international' and 'domestic'… no longer apply." His globalisation program, often
summarised under the tagline "think global, act global," had included an unprecedented amount
of standardisation. By the time he passed away in 1997, Coca-Cola derived 67 % of its revenue
and 77 % of its profits from outside North America. To cross borders, organizations have to face
a very critical question that is Product Standardisation vs. Product Adaptation.

Standardisation provides advantages in the production and distribution of products and services.
Cost is the decisive factor for most commodities. Through economies of scale and through
standardisation, an organization can fulfil the demand of many nations through one plant.
Even in consumer good economies, standardisation works at least at regional levels. Like in
India, Chinese toys took the advantage of reduction of tariff barriers and successful captured the
Indian market. Similarly, in industrial goods like Processors, RAM, Chemicals, etc.,
standardisation can save millions of Dollars. Globalisation also helps in establishing world-
class plants, which is a win-win situation as organisations reduce the cost and the customer gets
the product at an economical price. Standardisation is not possible in all the goods, specifically
in most of the consumer goods.
In many goods product adaptation is essential to meet the local conditions or preferences.
Sometimes adaptation is mandatory because of the government's regulations, Local Standards
(as Electrical), Measurement Standards and Product Standards and Systems. Sometimes product
modification is done only to make it fit for specific distribution channel.

Example: Like in India Coca Cola is distributed in glass bottles that are reused. On the
other hand, they use Tin cans in USA, which are not recollected from the outlet.
Product adaptation increases the cost. Sometimes, when the product is new to the market, the
issue of adaptation and standardisation become crucial. Sales volumes do not justify the
adaptation and the standard product doesn't suit the local requirement. This happened a few
years back when the electric shaver came to the Indian market.
But organizations have to choose a trade off between standardization and product adaptation.
Besides, globalisation has influenced all aspects of organizations: Sales Promotion, Research,
Market Research, Distribution Strategies, Product Development Strategies, etc.
After the implementation of GATS (General Agreement on Trade and Tariffs) and the clause of
free movement of labour in most of the regional trade agreements, HR policies have seen a
significant change. More and more organizations are adopting international HR standards
because:
1. Job-hopping may increase after new opportunities will be available.
2. When an MNC follows international standards in a new territory, the local industry also
learns and follows international HR standards.
3. Because of free movement of capital and goods, competition increases. Because of FDI and
imports in this situation, a business unit can survive only by providing a world-class
product. And to provide world-class products, it must have HR practices of international
standards and it has to invest in its nourishment.

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