1. Main Drivers Of Globalization

A cost driver is the unit of an activity that causes the change in activity's cost.

Other cost drivers to globalization are the opportunity to build global scale economies and the high product development costs nowadays. (Ferrier, 2004) 5) Competitive drivers.

cost driver is any factor which causes a change in the cost of an activity

'Cost drivers are the structural determinants of the cost of an activity, reflecting any linkages or interrelationships that affect it'.^[1] Therefore we could assume that the cost drivers determine the cost behavior within the activities, reflecting the links that these have with other activities and relationships that affect them.

The Activity Based Costing (ABC) approach relates indirect cost to the activities that drive them to be incurred. Activity Based Costing is based on the belief that activities cause costs and therefore a link should be established between activities and product. The cost drivers thus are the link between the activities and the cost.

Generally, the cost driver for short term indirect variable costs may be the volume of output/activity; but for long term indirect variable costs, the cost drivers will not be related to volume of output/activity.

In traditional costing the cost driver to allocate indirect cost to cost objects was volume of output. With the change in business structures, technology and thereby cost structures it was found that the volume of output was not the only cost driver. John Shank and Vijay Govindarajan list cost drivers into two categories:^[2]Structural cost drivers that are derived from the business strategic choices about its underlying economic structure such as scale and scope of operations, complexity of products, use of technology, etc., andExecutional cost drivers that are derived from the execution of the business activities such as capacity utilization, plant layout, work-force involvement, etc.Resource cost Driver is measure of quantity of resources consumed by an activity. It is used to assign cost of a resource to activity or cost pool.Activity Cost Driver is measure of frequency and intensity of demand placed on activities by cost object. It is used to assign activity costs to cost objects.

To carry out a value chain analysis, ABC is a necessary tool. To carry out ABC, it is necessary that cost drivers are established for different cost pools.

Examples[edit]

Main Drivers Of Globalization

Some examples of indirect costs and their drivers are: indirect costs for maintenance, with the possible driver of this cost being the number of machine hours; or, the indirect cost of handling raw-material cost, which may be driven by the number of orders received; or, inspection costs that are driven by the number of inspections or the hours of inspection or production runs. In marketing, cost drivers are Number of advertisements, Number of sales personnel etc. In Customer service, cost drivers are Number of service calls attended, number of staff in service department, number of warranties handled, Hours spent on servicing etc..

References[edit]

1. ^'Competitive Advantage', by Michael Porter
2. ^Strategic Cost Management: The New Tool for Competitive Advantage by Shank and Govindarajan

• “Cost Accounting: a managerial emphasis”, 12th Edition (2005) by Charles T. Horngren, George Foster and Srikant Datar

See also[edit]

I have 10 questions for which I need help finding a solution. Please complete as detailed as possible.

Thanks!

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1. Describe the two major drivers to globalization and two examples of 'reasons to go global'. (Please note that the drivers of globalization not the same as the 'reasons to go global.') (0.5 points for each correct answer, total = 2)

2. What are two disadvantages of using a wholly owned subsidiary mode of entry when entering a foreign market? (1 point for each correct answer, total =2)

3. Pick the correct answer from the choices below. (0.5 points)

The__________________________ exchange rate is the rate at which a dealer converts currency on a particular day

a) Forward
b) Speculative
c) Fair
d) Spot

4. Pick the correct answer from the choices below. (0.5 points)

_______________are the costs of exchange

a) Transfer fees
b) Transaction costs
c) Fronting Loans
d) Taxes
e) Royalties

5. The cost of capital in the global capital market is generally higher than the cost of capital in domestic markets? (0.5 points)

True or False?

6. Expatriate failure is the premature return of an expatriate manager to his or her home country. Expatriate failures impact the company, as do near-failures. (0.5 points)

True or False?

7. Describe one reason why a firm would want to use a localization strategy?
Describe one reason why a firm would want to use an international strategy? (2 points total)

8. What are three distinct examples of countertrade? (1 point)

9. Which organization structure best supports international horizontal differentiation? (0.5 points)

a) Functional
b) Hybrid
c) Informal Matrix
d) Geographical
e) Worldwide product division

10. Why would a firm want to implement a geocentric staffing policy? Describe a real world example of a company you think employs a geocentric staffing policy and tell me why you think it does so? (1.5 points)

Solution Preview

1. Describe the two major drivers to globalization and two examples of 'reasons to go global'. (Please note that the drivers of globalization not the same as the 'reasons to go global.')

The first major driver of globalization is technology. Introduction of modern technologies such as internet and advanced telecommunication technologies have propelled globalization as the whole world has become a global village. Secondly, removal of trade barriers and establishment of free trade zones and free trade agreements have also boosted globalization.

The first primary reason to go global is to explore new market opportunities in emerging markets across the world. The second major reason to go global is to take advantage of low cost labor and raw materials or comparative `advantage offered by low cost nations.

2. What are two disadvantages of using a wholly owned subsidiary mode of entry when entering a foreign market?

The main disadvantage of wholly owned subsidiary is that it involves substantial investment by the company in the foreign market. In other words, large investment is at stake in the case of wholly owned subsidiary. Further, if the company has no experience of operating in the local market and fails to adapt to local conditions due to lack of knowledge, wholly owned subsidiaries can become a failure. There is significant risk exposure in the case of wholly owned subsidiary. If political or other kinds of ...

Describe the two major drivers to globalization and two examples of 'reasons to go global'. (Please note that the drivers of globalization not the same as the 'reasons to go global.')