BTEC HND Unit 18: Global Business Environment Report 2021

This report, prepared for a BTEC Level 5 HND Diploma in Business Unit 18, examines the multifaceted concept of globalization. It defines globalization across economic, cultural, political, and social dimensions. The report then applies Yip's model to identify key drivers influencing the globalization of a specific industry, focusing on market, cost, competitive, and government factors. Furthermore, it explores the strategic challenges organizations face when operating in a global environment, utilizing the PESTEL framework to analyze the political, economic, social, technological, environmental, and legal factors impacting a company like Honda. The analysis includes considerations for market convergence, global customer demands, cost efficiencies, and competitive dynamics. This report aims to provide a comprehensive understanding of the complexities and opportunities within the global business landscape.

ASSIGNMENT 1 FRONT SHEET
Qualification BTEC Level 5 HND Diploma in Business
Unit number and title Unit 18: Global Business Environment (530)
Submission date 9/12/2021 Date received (1 st submission)
Re-submission date Date received (2 nd submission)
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Contents
I. Introduction......................................................................................................................... 3
II. Main Body.......................................................................................................................... 3
1. Define the concept globalization in terms of different dimensions......................................3
2. Discuss key drivers affecting a specific industry to go globalization based on Yip’s model.4
3. Explain the complexity of strategic challenges faced by organizations when operating in a
global environment................................................................................................................. 6
III. Conclusion...................................................................................................................... 10
Reference:............................................................................................................................. 11
I. Introduction.
There was a time when consumers only had access to goods and services that were available
locally. Their choices were limited by what they could access on foot, by horse, or by carriage. This is
still the case for many people around the world, and in rural and remote parts of the U.S., it is still
necessary for families to make weekly trips to town to stock up on food, household items and other
necessities. However, with the rise of Internet-based business, there has been an explosion of
international trade, and more and more consumers essentially have the world at their door. Of course,
international trade is not just a twentieth-century phenomenon. Trade across borders and between
cultures has been a feature of human civilization for centuries— there is evidence of this dating back
as far as the nineteenth century BCE. The Silk Road, one of the best-known and most enduring
“international” trade routes, began sometime around 200 BCE and for centuries was central to cultural
interaction from China through regions of the Asian continent all the way to the Mediterranean Sea. In
Viet Nam, as an investment-consulting intern, I was tasked with supporting my team in preparing a
report for a possible Vietnamese customer that examined the influence of globalization and its
dynamics on the local car sector as an issue. This will persuade potential all of partners to cooperate
with Vietnamese companies to expand their operations.
II. Main Body.
1. Define the concept globalization in terms of different dimensions.
 Globalization:

Globalization means the speedup of movements and exchanges (of human beings, goods, and
services, capital, technologies or cultural practices) all over the planet. One of the effects of
globalization is that it promotes and increases interactions between different regions and populations
around the globe.
 Economic:
Economic globalization includes many processes, opportunities and problems related to the spillover
of economic activities among countries of the world, or the establishment of a trading system among
the participating party’s transnational countries such as businesses or non-governmental organizations
is called economic globalization Example: the development of trade systems within transnational
actors such as corporations or NGOs
 Cultural:
Refers to the process by which one culture's experiences, values, and ideas are disseminated
throughout the world through various means. We will explore some examples of cultural
globalization, the factors that influence it, and its effects throughout the world. Example: You may
have noticed that every place has some things that are the same as your hometown, such as fast food
restaurants like McDonald's or Levi jeans being sold in a local store.
 Political:
Political globalization refers to the growth of the worldwide political system, both in size and
complexity. That system includes national governments, their governmental and intergovernmental
organizations as well as government-independent elements of global civil society such as international
non-governmental organizations and social movement organizations. One of the key aspects of the
political globalization is the declining importance of the nation-state and the rise of other actors on the
political scene. Example: the development and growing influence of international organizations such
as the UN or WHO means governmental action takes place at an international level. There are other
bodies operating a global level such as NGOs like Doctors without borders or Oxfam.
 Social:
Social globalization refers to the sharing of ideas and information between and through different
countries. Example: include internationally popular films, books and TV series. The Harry Potter/
Twilight films and books have been successful all over the world, making the characters featured
globally recognizable. However, this cultural flow tends to flow from the center (i.e. from developed
countries such as the USA to less developed countries). Social globalizations is often criticized for
eroding cultural differences.

2. Discuss key drivers affecting a specific industry to go globalization based on Yip’s model.
Yip identifies four sets of “industry globalization drivers” that underlie conditions in each industry
that create the potential for that industry to become more global and, as a consequence, for the
potential viability of a global approach to strategy. Market drivers define how customer behavior
distribution patterns evolve, including the degree to which customer needs converge around the world,
customers procure on a global basis, worldwide channels of distribution develop, marketing platforms
are transferable, and “lead” countries in which most innovation takes place can be identified. Cost
globalization drivers—the opportunity for global scale or scope economics, experience effects,
sourcing efficiencies reflecting differentials in costs between countries or regions, and technology
advantages—shape the economics of the industry. Competitive drivers are defined by the actions of
competing firms, such as the extent to which competitors from different continents enter the fray,
globalize their strategies and corporate capabilities, and create interdependence between geographical
markets. Government drivers include such factors as favorable trade policies, a benign regulatory
climate, and common product and technology standards.
 Market Driver:
One aspect of globalization is the steady convergence of customer needs. As customers in different
parts of the world increasingly demand similar products and services, opportunities for scale arise
through the marketing of more or less standardized offerings. How common needs, tastes, and
preferences will vary greatly by product and depend on such factors as the importance of cultural
variables, disposable incomes, and the degree of homogeneity of the conditions in which the product
is consumed or used. This applies to consumer as well as industrial products and services. Coca-Cola
offers similar but not identical products around the world. McDonald has, while adapting to local
tastes and preferences, has standardized many elements of its operations. Software, oil products, and
accounting services increasingly look alike no matter where they are purchased. The key to exploiting
such opportunities for scale lies in understanding which elements of the product or service can be
standardized without sacrificing responsiveness to local preferences and conditions. Global customers
have emerged as needs continue to converge. Large corporations such as DuPont, Boeing, or GE
demand the same level of quality in the products and services they buy no matter where in the world
they are procured. In many industries, global distribution channels are emerging to satisfy an
increasingly global customer base, further causing a convergence of needs. Finally, as consumption,
patterns become more homogeneous, global branding and marketing will become increasingly
important to global success.
 Cost Drivers:
The globalization of customer needs and the opportunities for scale and standardization it brings will
fundamentally alter the economics of many industries. Economies of scale and scope, experience

effects, and exploiting differences in factor costs for product development, manufacturing, and
sourcing in different parts of the world will assume a greater importance as determinants of global
strategy. At bottom is a simple fact: a single market will no longer be large enough to support a
competitive strategy on a global scale in many industries. Global scale and scope economics are
already having far-reaching effects. On the one hand, the more the new economies of scale and scope
shape the strategies of incumbents in global industries, the harder it will be for new entrants to
develop an effective competitive threat. Thus, barriers to entry in such industries will get higher. At
the same time, the rivalry within such industries is likely to increase, reflecting the broadening scope
of competition among interdependent national and regional markets and the fact that true
differentiation in such a competitive environment may be harder to achieve.
 Competition Drivers:
Industry characteristics—such as the degree to which total industry sales are made up by export or
import volume, the diversity of competitors in terms of their national origin, the extent to which major
players have globalized their operations and created an interdependence between their competitive
strategies in different parts of the world—also affect the globalization potential of an industry. High
levels of trade, competitive diversity, and interdependence increase the potential for industry
globalization. Industry evolution plays a role, too. As the underlying characteristics of the industry
change, competitors will respond to enhance and preserve their competitive advantage. Sometimes,
this causes industry globalization to accelerate. At other times, as in the case of the worldwide major
appliance industry, the globalization process may be reversed.
 Government Drivers:
Government globalization drivers—such as the presence or absence of favorable trade policies,
technical standards, policies and regulations, and government operated or subsidized competitors or
customers—affect all other elements of a global strategy and are therefore important in shaping the
global competitive environment in an industry. In the past, multinationals almost exclusively relied on
governments to negotiate the rules of global competition. Today, however, this is changing. As the
politics and economics of global competition become more closely intertwined, multinational
companies are beginning to pay greater attention to the so-called nonmarket dimensions of their
global strategies aimed at shaping the global competitive environment to their advantage (see the
following section). This broadening of the scope of global strategy reflects a subtle but real change in
the balance of power between national governments and multinational corporations and is likely to
have important consequences for how differences in policies and regulations affecting global
competitiveness will be settled in the years to come.
3. Explain the complexity of strategic challenges faced by organizations when operating in a
global environment.
PESTEL of Honda:

 Political:
The form of political law critically influences a business unit. Every decisions of expanding the
consumption scale and prices are governed by the policy of the state management agencies. Taxes,
commercial laws, business laws, According to state policy, also affect motorbike manufacturing;
motorbikes will be banned from Hanoi in 2030, which will greatly affect the company's production
strategy and sales. Rather than focusing on motorbike production, the company can invest more in the
development of automobiles. The director of the company confirmed that: Honda Vietnam continues
to maintain its position as the leading company even after society has shifted to a period of "Car
goods". (Vision of 2030)
 Economic:
Economic environment affects consumer-buying power and spending patterns. The research is about
Honda motorcycle. On the other hand, it is examined all factors which are involved in economic
environment that influence the manufacturing and sales of motorbikes in Vietnam, In fact, Vietnam is
a developing country in the process of industrialization and modernization, and therefore, many
economic factors have recently changed. Our essay covers four parts belonging to the economic
environment.
 Social:
Social culture and the ways of doing things affect the culture of an organization in an environment.
Sharing beliefs and attitudes to the consumers play a great role in how marketers at Honda Motor Co.,
Ltd. understand the customers of a target market and how they design the marketing message for Auto
Manufacturers - Major industry consumers. Social factors that leadership of Honda Motor Co., Ltd.
should analyze for PESTEL analysis are:
- Class structure, hierarchy and power structure in the society.
- Education level as well as education standard in the Honda Motor Co., Ltd.’s industry:
- 95% know how to read and write
- Culture (gender roles, social conventions etc.)
- Manpower but more and more equal.
-Entrepreneurial spirit and broader nature of the society. Some societies encourage entrepreneurship
while some do not - Attitudes (health, environmental consciousness, etc.)
- Leisure interest

Vietnamese people always prefer to have the personal vehicle as an asset, not a public transportation,
besides the price of the car in Vietnam is very high due to the import tax so it is the opportunity for
them to sell the product. Vietnam people believe that the Japanese products have the best quality.
They always want to buy products made in Japan first
 Technology:
Technology is fast disrupting various industries across the board. The transportation industry is a good
case to illustrate this point. Over the last 5 years, the industry has been transforming really fast, not
even giving chance to the established players to cope with the changes.- A firm should not only do the
technical analysis of the industry but also the speed at which technology disrupts that industry. Slow
speed will give more time while the fast speed of technological disruption may give a firm little time
to cope and be profitable. Technology analysis involves understanding the following impacts. Recent
technological developments by Honda Motor Co., Ltd. Competitors:
+ Technology's impact on product offering.
+ Impact on cost structure in Auto Manufacturers - Major industry.
+ Impact on value chain structure in Consumer Goods sector.
+ The rate of technological diffusion
 Environment:
Environment pollution in our country is increasing seriously, mainly due to the waste from industrial
zones. It is estimated that out of 183 industrial parks in the country, over 60% of industrial parks do
not have a centralized waste-water treatment system. Therefore, since 2001, Honda Vietnam has
applied a comprehensive environmental management system ISO 14001 in the production process
with modern waste treatment systems, waste-water and improve the efficiency of using energy. . This
system has contributed to reducing CO2 concentrations in the workshop from 5107mg / m3 in 2003 to
1403mg / m3 in 2004 and less than 900mg / m3 in 2005 and 2006.
In Vietnam, motorcycles are the most common means of transportation and motorcycle emissions are
a major cause of air pollution. In that situation, the company has produced motorcycle exhaust to
ensure emission standards in order to not harm the people. In addition, the scarcity of natural
resources is also a concern of humankind. Therefore, the creation of fuel efficient and
environmentally friendly motorcycles is a matter for Honda Vietnam. In 2006, the company
introduced a new, eco-friendly and fuel-efficient, which features a new 108cc engine, which is cooled
by a radiator with integrated exhaust; Nox, HC and CO2 are even lower than the Euro-2 standard
 Legal:

Relating to localization issues, while motorcycle imported from foreign countries suffered 30-40% tax
rate, the components are imported for domestic assembling just suffered 20-25% tax rate, so local
motorcycles will have a great advantage in price competition, especially for moderately priced
motorcycles. Since 1998, Honda has built three large motorcycle factories in Vietnam, producing
about 2.5 million products per year. Nowadays, because of joining economic organizations, the tariff
barriers are gradually abolished. According to the project in 2018, the import tax on motorcycles fell
sharply, even some motorbike are free-tax imported from Thailand. Therefore, the company are
forced to bring out competitive solutions, such as lower costs, improve quality, creating more
incentive programs and enhancing warranty service or repair.
 Global supply chain of Toyota:
Toyota is one of the largest vehicle brands with a global footprint. Known for its innovative
methods of production, Toyota has acquired a leadership position in the automotive industry. Every
vehicle that it makes requires assembling of thousands of parts sourced from suppliers all around the
world. The brand has worked in close collaboration with its suppliers since its foundation. It has also
built close and strong relationships with its suppliers. Having and managing a large and global supply
chain network are difficult tasks. The brand has also adopted several policies aimed at driving better
relationships with suppliers as well as making its supply chain partners more accountable. In the
vehicle industry, competition has grown quite intense and in such a scenario unless a brand has a
well-managed supply chain, acquiring a leadership position would be impossible. Moreover, a supply
chain is like the backbone of your manufacturing process and apart from timely availability of raw
materials, you need to engage your suppliers to ensure continuous supply. Toyota’s supply chain
practices have been lauded widely as among the best in the industry. The situation has grown highly
demanding in the 21st century and h The Japanese word for manufacturing is called Monozukuri. At
Toyota, manufacturing takes place in close collaboration with the suppliers. Vietnam is Japan’s
biggest source of wire harnesses. Several Japanese parts makers operate plants in the country. The Hai
Duong factory that shut in early August belongs to Sumitomo Electric Industries Ltd., which declined
to comment on individual site operations. Another major wire-harness maker and Toyota supplier in
the region, Furukawa Electric Co., has been forced to limit operations due to Covid restrictions,
according to a company spokesperson.
Toyota Motor Corporation's vehicle production system is a way of making things that is sometimes
referred to as a "lean manufacturing system," or a "Just-in-Time (JIT) system," and has come to be
well known and studied worldwide. This production control system was established based on many
years of continuous improvements, with the objective of making the vehicles ordered by customers in
the quickest and most efficient way, in order to deliver the vehicles as swiftly as possible. The Toyota
Production System (TPS) was established based on two concepts: "jidoka" (which can be loosely
translated as "automation with a human touch"), as when a problem occurs, the equipment stops

immediately, preventing defective products from being produced; and the "Just-in-Time" concept, in
which each process produces only what is needed for the next process in a continuous flow.
Just-in-Time:
Making only "what is needed, when it is needed, and in the amount needed"
Producing quality products efficiently through the complete elimination of waste, inconsistencies, and
unreasonable requirements on the production line. In order to fulfill an order from a customer as
quickly as possible, the vehicle is efficiently built within the shortest possible period of time by
adhering to the following:
1. When a vehicle order is received, production instructions must be issued to the beginning of
the vehicle production line as soon as possible.
2. The assembly line must be stocked with the required number of all necessary parts so that any
kind of ordered vehicle can be assembled.
3. The assembly line must replace the parts used by retrieving the same number of parts from the
parts-producing process (the preceding process).
4. The preceding process must be stocked with small numbers of all types of parts and produce
only the numbers of parts that were retrieved by an operator from the next process.
One of the successful automobile companies that have effectively used its distribution channels is
‘Toyota.’ Toyota mainly relies on its dealership for the sales of its products. A Toyota dealer relies
upon the parent organization to outline the car designs according to the needs of the consumers. Thus,
Toyota relies upon the dealer to pull in customers, influence them to purchase Toyota cars, and
service cars after the deal has been made. The organization additionally relies upon different dealers
to give great sales and services that will maintain the reputation of Toyota and its dealer body. Indeed,
the accomplishment of individual Toyota dealer relies upon how well the whole Toyota distribution
channel contends with the channels of other automobile producers (Toyota 2015).
Looking at the worldwide automobile market, Toyota has managed to gain the reputation of being the
world’s biggest automaker both as a brand and in terms of the number of cars sold (Forbes 2015). As
mentioned earlier, the main places for the distribution of Toyota’s products are Dealerships. These are
the places where customers can access Toyota’s products. For an automobile industry player like
Toyota, distribution channels are limited. The firm relies on either the dealerships or retailers. The
dealerships see majority of sales transactions be it cars, spare parts, accessories or servicing. How
well Toyota manages this distribution channel in collaboration with marketing channels is the key to
Toyota’s success.

III. Conclusion.
As a result, it is apparent that globalization is perfectly viable after a pandemic has ended. It will
mark the beginning of a new era in the globalization process. In order to compete with competitors in
the same industry and maintain consumer loyalty, Honda must work on enhancing strengths such as
product quality and hybrid engines while also attempting to enhance localization.
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