Industry Globalization vs. Global Competition

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  • 0:00 Industry Globalization
  • 1:57 Global Competition
  • 3:00 Degree of Globalization
  • 4:51 Lesson Summary
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Lesson Transcript
Instructor: Beth Loy

Dr. Loy has a Ph.D. in Resource Economics; master's degrees in economics, human resources, and safety; and has taught masters and doctorate level courses in statistics, research methods, economics, and management.

This lesson discusses the concept of an industry being global. We'll look at the difference between industry globalization, global competition, and the degree to which a company has globalized its operations.

Industry Globalization

An industry is a group of businesses that produce a specific product or service. Agriculture, entertainment, construction, education, government, transportation, logistics, and health care are all types of industries. Industry globalization comes about when many of an industry's companies become global in one way or another. This means they can garner the services of suppliers and the attention of customers in foreign countries. Let's look at an industry we all use.

Courier services is a segment of the logistics industry that most of us know well. UPS, FedEx, TNT, and DHL are the top global carriers. What separates these companies from local carriers is that each has a unique global structure. Let's look closer at the globalization process for some of the larger courier services.

UPS has corporate and regional headquarters all over the world. FedEx is a worthy competitor to UPS, as is TNT and DHL in certain regions, and all continue to look for global opportunities. Recently, both FedEx and UPS were granted access to China's domestic express delivery market. DHL, on the other hand, had already purchased Chinese domestic courier firms years earlier. Each company has been looking for a way to access China's 1.5 billion citizens.

As we can see from these companies, industry globalization is a process. As companies expand, the industry's model for success molds itself to the region where it is attempting integration. In China, companies found ways to gain inroads to the country's local courier services industry. From there, the companies begin creating avenues to compete for human resources, suppliers, and customers. Global competition will continue as the industry becomes more stable in these unfamiliar markets.

Global Competition

Global competition exists in many industries, even if the entire industry isn't considered international. A company may even exist in one region and market primarily in that region, then serve international customers only via the Internet. Whether or not its industry is globalized, if a company provides products and services to customers in foreign countries, it is involved in global competition.

We also have other situations where some global companies compete with smaller companies that have been in existence for years. For example, many countries are served by local courier services that have to compete against much larger, global competitors like UPS and FedEx.

Some countries are also transitioning to more capitalistic markets, which opens the doors for companies to help the country transition from state-owned industries to private ownership. It's important to note that global companies have to be strong enough to incur years of losses before ever making a profit. This is why a lot of smaller companies are excluded from global competition, but are worthy local competitors.

Degree of Globalization

Some companies are more global than others. Most of us would agree that the oil and auto industries are global, but what about retail stores that may just have a few outlets in Paris and London? Both industries are global, but the oil and auto industries are considered more global. How do we measure the degree of a company's globalization? Here are a few guidelines:

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