"Small Budget, Big Success" in HK Movie Industry

1. Overview on movie industry

Our “global indicator” is the number of small budget film can go into the global market successfully. Moreover, we can further discuss how the changes in strategy of production, marketing and distribution can lead to success.

The film producer is involved in the creation and distribution of films as a product. This industry is a worldwide phenomenon, but some countries, like Hollywood in USA have a greater role in production than others. This industry generally employs a wide number of people directly through production and distribution process, and it also employs a large number of people indirectly because of the money spent to produce films. In most cases, the film industry is focused on films as a medium for entertainment, but in some situations, it may use film for educational purposes as well.

The people in charge of the film industry in the area of finance and marketing are generally the film producers. These people arrange funding to create the film and oversee the hiring of talent to create the product. Distribution and marketing are also important factors that determine the success of a film. Different producers have different levels of power. Some simply aid in financing and may have very little to do with the actual creation of a film, while others take a much more significant role in the process. Sometimes films have several different producers although usually only one or two will actually have any real involvement.

We chose film market as the “global indicator” because we found that the on-going technological convergence lead to the decreasing usage of cinemas. So the production companies and distributors both have to adapt the new concept and idea around the film market over the world. They changed to focus more on the scenario and the script to promote their local culture that may lead them to the global market.

"Box office miracle"－Infernal Affairs

We focus on one of the “small budget, big success” films from our local market - “Infernal Affairs (無間道)” as our example.

Infernal Affairs is a 2002 Hong Kong crime-thriller film directed by Andrew Lau and Alan Mak. It tells the story of a police officer who infiltrates the triads, and a police officer secretly working for the same gang. The English title is a word play combining the law enforcement term "internal affairs" with the adjective infernal. The box office is around 55millions HK dollar. Due to its commercial and critical success, Infernal Affairs was followed by a prequel, Infernal Affairs II, and a sequel, Infernal Affairs III, both released in 2003, as well as a 2006 American remake.

Pre-release publicity for Infernal Affairs focused on its star-studded cast (Andy Lau, Tony Leung, Anthony Wong, Eric Tsang, Kelly Chen and Sammi Cheng), but it later received critical acclaim for its original plot and its concise and swift storytelling style. The film did exceptionally well in Hong Kong, where it was considered "a box office miracle" and heralded as a revival of Hong Kong cinema.

Successful cases of '' small budget, big success'' films in past decade:

Film name	Actor	Box office (HKD)
Shaolin Soccer (2001)	Stephen Chow, Vicki Zhao	60 millions
Kung Fu Hustle (2004)	Stephen Chow, Yuen Wah	59 millions
Police Story 4 : First Strike	Jakie Chan	58 millions
God of Gamblers Returns	Chow Yun-fat, Wu Chien-Lien	52 millions
CJ7 (2008)	Stephen Chow, Zhang Yuqi	51 millions
You Are The Apple of My Eye (2011)	Ko Chen-tung, Michelle Chen	50 millions
Ip Man (2008)	Donnie Yen, Simon Yam	25 millions

2.Changes in strategies－an overview

To make a successful film with limited budget, there are changes in production, distribution, and marketing strategies.

Production strategy changes:
For production strategies, it includes lots of elements like director who is responsible for managing the whole film production, casting selection, location for shooting, and last but not least the film scripts itself. (Filmmaking from wiki, n.d.)

In the past, film producers thought that in order to make their films successful in global market, visual effect is the most important as it can attract people at the first glance. As a result, film producers inclined to spend most of their budget in creating fantastic scene, like action scene, as their first priority. In the next place, they would select actors who are very well known even though with limited budget. Therefore, they would eventually forget the soul of a film, which is the movie script itself. However, they forgot that with the limited budget, it is difficult to make visual effect better than Hollywood’s film as they have huge capital. As a result, the films will be inferior if they only focus on visual effect and casting selection.

Fortunately, the local film producer finally realized that if they want to go into global market, they should make something different from the Hollywood’s instead of trying to copy what the Hollywood films are now doing. That is making a totally new and fresh film plot to inspire people all over the world. Creating a new and special film script is not so costly. The most essential thing you need is creativity.

To succeed, film producers try to create film script with local culture which is new and fresh to global audience. According to the a research paper (rethinking globalization,2009), in order to make globalization successful, sometimes, it is important to keep your own culture instead of having localization because whether having localization depends on competition, context, culture etc. (rethinking globalization, 2009)For film market, keeping own culture is essential because audiences like to see something different from them. That is why the martial art film is particular successful in global market as martial art is the unique culture of Chinese. Additionally, an entirely new idea can also get a competitive advantage because people have never seen similar films before and therefore they are curious about it.

Distribution strategy changes:For film distribution strategy, film used to first appear in local cinema and appeared in foreign countries’ cinema after a long period of time due to the geographical and communication barrier. At the time that the film could finally appear in global cinemas, people who originally want to watch the film might already loss the desire of watching it. Also, it is difficult to acquire the foreign film in audio shop. Nevertheless, thanks to the technology advances, the film producers can shorten the time it takes to bring their film to cinema worldwide by convenience communication and negotiation with the foreign countries’ cinema like having video conferencing. Besides, the channel to distribute film increases. They can make their film DVD available to global audience by purchasing online. Also, the technology advance reduces the cost to do distribution so it allows film producer to distribute their film in a larger scale compared with the past.

Marketing strategy changes:

As far as marketing strategy is concerned, the old marketing strategy is totally different from the current one. In the past, film producer mainly marketed their film by promoting film on television. Now, again thanks to the technology development, film producers think of new way to promote their film.

With the convenience of internet, film producers could simply post their trailer online and make an official website for introducing their film in different languages so that different countries’ web users can approach to it. Also, film makers could make use of the power of the internet to promote their film since people who watched the film are willing to share their comment through discussing in web forum. Besides, technological advance, the trend of globalization encourages more international film festivals which provide opportunities for local film to participate in global market. Not saying having award, being nominated is already a good promotion.

3.Example－ Internal Affairs

After having a brief idea of the changes of strategies in production, distribution and marketing, we are going to use a successful film to illustrate the new kinds of strategies, which is Internal Affairs.

Production strategy－ Paying effort on film script:In terms of production, Internal Affairs has an attractive film script directed by Andrew Lau Wai Keung and Alan Mak Siu Fai. The story is about the local culture in Hong Kong. Being a pure local film, all the scenes are shot in Hong Kong including many local features like actors saying special local slang. Also, the story is based on Hong Kong current situation. In Hong Kong, it is common that there is undercover who lurk in gangland but secretly work for police to collect evidence to reduce crime.

Besides the local culture element, the directors made use of their imagination and creativity adding a new idea into the film. Besides polices pretend to be gang, the gangs lurk in police station too. Since we do not know who is the real police and who is the gang, there is suspense. This made the story become more complex but attractive. Additionally, the story is meaningful because it provides people room to have reflection. In the reality, there is no absolute black and white. There is always some grey area which means whether things are right or wrong depends on the angles we take. Therefore, it creates constructive controversy and makes the film become more popular. All these elements in the script can arouse audience interest. On one hand, the unique culture attracts people curiosity. On the other hand, the meaningful story allow audience to participate in the film in the sense of thinking about the meaning and guessing the development of the story. It could eliminate the disadvantages that people lack participation because they do not understand the unique culture.

With an excellent film script, the producers did not use some expensive visual effect like explosion or exaggerated action scene (Internal Affairs message: importance of film script, n.d), which is commonly used in Hollywood film, to attract global audiences. In short, all local movies succeeded in global market, film makers have put more effort on the film script (story plot) instead of spending money to play special visual effect and casting selection.

Distribution Strategy

Synchronizing released date:

One of the successful tools is to make the movie available to watch for the audiences around the world. As we know that the released date is an important strategy to promote the movie in order to make a profit. The first 'Infernal Affairs' was released in HK2002. With a good box office record, it had been distributed to a lot of countries within following 2 years. People around the world had a chance to watch this film, at the same time, more country distribution helped to enhance its popularity. There is the list of the released date in different countries:

 

Country	Date
Hong Kong	12 December 2002
Taiwan	13 December 2002
South Korea	21 February 2003
France	15 March 2003
Italy	24 April 2003
Philippines	12 August 2003
Greece	18 September 2003
Finland	10 October 2003
Japan	11 October 2003
Ireland	16 October 2003
Norway	16 October 2003
Sweden	November 2003
Australia	1 January 2004
Hungery	19 January 2004
Portugal	5 February 2004
Romania	20 February 2004
UK	27 February 2004
Denmark	29 March 2004
Estonia	21 May 2004
Germany	12 August 2004
Netherlands	9 September 2004
USA	24 september 2004
Belgium	8 December 2004

Online DVD rental service enhance globalization:

After an additional number of months, the movie was released to DAD, VCD and even online rental service. People can buy the videos and watch the film from the internet other than shopping in the VCD shops. The online DVD rental industry is driving movie rental services, with changing customer preferences, demand is shifting towards digital movie rental market. Meanwhile, online DVD rental service plays an important role to make the movie into global market as people around the world can shop on the online shops. There are a lot of internet shops which we can purchase 'Infernal Affairs' video:

easyCinema.com

blockbuster.com

SEVENTYMM.com

LOVEFiLM.com

BARNES&NOBLE.com

Dvd-subtitles.com

Netflix.com

Tesco Entertainment

Amazon.com

Marketing Strategy－Various Media Channels:

In the past, except Hollywood films, it is difficult to promote a movie in global market, let alone a small budget Hong Kong local film. However, in the 21st century, because of the technological advance, ‘Infernal Affairs’ was promoted in diversified ways.

Before promoting ‘Infernal Affairs’ to oversea market, it has already been realized as one of the most successful Asia films worldwide at that time. Why? Due to the technological development, it encourages the globalization of communication. (No author, 1998) John Chong Ching, who was the producer and marketing director of ‘Infernal Affairs’, shared his feeling on the CEBD, said ‘Different from ten years ago, thanks to the technological advance, after seizing the excellent box office on the premiere of “Infernal Affairs’ in Hong Kong, the universal recognized this movie right away. It helped the overseas promotion a lot.’ (Chong Ching, 2003) It reveals that the new information technologies help to reduce the cost of promotion and communication. The global communication facilities, especially the Internet, have the power to move low cost production film ‘Infernal Affairs’ visible from Hong Kong to the global arena and gather support for issue worldwide. (No author, 1998)

In fact, some of the social networking sites and tools were platforms of creating noise and discussions among ‘Infernal Affairs’, which was also one of the changes of marketing strategies. For example, some netizens share the movie trailers with different language versions on Youtube. People from all round the world could watch it and made comments to it. Besides, the MSN could be used as a tool for communicating about the film. Thus, those social networking tools caused the changes of market strategy and supported the low cost Hong Kong film ‘Infernal Affairs’ to gain high reputation worldwide.

 

 (English Version)

(German Version)

Other than using the Internet as media of promotion, the marketing team still using traditional promotion campaigns to consolidate the marketing strategy. First, they produced posters with different languages, such as Korean, Italian, English, French and so on. Besides, the main actors and actress went overseas for instance, Korea and Japan to promote the movie. Thus, in the 21st century, it tends to have more diversified marketing strategies and channels for small budget film like ‘Infernal Affairs’ to move to global market place.

The Power of Word-of-Mouth:
Traditionally, many Hollywood movie distributors invest in expensive global marketing campaigns by placing ads on TV commercials, newspaper ads, theaters, and promotional tour to maximize film publicity and revenue early in the release cycle. The casts, director, visual effects and cinematography, are highlighted in the ads to generate noise and audience interest.

Word-of-mouth also plays a significant role in a movie’s success. Consumers may seek signals of quality in advance of watching, such as critic’s review, comments from online social communities, and word of mouth from friends. (Duan, Wenjing, Gu, Bin and Whinston, Andrew B., 2011)Online WOM in the movie industry takes many forms, including online reviews, discussion boards, and blogs. IMDB.com, and Yahoo! Movie discussion are popular online platforms for moviegoers to post reviews, online ratings and search for film showtime. It is reported by a survey in the Wall Street Journal that a third of moviegoers chose a film because of a favorable review (Simmons [1994]).

To put ‘Infernal Affairs’ to International Stages, it emphasizes on the extensive use of WOM marketing strategies. However, independent online user reviews are of uncertain quality. There is great variety among reviewer’s taste and independent judgment about the quality of the movie. Film critics, who have established high-quality reputations, to exert the most influence on audience decisions. ‘Infernal Affairs’ put its focus on using online film critics review in foreign markets. ‘Infernal Affairs’ was usually first shown in International Film festival in different countries like Milwaukee International Film Festival in USA and Deauville Asian Film Festival. These festivals invite lots of local film critics who write film review and film periodicals to participate. Fortunately, review of ‘Infernal Affairs’ has around 150 expert reviews in many popular printed and online media worldwide. (http://www.imdb.com/title/tt0338564/externalreviews) For instance, the film reviews include Elvis Mitchell(2003), FILM FESTIVAL REVIEW: Loyalty and Betrayal, With Two Detectives Steeped in Corruption. The New York Times. Roger Ebert(2004), Infernal Affairs. Chicago Sun-Times. And G. Allen Johnson (2005) , Good guy, bad guy -- who's who? . San Francisco Chronicle. Their reviews serve as a consumer guide to movies. With their endorsement, ‘Infernal Affairs’ has already aroused the audience interest and favor before the release of the film. Hence, it finally achieves satisfactory box office revenue and was dominated in film awards in oversea countries.

Increasing realizations in International Film Festivals:
Apart from the promotion strategies above, anticipating in international film festivals is an important indicator of the marketing strategy change. It is hard to mention a small budget Hong Kong film that could get rewards o
r take part in the international film festival in the past. However, in the 21st century, much more Hong Kong films, such as ‘Echoes of the Rainbow’ (Echoes of the Rainbow from wiki, n.d.) and ‘A Simple Life’ (A Simple Life from wiki, n.d) are nominated or rewarded in international film festival.

‘Infernal Affairs’ won the Audience Award in 2003 Far East Film Festival, the Audience Award in 40th Annual Golden Horse Awards and the Best Foreign Language Film in 2004 Blue Ribbon Awards. Also, it was screened in competition at the Berlin Film Festival. No matter the film was just nominated or won a reward; it increases the reputation around the world. (Infernal Affairs from wikipedia, n.d) Due to the successful result overseas, the foreign distributors were more interested in buying ‘Infernal Affairs’. As a result, much more global citizen recognized and US buyer even remade this movie. (G. Allen Johnson, 2005) Therefore, the raise of realizations in international film festivals is a force pushing the ‘Infernal Affairs’, the small budget local firm to the international.

4.Conclusion
‘Infernal Affairs’ is a good example to illustrate the changes of production, distribution and marketing strategies of small budget Hong Kong movie respectively. It proofs the strategy changes of small budget Hong Kong films leads to great success is a global indicators.

Extension section

It is an extension section to reply your comments. First of all, our team is very pleased that all of you leaf us meaningful comments. After reading all your comments, we would like to make further explanation.

Many of you mentioned that technology also brings disadvantages like illegal downloading which will negatively influence the whole film industry. Our team admits that there are disadvantages. However, we should not deny the advantages that technology brings to the small budget film. In reality, nothing is perfect. All the things have their own strengths and weaknesses. Our team think that even though disadvantages exist, there are more advantages than disadvantages and technology which does really contribute a lot on success of small budget films. As our team mentioned in the blog, the advantages, like allowing film advertisement to appear in all over the world, shortening time to let the films to be shown in global cinema etc, are really important for small budget film to go globally.

In addition, different parties are engaging in eliminating the illegal downloading problems. For example, WinMx used to be a famous sharing software allowing computer users to share and download songs, movies etc. To restrict illegal downloading, a USA company said they would sue WinMx unless the WinMx adds filter function into the software so that people cannot search products with patent and copy right or suit down. Finally, WinMx shut down their company. And Hong Kong government said after WinMix shut down, the illegal downloading reduced by 80%. (News DJ.com, 2005) It shows that the situation is getting improved even though it is slow. Also, our team think that in the future as the technology goes on improving, the problem will be relieved. For example, illegal downloading could be detected by software and blocked. From the above example, it evident that disadvantages of technology is smaller than advantages.

Regarding Hollywood films can show globalization better than small budget films, our team is not agree with it because small budget films can show greater power of globalization. For Hollywood films, they have put a lot of money and resources into the production, marketing and distribution. It is reasonable that they can get into the global market. Even though globalization is not so significant, Hollywood films still can get into global market easily. However, it is mainly due to their huge money and resources spent. On the contrary, using small budget films to be the indicator is more suitable because the small budget films would not have been so success if globalization is not significant. Imagine that one clever boy and stupid boy go to a tutorial school. If the clever boy gets good academic result, people will just think that it is because he is clever even though the tutorial school has helped too. However, if the stupid boy gets good academic result, people will think that it is mainly because the tutorial school is helpful. There is similar situation in film market. Small budget films can better show the powerfulness of globalization. That is why we choose to analyze small budget film but not Hollywood films.

In addition, we would also respond to the question that whether technology helps to promote film internationally or globalization opens up the world eyes and ears to be interested in the local films. Our team thinks that both of them are right. We believe that both emerged simultaneously. Instead of one leads to another one, we think that they are correlated but not in cause and effect relationship. Indeed, you could say that the promotion of film let the global audience to have a chance to try the local film. On the other hand, the higher level of interest in local film encourages the local film maker to produce more and promote more. They are influencing each other.

In conclusion, once again, we appreciate all of your critical and helpful comment. It is hoped that the above session can let you have more understanding about our blog.

References1. Filmmaking from Wiki, (n.d). Retrieved February 18, 2012 from http://en.wikipedia.org/wiki/Filmmaking
2. Nigel Hollis (2009). Rethinking globalization P. 18
3. Internal Affairs message: importance of film script, (n.d). Retrieved February 18, 2012 Retrieved from http://blog.yahoo.com/_EODDNJJXBAX4WZP2XRIXXNAILY/articles/11334
4. No author. (1998). Globalization: A World-System Perspective. P. 3-4.Chong Ching. (2003). 莊澄回首無間道. Retrieved February 19, 2012 from http://www.iatopia.com/CEDB/magsearch.jsp?artid=11402
5. A Simple Life from Wikipedia. (n.d.). Retrieved February 19, 2012 from http://en.wikipedia.org/wiki/A_Simple_Life
6. Echoes of the Rainbow from Wikipedia. (n.d.). Retrieved February 19, 2012 from http://en.wikipedia.org/wiki/Echoes_of_the_Rainbow
7. Infernal Affairs from Wikipedia. (n.d.). Retrieved from February 19, 2012 from http://en.wikipedia.org/wiki/Infernal_Affairs
8. G. Allen Johnson. (2005). View Worldwide, Asian films are grossing millions. 9. Here, they’re either remade. Held hostage or released with little fanfare. Retrieved February 19, 2012 from http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/02/03/DDGHFB40EG1.DTL&ao=all
10. Duan, Wenjing, Gu, Bin and Whinston, Andrew B., (2011) The Dynamics of Online Word-of-Mouth and Product Sales: An Empirical Investigation of the Movie Industry. Journal of Retailing, Vol. 84, No. 2, pp. 233-242, 2008.
11. David A. Reinstein and Christopher M. Snyder(2005), The Influence of Expert Reviews on Consumer Demand for Experience Goods: A Case Study of Novie Critics. The Journal of Industrial Economics, VolumeLIII, No. 1
12. News DJ.com, (2005) Pressured from RIAA, WinMx and eDonkey will shut down, Retrieved from 7 May 2012 from http://newsdj.com/forum/viewthread.php?tid=3121

Greeting from ELITE

‎1) Brief introduction of ourselves

I’m Shantal Lung. I’m a local student from Human Resources Management(HRM) programme. I’m going to finish my bachelor degree this year and start searching for a graduate job in HR or marketing field in Asia-Pacific region, including but not limited to Hong Kong, Singapore, Taiwan and Shanghai.

I am Denise Law. I am a Year 3 local student who is now studying HRM. The reason why I take this course is to understand more about the current topics and management practices globally. As nowadays people advocate the importance of globalization, being aware of international knowledge such as the culture differences of different nations and managing global uncertainty not only broaden my horizon, but also beneficial to my future career. After graduate, I want to know the banking industry and my interest more comprehensively through working as a management trainee in the related industry. My target is to be at managerial level in the future.

I am Poey Tse majoring in HRM from Hong Kong. This is my final year of study. I would like to make use of my final semester to communicate with more foreigners and learn more about different countries culture because I want to join an international company in the future in which there will be many coworkers from different countries. Therefore, I believe that this course can help me to enrich my international knowledge.

I’m Yuki Yip. I am a year 3 student and my major subject is HRM. I like playing badminton and travelling. In the future, I want to be a successful management so I would like to know more about the international situation and management. I hope I can get a lot from the class such as knowing the foreigner students and exchange our experiences as well.

I’m Rita Lo. I am studying in HRM department. I want to get more knowledge relation to the world from the class. As I want to be a more professional management staff, global management skill and knowledge would help me to succeed my future career. Also, I hope I can know more foreign students in the class so I can learn a lot from them.  

2) Explanation of the Group Name

The name of our team is “ELITE” which means that all our teammates are elites and thus we are going to be a dream team. There are 5 letters in the name and every single letter represents one characteristic of our team. The first “E” stands for energetic showing that all of us are full of energy to study and are enthusiastic toward learning. The “L” stands for leadership because we have already got some leadership skills in order to run the team smoothly and we hope that all of us can develop more excellent leadership skills through doing teamwork. The “I” represents intelligence as our teammates are clever and possess knowledge to cope with the team work later on. Then, the “T” means teamwork reflecting that we are willing to show the team spirit to cooperate and collaborate with every teammate. Last but not least, with the above characteristic, we will be qualified to get the second “E” meaning elite. That is why we call ourselves “ELITE” (Energetic + Leadership + Intelligent + Teamwork = Elite)

Despite the fact that we may not fully fulfil the above characteristc at the current moment, we hope that we can improve ourselves to be the real elites via  doing the comming team activities and course work.

3) Explanation of the Logo

The logo is constituted of two parts, our group name Elite and a scarlet flame. As mentioned before, Elite is stand for energetic, leadership, intelligence, teamwork and elite respectively. We hope we all can fully fulfill the first four elements in order to be the last red E, which is being an elite person in the global society. Besides, this scarlet and aggressive flame represents our determination of pursuing of this goal. Thus, no matter how hard the difficulties we encounter, we will overcome them bravely and whole-heartedly and our determination is just like this red flame.

4) Our group goals for the class in relation to school, work and life:

As our entire group members are studying in HRM department and we are going to graduate from the university after this semester.

For school, we aim at studying more about global management from the class, we believe that it can benefit us and enrich  our international experience. Meanwhile, we can have a broader view to look at the international situation and cases and therefore we can have more point of views in our coming projects and assignments.

For work, we all have projected to upgrade our management knowledge over the world as we want to be a more professional management staff. As we know, only studying the specific HR skills and knowledge such as the recruitment and selection, training and development may be not sufficient to our future career. Living in  such an international city like Hong Kong, it is definite to take an action to learn more and know more about other countries that we can search more opportunities around the world.

For life, we want to improve our life standard as soon as possible and we believe that knowing more about the world would be more skillful and easier to broaden our social relationship.For example, knowing more about other countries' culture help us to solve international conflict and get along with foregners well.

5) What excites your group most about the weekly topics

We are all interested in those topics related to human resources management, particularly for week 6 topic - Leading and Motivating Workers in International Cultural Contexts. Compared with HR practices, managerial strategies and approaches are much easier to be modified and diffused from one country to another, as well as from one corporation to another successfully. Each county, culture and generation has their own sets of work attitudes,...⋯⋯ styles and values. Any attempt for a single HR management approach across different age groups, different countries within an organization will not work. Therefore, our group is much excited to learn about how the cultural difference influences the ways to engage and motivate workers.

Week 9 topic - Organizational Learning and knowledge management would remain as a hot issue in this century. The ability to consolidate experience, identifying cause-and-effect relationship, and hence creating and sharing knowledge would be essential for organization to gain competitive advantage in global marketplace. We all wish to learn the up-to-date methods in enhancing knowledge creation, learning and sharing in workplace.

Other topics we want to explore include change management, organization transformation and cross-cultural negotiations. Change management and organization transformation are vitual for companies to surive under dynamic global environment. Cross-cultural negotiations skills and tactics are very useful to different situations we probably encounter in the future.

6) Myth about globalization

Our team is interested in a myth regarding globalization could increase competition and therefore enhance competitiveness. We know that many people dose believe in it. However, our team has reservation about it.

For those who agree with this myth, they think that globalization makes a breakthrough allowing companies to overcomes the geographical boundaries and have expansion.

Let us take Adidas as an example. Adidas enhance competitiveness because they could enjoy the benefit of globalization shifting their manufacturing to low labor cost countries like China and India. Also, they enlarge their customer base by entering into various countries’ market. With larger customer size, they could enjoy economies of scale having an advantage to lower the average cost. Additionally, increasing competition from other global competitors like Nike and Puma motivate Adidas to enhance their competitiveness by creating new competitive advantages like developing new materials for higher quality’s shoes and stylish design to distinguish from their competitors. From this example, it seems that globalization really increase competition and increase competitiveness.

Nonetheless, in our team opinion, we think that globalization is not as fantastic as the example mentioned above. Globalization does bring more harmful effects which people always neglect. First of all, globalization hampers competition because many local small and medium size enterprises (SMEs) are eliminated through competition. They do not have enough capital as well as market influence to compete with the incoming powerful global competitors. Therefore, to reduce loss caused by the decreasing sales, the best way is shut down their business.

A typical example is fast food industry. Many small size fast food shops have shut down these years due to the international competition from McDonalds, KFC, Café de Carol etc. These large size companies sell food in lower price than those SMEs and open as much as branches as they can. Meanwhile, the SMEs cannot offer such a low price and they cannot afford the high land rent boosted by the large companies. As a result, many of them closed down and create oligopoly problems which solely a few large company dominates the market.

Furthermore, after oligopoly phenomenon appears, those dominators have less motivation and incentive to enhance their competitiveness. Eventually, they may on one hand start to lower their quality to further save cost and on the other hand increase the selling price to increase revenue. This problem also applies to fast food industry. For example, the menu of McDonald is more or less the same for many years. Also, they can increase their price frequently. For instance, Café de Carol increased the food price after Lunar New Year.

Indeed, there are a lot of industries facing this problem like convenience store being occupied by 7-11 in Asian countries, toothpaste industry being occupied by Colgate and Hazel & Hawley and even the sport swear industry (occupied by Adidas and Nike) mentioned above etc. All these show that global competition will create monopoly problem and hence reduce competition and competitiveness. As a result, our team find out that the myth (globalization could increase competition and therefore enhance competitiveness) is not true at all.

Extension

In response to the those comments on this blog, we would like to explain more about our myth and points of view.

It is no denying that globalization can help the market to be more competitive that the local quality of goods would definitely be boosted up due to the global competitors. However, we should not ignore that the globalization harms the small budgeted companies especially the local companies because of many global companies established in the same place. To analyze more, try to think of a point, the global companies have lots of capital that they can do marketing and advertising to promote their products. With millions of advertising on the TV, magazines, newspapers and etc...the customers would most likely tend to try the new products mentioned on the advertisements in the global companies. For example, take Mc'donals as an example again, they have made a lot of promotions about their new products quarterly on the TV advertisement, people at home will be attracted with the new promotions and then they will get a try of the products. On the other hand, the small local restaurants just run their business with small budget and their limited loyal customers would be those people living around the restaurant. Although they sometimes would try to copy the products from the welcome restaurants, they were failed to attract much more customers as possible because there is fewer people who know about it and there is not enough budget to promote their products in the market. Thus, the small companies would be affected by global companies as they cannot get more potential customers in the market due to their small capital.

Advertising from global companies has really made much effect to the local or smaller companies. Apple company is an obvious evident to prove that the crowd just pay attention on the bigger companies. Although other companies such Nokia(we are not meaning that Nokia is not a big company, just comparing with Apple.) have done a lot of improvements on their products, the public would tend to only purchase Apple's products as we can see that almost everyone has an iPhone on hand. We now can watch Apple's advertisement on TV, but how about Nokia? Who cares Nokia anymore? Who knows about the new product from Nokia?