global business

Global BusinessGlobal BusinessGlobal BusinessGlobal Business

What is a Global Company?

• It is a business that operates all over the world and;

• Treats the world as one country.• Locates in low wage countries.• Purchases raw materials from cheapest

country.• Borrows from cheapest country.• Moves managers around.

Examples• Coca-Cola• Toyota• McDonalds• Nike………………

Reasons for the development of Global

Co.’sIncrease Sales: Higher profits. (home market saturated)

Mass Production:Enables Economies of Scale (more produced = lower cost per unit).

Developments in ICT: Communication is faster & easier.

Deregulation: World Trade Organisation making trade easier.

Global Marketing• Selling the same product in the

same way all over the world using the global marketing mix (4 P’s).

• Concentrates on similarities across world markets.

• Uses a Standardised Marketing Mix

wherever possible.

• However the standardised marketing mix may have to be adjusted to meet local tastes, cultures & legislation.

• Eg. RHD cars in Ireland & UK……… LHD rest of world.

Global Product• Try to use same brand name world wide• However this may not always be possible.

• Eg. Jif to Cif, Marathon to Snicker.• Barbie doll modified for Japan!!!• McDonalds don’t sell beef in India!!

Global Price• The price may vary around the world

due to:• Higher standard of living = higher

price.• Higher transport costs = higher price.• Taxes & tariffs = higher price.• More competition = lower price.

Global Promotion• Special Events = economies of scale:• Olympic Games• World Cup• Not always possible to use identical promotion

due to legislation, language & culture:• Proctor & Gamble had to withdraw bathroom tv

add in Japan.• In Germany “come to life with coke” = “come

out of the grave with coke”!!!!!!

Global Place• Channels of distribution is longer.• Manufacturer-exporter-importer-

agents and distributors ……….• More time consuming and

expensive.

.......................• Many global businesses rely on

local agents and distributors to deliver.

• Coca–Cola allows local businesses to produce & sell its product under licence.

• Less expensive but involves loss of control over quality.

Why is Global Marketing important?

•Economies of Scale: The more products that are

made/advertised the cheaper per unit to make/promote.

• Home market may be saturated: There is no more potential to increase

sales at home. •

Continued….• Standard Marketing Mix may not

always work.• Cultural differences must be

recognised.• Adapted Marketing Mix takes

these differences into consideration.

Role of ICT in International Trade

1. Increase sales: • e-commerce is using the internet to sell

products all around the world either through websites or e-bay.

2. Advertising: Using MSN or Yahoo to advertise

golbally.

3. Faster & cheaper communications

• E-mail is faster than “ snail mail”.• Businesses can e-mail documents

worldwide for a flat monthly fee.• EDI: Electronic Data Interchange,

sending standardised documents to other firms that you deal with regularly.

4. Decision-making

• WWW is a vast library of information.• Managers can access information it

needs about trading partners.• More informed decisions can be made

5. Reduced Costs• Video-conferencing allows virtual

face-to-face meetings without travel.• Live pictures & sound are sent via the

internet or satellite.• This reduces cost as no flights or

accommodation is needed.• e-banking reduces fees….

Try this yourself!!• Explain 3 opportunities of global marketing

for Irish business:• Hint: Less dependent on home market,

economies of scale, avail of low cost wages…

• Explain 3 threats of global marketing for Irish business:

• Hint: Language, transport, competition

Transnationals (TNC)• Large business with headquarters in one

country and branches in many others.• May move operations from one country to

another in response to market conditions.• IDA offers incentives to foreign TNC’s to set

up here.• Eg. INTEL, IBM, Coca Cola, Nestle,

Unilever……….

Unilever

Impact of TNC’s in Ireland

• Advantages of TNC’c

• Disadvantages of TNC’s

Impact of TNC’s in Ireland Advantages of TNC’s• Jobs are created directly & indirectly.• Taxes revenue from corporation tax , Vat

and PAYE increase.• Import substitution: TNC’s source raw

materials in Ireland• Exports increase improving the balance of

trade.• Effeciency & quality are improved in order to

compete on the world stage, benefits consumers.

Disadvantages of TNC’s• Powerful TNC’s try to influence

indusrial relations & tax policy by threatening to withdraw.

• Closures of TNC’s causes massive unemployment.

• Grants are lost if TNC’s move.• Profits are transferred out of the host

country

Why do some businesses become

TNC’s?• Less dependent on the home market, inc

sales/pr.• Avail of low labour costs in some countries

such as Poland, Hong Kong..• Reduce warehouse costs by making &

selling in same country.• Overcome trade barriers, Japanese car

manufacturers set up in Ireland so they can sell to EU without import duties being imposed.

Reasons for the development of TNC’s in

Ireland

TNC’s locate in Ireland for the following reasons.

• EU: Access to EU markets, Ireland only English speaking country using the euro.

• Infrastructure: Improved roads, telceommunication & skilled work force.

• Incentives: Low corporation tax 12 ½ % and grants.• Economic & political stability: National wage

agreements, good industrial relations….???????????????

Factors that influence the location of a new factory.

• Infrastructure: Good roads, broadband• Incentives: Grants and low tax• Workforce: Skilled and unskilled• Support services: Finance, government

agencies, shops, housing, hospitals, schools • Availability of raw materials: • Proximity of markets: Close to where goods will be sold.

Distinguish betweenTNC

& State Owned Enterprise

Exam Questions• Short• 1999 Q. 10

TNC

• Long• 2009 Q 3. (b) Global Mkting• 2008 Q. 2. TNC• 2007 Q. 3. (b) GM• 2006 Q. 3. (c) GM• 2004 Q. 3. (a), (b) GM, TNC• 2002 Q. 3. (b) GM• 2000 Q. 3. (a) GM