Global Business

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Global Business
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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.

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Examples

• Coca-Cola
• Toyota
• McDonalds
• Nike

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Reasons for the development of Global Co.s

• Increase Sales Higher profits.
• (home market
  saturated)
• Mass ProductionEnables Economies of Scale (more
  produced lower cost per unit).
• Developments in ICT Communication is faster
  easier.
• Deregulation World Trade Organisation
• making trade easier.

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Global Marketing

• Selling the same product in the same way all over
  the world using the global marketing mix (4 Ps).
• Concentrates on similarities across world
  markets.
• Uses a
• Standardised Marketing Mix wherever possible.

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• 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.

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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 dont sell beef in India!!

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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.

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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!!!!!!

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Global Place

• Channels of distribution is longer.
• Manufacturer-exporter-importer-agents and
  distributors .
• More time consuming and expensive.

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.......................

• Many global businesses rely on local agents and
  distributors to deliver.
• CocaCola allows local businesses to produce
  sell its product under licence.
• Less expensive but involves loss of control over
  quality.

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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.

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Continued.

• Standard Marketing Mix may not always work.
• Cultural differences must be recognised.
• Adapted Marketing Mix takes these differences
  into consideration.

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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.

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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.

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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

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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.

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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

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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 TNCs to set up
  here.
• Eg. INTEL, IBM, Coca Cola, Nestle, Unilever.

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Unilever
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Impact of TNCs in Ireland

• Advantages of TNCc
• Disadvantages of TNCs

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Impact of TNCs in Ireland

• Advantages of TNCs
• Jobs are created directly indirectly.
• Taxes revenue from corporation tax , Vat and PAYE
  increase.
• Import substitution TNCs 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.

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Disadvantages of TNCs

• Powerful TNCs try to influence indusrial
  relations tax policy by threatening to
  withdraw.
• Closures of TNCs causes massive unemployment.
• Grants are lost if TNCs move.
• Profits are transferred out of the host country

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Why do some businesses become TNCs?

• 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.

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Reasons for the development of TNCs in Ireland

• TNCs 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.???????????????

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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.

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Distinguish between

• TNC
• State Owned Enterprise

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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