The world is shrinking and globalisation is the new order that binds us all together in mutual interdependence. Sink or swim, we go forward as one world.

University Degree Business and Administrative studies

EXECUTIVE SUMMARY

Global strategies prevail as South Africa bodes its resilience in the global environment showing an economy growing by more than 3% at times. Opportunities and threats in the global arena are addressed by the policies and strategic plans set in place by the prevailing democratic government.

Although SA was a latecomer to the globalisation drive, much has happened in the past few years to ensure a growing international presence and the increased competitiveness of the South African economy.

CONTENTS

INTRODUTION TO GLOBALISATION

DEFINING GLOBALISATION

Every day you hear it on the news, read it in the newspapers, and overhear people talking about it…and in every instance the word globalisation seems to have a different meaning.

The descriptions refer to the fact that international flows of trade, finance and information are being integrated into a single global market. Globalisation, therefore could be described as a process which is aimed at integrating the world market where national commodity capital, financial and currency markets are joined together into a single market which operates according to a set of rules which apply are universal. Transnational corporations, multi-lateral institutions and governments of advanced industrialised countries are driving Globalisation.

This is happening in a context where there are major advances in technology, particularly in the information and communication industries. The result of this technological upsurge has seen unprecedented economic and social development. Technology has shrunk the world from a size large to a size small rendering instantaneous real space-time communication possible and, through this, revolutionising global trade, global financial transactions and banking.

WHAT PRECEDED GLOBALISATION?

The world is 10 years old

It was born when the Wall fell in 1989. It’s no surprise that the world’s youngest economy – the global economy – is still finding its bearings. The intricate checks and balances that stabilize economies are only incorporated with time. Many world markets are only recently freed, governed for the first time by the emotions of people rather than the fists of the state. From where we sit, none of this diminishes the promise offered a decade ago by the demise of the walled-off worlds. The spread of free markets and democracy around the world is permitting more people everywhere to turn their aspirations into achievements. And technology, properly harnessed and liberally distributed, has the power to erase not just geographical borders, but also human ones. It seems to us that, for a 10-year old, the world continues to hold great promise. In the meantime, no one ever said growing up was easy.

Merrill Lynch

11 October 1998

In American press adverts placed almost ten months to the day after the Asian Crisis was triggered by the government of Thailand closing 56 of Thailand’s top finance houses

GLOBAL STRATEGIC MANAGEMENT

During the last half of the 20th century, many barriers to international trade fell away and companies began pursuing global strategies to gain a competitive advantage. To create a successful global strategy, we must first understand the nature of global industries and the dynamics of global competition.

Sources of competitive advantage from a global strategy

A well designed global strategy can assist a company to gain a competitive advantage. This advantage can arise from the following sources:

Efficiency

Economics of scale from access to more customers and markets
Exploit another country’s resources – labour, raw materials
Extend the product lifecycle - older products can be sold in less developed countries
Operational flexibility – shift production as costs, exchange rates change over time

Strategic

First mover advantage and only provider of a product to the market
Cross subsidization between countries
Transfer price

Risk

Diversify macroeconomic risks (business cycles not perfectly correlated among countries)
Diversify operational risks (labour problems, earthquakes, wars)

Learning

Broaden learning opportunities due to diversity of operating environments

Reputation

Crossover customers between markets – reputation and brand identification

Drivers of a global strategy

A global industry can be defined as:

An industry in which companies must compete in all world markets of that product in order to survive.
An industry in which a company’s competitive advantage depends on economics of scale of scope gained across markets

The following drivers determine an industry’s globalisation potential.

Cost advantages

Location of strategic resources
Differences in country costs
Potential for economics of scale (production, R&D). Industries in which costs drop by at least 20% for each doubling of volume tend to be good industries for globalisation.
Transportation costs (value/ bulk of value/ weight ratio) – Diamonds are more global than ice

Customer needs

Common customer needs favour globalisation. For example, the fax machine industry’s customers have more similar needs than customers in the furniture industry whose needs may be defined by among other things, local tastes.
Global customers: Global customers often require globally standardized products
Global channels require a globally coordinated marketing programme. Strong established local distribution channels inhibit globalisation.
Transferable marketing: Whether marketing elements such as brand names and advertising require little local adaptation. World brands with non-dictionary names may be developed in order to benefit from a single global advertising campaign.

Competition

Global competitors: Global competitors will have a cost advantage over local competitors.
When competitors start leveraging their global positions through cross-subsidisation, an industry is ripe for globalisation

Government influence

Trade policies
Technical standards
Regulations

Country comparative advantages

Competitive advantage is a company’s ability to transform inputs into goods and services at a maximum profit on a sustained basis, better than competitors.

Comparative advantage resides in the endowments of a particular region. These include land, natural resources, labour and the size of the local population.

Michael E. Porter argued that a nation can create its own endowments to gain a comparative advantage. Created endowments include skilled labour, the technology and knowledge base, government support, and culture. Porter’s diamond of national advantage is a framework that illustrates the determinants of national advantage. This diamond represents the national playing field that countries establish for their industries.

Porter’s diamond of national advantage:

The individual points on the diamond and the diamond as a whole affect four ingredients that lead to a national comparative advantage. These ingredients are:

The availability of resources and skills,
Information that companies use to decide which opportunities to pursue with those resources and skills,
The goals of individuals in the companies,
The pressure on companies to innovate and invest.

The points of the diamond are described as follows:

Factor conditions

A country creates its own important factors such as skilled resources and technological base
The stock of factors at a given time is less important than the extent that they are upgraded and deployed
Local disadvantages in factors of production force innovation. Adverse conditions such as labour shortages or scarce raw materials force companies to develop new methods, and this innovation often leads to a national comparative advantage

Demand conditions

When the market of a particular product is larger locally than in foreign markets, the local companies devote more attention to the product than do foreign companies, leading to a competitive advantage when the local companies begin exploiting the product
A more demanding local market leads to national advantage
A strong, trend-setting local market helps local companies anticipate global trends

Related and supporting industries

When local supporting industries are competitive, s enjoy more cost effective and innovative inputs
This effect is strengthened when the suppliers themselves are strong global competitors

Company ...

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Demand conditions

When the market of a particular product is larger locally than in foreign markets, the local companies devote more attention to the product than do foreign companies, leading to a competitive advantage when the local companies begin exploiting the product
A more demanding local market leads to national advantage
A strong, trend-setting local market helps local companies anticipate global trends

Related and supporting industries

When local supporting industries are competitive, s enjoy more cost effective and innovative inputs
This effect is strengthened when the suppliers themselves are strong global competitors

Company strategy, structure and rivalry

Local conditions affect company strategy
Low rivalry makes an industry attractive. Over the long run, more local rivalry is better since it puts pressure on companies to innovate and improve. High local rivalry results in less global rivalry.
Local rivalry forces companies to move beyond basic advantages that the home country may enjoy, such as low factors costs.

The diamond as a system:

The effect of one point depends on the others. For example, factor disadvantages will not lead companies to innovate unless there is sufficient rivalry.
The diamond is also a self-reinforcing system. For example, a high level of rivalry often leads to the formation of unique specialised factors.

Government’s role:

The role of government in the model is to:

Encourage companies to raise their performance, for example by enforcing strict product standards
Stimulate early demand for advanced products
Focus on specialised factor creation
Stimulate local rivalry by limiting direct cooperation and enforcing antitrust regulations

Disadvantages of the diamond model:

It does not address cultural issues in different regions
The political dynamics of a region are not factored into the model
Components of the multinational environment

Government, laws, regulations and policies

Monetary and fiscal policies and their impact on price trends and inflation
Commercial policies such as tariff controls, import restrictions
Export controls and restrictions on trade
Tax policies

For example in some countries, especially the United States, there are laws that govern citizen’s companies operational abroad. This addresses issues like means of production, e.g. child labour, resident based taxation laws.

Another example, in France the labour force work to a 35hr week, so any company investing here would have to this into account.

Key legal and political parameters and their projections

Political philosophy, government stability

Factors here would include the country’s attitude towards private and foreign investment, form of the national government and the degree of anti foreign discrimination.

Key economic parameters and their projections

Population and its distribution
Level of economic development
National income in real terms
Distribution of personal income
Price stability
Labour supply and wage rates
Balance of payments equilibrium
Exchange controls

Issues such as the foreign exchange position and the membership in custom unions would be factors to consider here.

Business system and structure

Prevailing business philosophy
Major types of industry
Number, size and types of companies
Ownership patterns and legal forms off enterprise
Domestic and foreign patterns of industry ownership
Business associations and their influence
Business codes
Business managers available
Managerial processes and practices

Social and cultural parameters and their projections

Literacy and education levels
Business, economic and technical education available
Language and cultural characteristics
Class structure and mobility
Religious, racial and national characteristics
Degree of urbanization and urban-shift
Rate of social change

An example here would be the global company McDonalds not being able to serve beef burgers in India because of the Hindu population’s cultural beliefs.

Types of international strategy: Multi-domestic vs. global

Multi-domestic strategy

Product customized for each market
Decentralised control – local decision making
Effective when large differences exist between countries
Advantages: product differentiation, local responsiveness, minimized political risk, minimized exchange rate risk

Companies in this class would include the motor industry where cars are customised to local tastes.

Global strategy

Product is the same in all countries
Centralised control – little decision making authority at the local level
Effective when differences between countries are small
Advantages: cost, coordinated activities, faster product development

A fully multi-local value chain will have every function from R&D to distribution and service performed entirely at the local level in each country. At the other extreme, a fully global value chain will source each activity in a different country.

McDonalds fast foods would be classified as a global industry where control is centralised and little decision making is taken at the local level.

International strategy options

The complexity and diversity of globalised organisations can result in many different forms of strategy. Expansion into foreign markets can be achieved by the following four mechanisms:

Exporting

Exporting is the marketing and direct sale of domestically-produced goods in another country. Since exporting does not require that the goods be produced in the target country, no investment in foreign production facilities is required. Most of the costs associated with exporting take the form of marketing expenses.

Exporting usually requires coordination among the exporter, importer, transport provider and the government.

Export markets in South Africa include exports in coal, fruit, aluminium, wood chips and diamonds.

Licensing

Licensing permits a company in the target country to use the property of the licensor. This property is usually intangible, such as trademarks, patents and production techniques. The licensee pays a fee in exchange for the rights to use the intangible property and possibly technical assistance.

Franchising markets in South Africa include restaurants such as Steers, Spur, McDonalds.

Joint venture

There are 5 common objectives in a joint venture: market entry, risk/ reward sharing, technology sharing and joint product development and conforming to government regulations. Other benefits include political and distribution channel access that may depend on relationships.

The key issues to consider in a joint are ownership, control, length of agreement, pricing, technology transfer, local company capabilities and resources, and government intentions.

Bell Equipment is a prime example of a successful joint venture strategy with international companies like John Deere and Hitachi where global market penetration is being gained.

Foreign direct investment

Foreign direct investment is the direct ownership of facilities in the target country. It involves the transfer of resources including capital, technology and personnel. Direct foreign investment may be made through the acquisition of an existing entity or the establishment of a new enterprise.

Comparison of market entry options:

Globalising service businesses

Service industries tend to have a low economics of scale. However, some economy of scale may be gained through knowledge sharing, which enables the cost of developing the knowledge over a larger base. On the customer side, because a service company’s customers may themselves be operating internationally, global expansion may be a necessity. Knowledge gained in foreign markets can be used to better service customers. Being global also enhances a company’s reputation which is critical in service businesses.

High quality service products often depend on the service company’s culture, and maintaining a consistent culture when expanding globally is a challenge.

Investec is a major independent financial services group with activities in SA, Europe, the UK, the US and Israel offering services in the financial sector.

Knowledge management in global companies

There is much value in transferring knowledge and best practices between parts of a global company. However, many barriers prevent knowledge from being transferred:

Barriers attributed to the knowledge source

lack of motivation
lack of credibility

Barriers attributable to the knowledge itself – ambiguity and complexity
Barriers attributable to the knowledge recipient

lack of motivation
lack of absorptive capacity

Barriers attributable to the recipient’s existing process – process rigidity
Barriers attributable to the recipient’s external environment and constraints

SOUTH AFRICA AND GLOBALISATION

South Africa (SA) depends on its relationship with the world economy for about 50% of its Gross Domestic Product (GDP). The African National Congress (ANC) has taken a policy decision to engage proactively with globalisation and look for beneficial re-insertion of SA, isolated by apartheid, into the world economy.

ECONOMY

South Africa has the most advanced economy on the African continent. Since 1994, particularly, the country’s economy has grown rapidly. After years of apartheid induced isolation from the global economy, countries lifted sanctions and companies stopped disinvesting from South Africa. Profitable opportunities were opened up for South Africa to reintegrate its economy into the global economy.

The most important contributors to the economy include the mining sector, manufacturing and agriculture. The country’s financial and industrial infrastructure is well developed with excellent growth potential.

The country is plagued with the problem of large socio-economic inequalities that resulted from the apartheid regime and continues to manifest itself in the form of high unemployment rates, wide areas of poverty and increases in crime. An informal sector has developed as a result of unemployment and this poses another challenge to the country’s economic development.

ADVANTAGES AND DISADVANTAGES IN THE SOUTH AFRICAN CONTEXT

Geo-locational advantages

The strategic location of South Africa within a region of great diversity and enormity of natural resources seems responsible for the country’s rapid economic turnaround. Situated at the southern tip of the African continent, SA provides a bridge for trade in the Atlantic Ocean to its west and the Indian Ocean to its east.

The natural wealth and availability of human resources make SA a leader in many areas. Its gold, silver, diamond and other mineral production enhance its economic capacity beyond regional into the global market.

SA neighbours, most of them developing countries, depend on SA for their trade and commerce. Southern African countries in turn provide a market for South African goods and services as well as primary products for its factories.

Government, society and the politics of economic growth

Government and politics weigh heavily on business and economic decisions in SA. The systems of government, the administration of law and the legislative processes are found to affect economic policies and the conduct of business in South Africa.

Corporate governance

In a report on 27 October 2003, South Africa rated among the best performers in corporate governance in emerging markets, according to a report by the Institute of International Finance (IIF).

"This important development is a key contributor to the overall modernisation of South Africa's economy and its increasing attractiveness to international investors," said Peter Wuffli, co-chairman of the institute's equity advisory group.

The IIF is a global association of financial companies with over 330 member institutions.

Corruption in South Africa remains a huge challenge for the country with contractor’s budgets on projects often including a “back hander” for the project facilitator.

However, in a recent interview Geraldine Fraser-Molokai, the South African public service minister, says the government's efforts to combat corruption are beginning to pay off.

According to the latest global integrity report, which was released in April 2004, South Africa was rated "strong", along with countries like Germany, the US and Italy.

Fraser-Moleketi says the report is a good reflection that South Africa has put a sound basis in place to combat corruption. She says legislation has been adopted to allow public servants who act as whistle blowers to be guaranteed of confidentiality.

Also mentioned in Fraser-Moleketi’s comment is that 'Operation Impipa' - in which people are encouraged to speak out against corruption - has also played an important role in exposing corruption.

Economic growth

In an earlier report (24 January 2003), the International Monetary Fund (IMF) praised South Africa’s economic management, saying the country was poised to achieve 3% economic growth in 2003.

In its 2002 Article IV Staff Report on South Africa, released on 23 January, the IMF said that South African authorities continued to implement sound monetary and fiscal policies between 2001 and 2002.

The Washington-based institution said South Africa’s government finances continued to be strong, particularly at the levels of the central and provincial governments.

According to the recent South African Reserve Bank (SARB) review, the South African financial system is well regulated and robust and in the current macro-economic environment it would be likely to be able to withstand considerable shocks should they occur.

Globally, the prospects of an economic recovery improved during the second half of 2003, but some areas of concern remain which include the risk of terror events disrupting global financial systems, the rising US budget deficit, the deteriorating ability of UK households to service their debt and destabilising capital flows in emerging-market economies.

Political instability, HIV/AIDS and poor infrastructure are the main concerns in Southern African.

Despite South Africa's good macroeconomic performance, there has not been an improvement in investor sentiment. This has had an impact on the exchange rate, where the exchange rate has been volatile. One of the assumptions made regarding the decline of the rand is the extent of liquidity of the South African market. However, there are benefits of rand depreciation. These include: expenditure switching, increased competitiveness of the export sector, increased domestic investment and fundamental economic restructuring.

Prospects for investment and growth are dependent to a large extent on the commitment of the private sector, in terms of investing capital in the economy. The domestic private sector continues to invest internationally, and this sends a negative signal to potential foreign investors who may be interested in investing in South Africa.

Labour force

With South Africa’s past history of ethnic-based policies of the previous government, has given rise to lopsided economic and social development in areas of education, housing, business ownership and other infrastructures. While over 95% of its white population is literate, only about 30% of its black people have an acceptable level of education.

A worldwide shortage of information technology workers is promoting industrial countries to acquire workers from other countries. However, it is not only the high-tech workers that are in strong demand. Numerous South African teachers have, for example, settled in Britain and New Zealand.

One of the most important impediments to growth and investment in South Africa is the huge skills shortage as a result of one or more of the following:

Impact of HIV/AIDS (resulting in high staff turnovers)
Skilled labour leaving the country which is partly attributed to globalisation and the relaxation on immigration policies of industrial countries
Inadequate education system
Low literacy levels
As a result of the Black Economic Empowerment (BEE) policy, businesses are closing and investors leaving the country for lack of being able to secure contract within South Africa

However, the South African government has shown commitment to providing facilities and opportunities to the communities that were previously disadvantaged by the pre-1994 apartheid system, by enabling those communities to share equitably in the resources of the country and its economic activity.

The government's macroeconomic strategy for Growth, Employment and Redistribution (GEAR) is based on promoting the free market and financial and fiscal discipline and aims at economic growth, job creation and the development and distribution of basic services to all South Africans.

The government has indicated the importance it attaches to investment by introducing measures to enhance and support trade and industrial development. The government has also stated that it intends to promote the development of small and medium sized businesses (SMMEs).

GEAR

Fiscal policies are aimed at attracting foreign investment in order to meet the government’s fiscal discipline goals as outlined in the Growth, Employment and Redistribution (GEAR) strategy. These policies include:

Reducing the budget deficit
Easing the debt burden
Improving the collection of tax
Privatising state assets
Eliminating government dis-saving
Increasing government investment on infrastructure
Reducing the household and corporate tax rates
Reducing government consumption expenditure as a percentage of GDP.

Labour legislation

However, to their advantage, South Africa’s labour legislation is among the most progressive in the world, providing for institutions to settle disputes and ensure fairness in the workplace.

This was not always the case. Industrial relations in the apartheid era were characterised by high levels of racial discrimination, conflict, union repression, cheap labour policies and authoritarian management style.

The post-1994 labour legislation, the product of extensive consultation between government, labour and employers, has established nine institutions to nurture sound, co-operative industrial relations.

Black economic empowerment (BEE)

Economic empowerment is an integral part of South Africa's transformation process, encouraging the redistribution of wealth and opportunities to previously disadvantaged communities and individuals, including blacks, women and people with disabilities. The empowerment process has been identified as crucial to the future viability of the country's economy.

Black Economic Empowerment (BEE) companies have shown tremendous growth since 1994, when the first major black consortium listed on the Johannesburg Stock Exchange (JSE).

Increasingly, foreign and local companies are seeking BEE partners in order to establish working relationships or joint ventures, thereby securing state approval for government contracts.

A BEE partner may add ten points onto any government contract. BEE companies are well-represented in the financial services sector, the media, forestry and pulp and paper, oil and energy, beverages and fishing industries.

However, what is becoming clear is that BEE is a risk in the short term and a benefit in the long term. There is an immediate dilution in value when companies sell off a stake and there is a possibility that a new partner may not deliver value, but extract income. In the long term, the benefit is derived from securing business from government and an access to a more diversified skills base. It is important to note that the process of managing BEE should be as a means to an end and the end being globalisation.

Spatial development initiatives

One of South Africa's key industrial policies remains its commitment to fostering sustainable industrial development in areas where poverty and unemployment are at their highest.

This objective is carried out through the Spatial Development Initiatives (SDI), which focuses high-level support in areas where socio-economic conditions require concentrated government assistance and where inherent economic potential exists.

The SDI programmes focus government attention across the various national, provincial and local government spheres with the goal of ensuring that investments are fast-tracked and that synergies between the various types of investments are maximised.

Primarily all the major projects in the SDI are based on a partnership between the public and private sectors, and are set to provide opportunities for participation in sectors such as agriculture, mining, tourism, environment, forestry, infrastructure and ports.

These projects are expected to create more than 68 000 new jobs. A key component of this initiative is the move away towards international competitiveness, regional co-operation, and a more diversified ownership base.

Incentives for investors

Several investment incentives have been created for potential investors in South Africa. All business sectors are open to investors, no government approval is required, and there are almost no restrictions on the form or extent of foreign investment.

The current tariff reform programme is specifically aimed at lowering input costs for the producer, while import controls have been relaxed in line with South Africa's General Agreement on Tariffs and Trade (GATT) and World Trade Organisation (WTO) obligations.

Exporters are granted incentives such as export marketing assistance, zero rating for value added tax (VAT) on exports of goods and services and relief from various customs and excise duties.

In his February 2001 budget speech, Finance Minister Trevor Manuel announced a R3-billion incentive package for inventors in strategic industrial projects for the following four years. This would entail tax allowances of either 50% or 100% of an approved investment, and will be managed through the Strategic Industrial Project (SIP) programme.

The trade and industry department announced in April 2002 that the SIP programme had come on stream after finalising the criteria for the evaluation of projects.

SOUTH AFRICAN GLOBAL ORGANISATIONS

A little over 10 years ago, South African companies were restricted to their national base. Sanctions, political isolation and legislative constraints made anything beyond normal trade relations almost impossible.

Following the democratic elections of 1994, the floodgates opened, and South African companies moved into the rest of Africa and beyond.

Mining houses led the way, followed by manufacturers and financial institutions. Trade mushroomed, mostly in favour of South Africa. As exchange controls were eased, companies began investing offshore.

South African companies

Today, South African based companies are rapidly expanding their global profile and proving that they can compete with the best multinational companies in the world. The companies listed below use various global strategies as detailed in this report to compete in the global arena.

Listed below are some global companies in South Africa:

Energy Africa is an African oil and gas exploration and production group. Energy Africa's strategy for growth is to increase its hydrocarbon reserves and production through exploration, development and acquisition of projects principally in Africa.

Likely strategy option: Joint venture/ acquisitions

One of the top five furniture groups in Europe, and the largest in Africa, the Steinhoff Group manufactures, warehouses and distributes a wide range of household goods (mainly comprising bedding, case goods and lounge furniture) as well as raw materials used primarily in the manufacturing of household goods.

Likely strategy option: Joint venture for the transfer of technology and knowledge

Metro Cash & Carry

The company is an investment holding company. The trading subsidiaries and associated companies are engaged in the distribution of groceries and other related consumer goods mainly on a cash and carry basis.

Likely strategy option: Foreign direct investment

Alexander Forbes is a leading independent international provider of financial and risk services. Listed on the JSE Securities Exchange South Africa, Alexander Forbes has, since 1998, been ranked in the world's top 10 risk and benefit consultants.

Likely strategy option: Joint ventures

Note: In this type of industry, sustained reputation if critical.

Nampak is Africa’s largest packaging manufacturer. In South Africa it is able to offer customers one of the widest product ranges of any packaging company in the world, providing them with a total solution to their packaging needs where necessary.

Likely strategy option: Foreign direct investment

Avis Rent A Car System, Inc and its subsidiaries operate the world's second largest general-use car rental business, providing business and leisure customers with a wide range of services at more than 1 700 locations in the United States, Africa, Canada, Australia, New Zealand and the Latin American/Caribbean region.

Likely strategy option: Foreign direct investment

Impala Platinum Holdings Limited – Implats – is in the business of mining, refining and marketing platinum group metals (PGM), particularly platinum, as well as nickel, copper and cobalt. It is also involved in the secondary sourcing of platinum group metals where the company's core refining competencies offer a competitive advantage.

Likely strategy option: Export

Active in over 20 countries and on six continents, Sasol is a global player in chemicals and fuels.

Likely strategy option: Foreign direct investment

A major group of world class companies serving the global value chain. Murray & Roberts deals with the extraction, beneficiation and industrialisation of natural resources. It has a strong presence in southern Africa and focuses on the construction economies of the developing world.

Likely strategy option: Foreign direct investment

Anglo (R193,639m) is one of the world's largest mining groups. Although mainly involved in gold, diamonds, and platinum production, it has extensive holdings in base and ferrous metals, forests, coal and industrial minerals.

Likely strategy option: Export

Richemont (R109,098m) is a Swiss-based holding company with investments in tobacco, luxury goods and the electronic media. Some of its well-known brands include Cartier, Piaget, Dunhill and Benson & Hedges. The group is controlled by South Africa's Rupert family.

Likely strategy option: Joint ventures

Founded by the Oppenheimer family, De Beers (R95,502m) is the world's largest producer of gem and industrial diamonds. Through its London-based Central Selling Organisation (CSO), De Beers controls almost 65% of the world's diamond, trade.

Likely strategy option: Export

Billiton (R78,001m) is one of the world's leading metals and mining companies, holding assets in base metals, coal, steel, ferroalloys, aluminium, titanium, nickel and copper.

Likely strategy option: Export

Old Mutual, (R67,477m) together with its listed subsidiaries Nedcor (banking) and Mutual and Federal (general insurance), is the largest financial services group in Southern Africa. One quarter of its operating profits u generated outside Africa, mainly in the US and UK.

Likely strategy option: Foreign direct investment

M Cell (R44,152m) is the owner of cellular phone network operator MTN, one of the largest and quickest growing in the world. The group operates in Uganda, Rwanda, Cameroon and Swaziland and is aggressively pursuing expansion in other parts of Africa.

Likely strategy option: Foreign direct investment

SABMiller is one of the world's largest brewers with a brewing presence in over 40 countries across four continents and a portfolio of strong brands and leading market shares in many of the countries in which it has brewing operations.

Likely strategy option: Joint venture

An international brand management company focused on heavy industrial products in Southern Africa, the UK, Europe, the US and Australia. Its best-known brand is Caterpillar.

Likely strategy option: Foreign direct investment

A major independent financial services group with activities in SA, Europe, the UK, the US and Israel.

Likely strategy option: Foreign direct investment

CONCLUSION

One needs to view globalisation as presenting both opportunities and threats, and to recognise that the country has strengths and weaknesses in engaging with it.

The opportunities arise from the fact that world trade is expanding more rapidly than world GDP, that international capital flows have increased and that globalisation has been associated with a communications and information technology revolution. This rapid expansion of world trade creates possibilities for a country like South Africa to boost its economic growth by increasing exports as well as achieving a diversification of exports that could reduce dependence on primary products. Both goals are critical to achieving GEAR targets. The technological advances also have potential to raise output and improve incomes. The increased movement of international capital has resulted in an increase in foreign investment – another GEAR initiative.

The threats come from the fact that globalisation has increased competitive pressures. Countries cannot maintain protective tariffs and regulatory barriers at the levels they were in the past. As protective barriers are lowered, producers directed at domestic markets face increased competition from potential imports. SA has responded to this with lowering input costs and providing incentives for importers.

As indicated, SA has strengths it has built on in developing a proactive response to globalisation. It has a significant natural resource base, is relatively developed in relation to its neighbours, has human resource potential and has undergone a successful political transition that is strongly supported.

The country also has weaknesses that need to be overcome. Much of the inherited productive economy and the manufacturing sector from the apartheid regime were relatively uncompetitive. This has left these industries vulnerable to foreign competition.

It was predicted in certain circles that there would be a declining economy and a strong anti-globalisation stance from SA in 1994 when the ANC won the election. Very few predicted an economy growing by more than 3% at times, political tolerance and stability and a government embracing globalisation.

BIBLIOGRAPHY

ANC. (2004). Globalisation: The challenge facing South Africa. . 22 April 2004.

Buelens, M, Kinicki, A, Kreitner, R, 2002. Organizational behaviour. 2nd ed. London: McGraw Hill.

Chambers, S, Johnston, R, Slack, N, 2001. Operations management. 3rd ed. International edition. Pitman Publishing.

Department of trade and industry. (2004). DTI pushes into global economy. . 15 April 2004.

Department of trade and industry. (2004). How competitive are South African firms? . 15 April 2004.

GIBS News. (2004). Global economic and social scenario. . 29 April 2004

Johnson, G and Scholes, K. Exploring Corporate Strategy. 2002, 6th Edition.

Mail and Guardian. (2004). Global deals threaten BEE. . 22 April 2004.

One World. (2004). Globalisation. . 22 April 2004.

SABC News. (2004). SA is managing corruption: Fraser-Moleketi. . 04 May 2004

South Africa info. (2004). Economy. . 21 April 2004.

South African labour bulletin. (2004). Fix it or nix it? The anti-globalisation movement. . 22 April 2004.

Sunday Times. (2004). The competitive edge. . 22 April 2004.

Sunday Times. (2004). Why Africa is a junior partner in global economy.

World Bank. (2004). What is RPED? . 22 April 2004.

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