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2. Integration processes
Use of advantages of integration — the first what remember when speech comes about strategy in the conditions of globalization. The integration essence internationally consists in implementing at world level model of the traditional integrated enterprise, and then to search for benefit from use of cheap labor power and production of the goods in great volume, to serve larger market at the optimized prices. Such approach many companies (use Sony, Zara and etc.).
That integration strategy was successful, it is necessary to acquire success key drivers, such as:
ü Support on strong position. To achieve success in the world market, the integrated enterprise should adjust efficient control all components of a price chain that will allow to resist to numerous competitors. To this strategy should adhere and those companies which were already fixed in the sector. Beginners seldom manage to use the given advantage, as they don't have that set компетенций, which are necessary to subordinate to itself all links of a chain. So, it is better to them to specialize on one of components of general activity and not to risk, trying to master others.
For example, Sony has stopped the choice on integration. At a growing competition capability to combine different types of activity allows this company to outstrip competitors in an adaptation question to changeable requirements of the market and to provide to the brand image of the manufacturer of high-quality electronics;
ü Enterprise carrying over on the new place, allowing to get access to the most favourable resources. Even if the integrated enterprises aren't subcontractors, all of them are equally interested in receiving benefit from globalization, choosing for the factories a convenient site and by that reducing the costs for production. As an example it is possible to result the Spanish company Zara which more than half of goods produces at home, but at the same time places production and in the countries with cheap labor power (in the Eastern Europe and Asia). The Hourly pay of work of the Chinese worker averages $1, while in the USA or the Western Europe — from $15 to $30. Other example — large capital publishing houses which use the typographies located in a province. Enterprise moving on a new place allows to get also access to those компетенциям which aren't present in own market. For example, the American players of the market of credit cards successfully transfer some tasks connected with the analysis of client base to India. As a result it is possible to lower essentially costs, and also not to involve in the decision of this problem of the American specialists which consider its excessively labor-consuming.
Benefit from moving can be received, only if to improve necessary skills and to deepen the knowledge. First of all it is a question of employees who are capable to establish effective mutual relations, successfully overcoming language and cultural barriers. Besides it is necessary to allocate means for quality control of conditions of moving. And at last, to invest in struggle against numerous specific risks (tab. 1), such as: policy risks, a know-how or intellectual property leakage, risk of fast deterioration of reputation at world level in case of origin of difficulties. So, at the factory in Haiti Levi Strauss has faced a problem of non-observance of the labor law. It has catastrophically affected its reputation, and the company has incurred essential losses which have surpassed the economy received for the account of cheap labor power;
| Costs necessary for decrease in risks at the international integration of business | |
| Cost type | Example. |
| Administrative expenses (the control of accomplishment of works, negotiating so further) | Bear all companies bar none. On the average constitute approximately 8 % of cost of the contract |
| Expenses on quality control, payment of production managers and tracing of working process | Emilia Maglia (the Italian textile company) has been forced to take for work of the Italian manager that he observed of labor obtainable locally at the factories placed in Romania |
| Expenses on repair work and maintenance service | In case of the company of Hewlett Packard moving of system of the customer accounting to India has caused heavy expenses as it was necessary to direct the technicians for check of operation of system on places. |
| The expenses connected with low production of work | Company Luxoptica has established following quotations on production of one and steams of lenses: 1,2 dollars for the Chinese worker and 2,63 dollars for Italian. However low production of work of the Chinese workers, an over-expenditure of materials and other factors couldn't compensate more attractive hourly rates |
| The expenses connected with a local infrastructure | In India the electricity, and telecommunication not always high quality often disconnect. It assumes heavy expenses at placing in these countries of the service centers and accounting systems. |
| Expenses connected with local standard conditions | Labor law non-observance at factories Levi Strauss placed to Haiti, has led to catastrophic consequences for image of the company. |
| The expenses connected with risks of delegation of power | When Sarp has realized that thanks to subcontractors competitors use its high technologies, it has reduced quantity of the operations transferred to partners. |
| The expenses connected with policy risks | Political instability in some developing states won't allow to count on that degree of reliability of business which is warranted by developed countries. |
| The expenses connected with social risks | The decision on moving of assets British Telecom abroad has led to debate with labor unions and has caused disapproving reaction of employees that has enough cost much to the company |
Adaptation of the offer of the company to specificity of the local markets. The world market only in rare instances can be perceived as uniform and homogeneous. Distinction of cultures, methods of consumption, legislative arrangements and rules forces the enterprises which want to react effectively to the demand existing in other countries, to adjust the offer for local conditions.
Besides it is necessary to conduct a clear boundary meanwhile that should be global, and that shouldn't lose local color. The main condition of success of the integrated enterprise — an embodiment in life of those processes which will allow to benefit by scale economy thanks to some standardization and personification without which not to manage at local level. So, pharmaceutical company GE has developed the Chinese version of goods. Unlike the USA, in China of 80 % ассортиментных positions GE implements at half price. Thanks to it enterprise goods so well disperses in the local market that it takes in the lead positions in the segment.
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