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Global Business

Global 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

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Global Business

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  1. Global Business

  2. 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.

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

  4. Reasons for the development of Global Co.’s Increase 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.

  5. 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.

  6. 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.

  7. 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!!

  8. 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.

  9. 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”!!!!!!

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

  11. ....................... • 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.

  12. 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.

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

  14. 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.

  15. 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.

  16. 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

  17. 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….

  18. 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

  19. 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……….

  20. Unilever

  21. Impact of TNC’s in Ireland • Advantages of TNC’c • Disadvantages of TNC’s

  22. 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.

  23. 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

  24. 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.

  25. 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….???????????????

  26. 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.

  27. Distinguish between TNC & State Owned Enterprise

  28. 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 Exam Questions

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