Drivers for Globalisation (YIP)

· Cultural homogenisation

o XTechs market does is not affected by cultural choices. Its products fit international standards (with customised variations to suit customer requirement, customers who operate in an international market)

· Economies of scale and scope

o Economies of scale are not the reason for XTechs consideration of a production facility in China; however this expansion will provide economy of scale opportunities. Economy of scope is of more value, increasing distribution and marketing opportunities and creating greater flexibility in development of products through access to new skills and know-how.

· Technological development

o No obvious advantages in technological development evident in the case study; a JV sheet metal expertise may provide some new technology.

· Deregulation and the lowering of trade barriers

o The opening up of China has had a global effect on business, and in particular manufacturing. XTechs lack of a manufacturing facility in China is being challenged by its suppliers and customers.

· Strong International competition

o XTech operates in a relatively small (£250M) global market with global competitors.

· Cost factors:

o Market is global and relatively small ($250M, estimated)

o XTech need global access to realise competitive markets share

o Large market share required to realise economies of scope (scale not so important as batch runs are small in this industry)

· Market conditions:

o Market is global

o Customers are worldwide

o Global distribution channels available and efficient

o Industry relies on Global manufacturing

o Suppliers/CM’s push to operate in Asia

· Government policies:

o Some industries in China protected – require minimum investment, etc.

o Trade barriers falling – widespread operations external to country of origin