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Chapter 5 – Agreements, Organizations and Policies

Chapter 5 – Agreements, Organizations and Policies. 5.1 Positioning in Global Economy. What is Positioning? The strategy used to communicate to the consumer How to get ‘heard’ or how to ‘reach’ your target audience Focus on what is unique, different or superior about a product/service

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Chapter 5 – Agreements, Organizations and Policies

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  1. Chapter 5 – Agreements, Organizations and Policies

  2. 5.1 Positioning in Global Economy What is Positioning? • The strategy used to communicate to the consumer • How to get ‘heard’ or how to ‘reach’ your target audience • Focus on what is unique, different or superior about a product/service • Focus on the main ‘benefit’ that a consumer gets from your product/service • E.g. cell phone allows you to make calls, but the real ‘benefit’ is keeping in touch with friends, enjoying life, entertainment, affiliation

  3. Global Positioning: • Franchise – authorizing someone else to sell goods/services e.g. Subway, Boston Pizza and McDonalds restaurants are franchised • Subsidiary • Owned and operated by a firm in a different country under a different name – “wholly owned subsidiary” • E.g. Marmon Group bought Robertson Inc. pg. 147 • E.g. Vale (Brazilian mining firm – largest iron ore producer) bought Inco (Sudbury’s Big Nickel) • Joint Venture - two companies join forces to compete in a foreign market

  4. Strategic Alliance – two or more firms cooperate, sometimes buying each other’s shares, stronger ‘partnership’ than a joint venture

  5. International vs. Global: International: • Central location – i.e. one country is ‘home’ • Top management usually from ‘home’ country • E.g. Loblaws (part of the Weston Group, based in Canada with some international operations in U.S. and U.K) Global: • Management makes decisions to maximize worldwide profits • Management from many different countries • Goal is to create a ‘stateless’ corporation that operates relatively free across international borders • Makes operations and financial (i.e. tax rates etc.) decisions based on cost i.e. moves manufacturing or corporate headquarters to countries with lowest costs e.g. Wal-Mart – international operations, management and manufacturing/sourcing

  6. International vs. Global: Benefits • Cost savings • Diverse leadership • Worldwide access to ideas, wants and needs • Jobs in developing countries Challenges: • Costs of global branding – complex, more logistics i.e. travel • Hard to have uniform quality and messaging around the world • Time required for decision making – time zones, distances • Complex political and taxation issues – many countries / laws • Political, economic, commercial and foreign currency risk • Local opposition to multinational corporations

  7. 5.2 Corporate Globalization • Globalization – growth and spread of international economies and business • Growing Power and Influence: • Ford Motor Co. larger than economy of Norway • Phillip Morris (food, cigarettes) sales larger than GDP of New Zealand • Corporations increasingly influence the politics, policies etc. of countries where they operate; • E.g. tax rates/laws, environmental standards, social policy • Other effects of globalization?

  8. 5.2 Corporate Globalization Triad – U.S. , European Union and Japan (pg. 152 – 153) Neo-Liberal Trade Policies: • Freer movement of goods, services, labour, capital • Liberalizing – reducing barriers, easier, less restricted • Economic imperialism – economic domination of nations • World’s largest 500 companies account for 50% of world trade

  9. 5.3 Trade Agreements Trading Blocs (or regions) – 90% of world trade • NAFTA (North American Free Trade Agreement • European Union (EU) • Asia-Pacific Economic Cooperation (APEC) • NAFTA – Jan. 1, 1994 • Canada, Mexico and U.S. • Increase trade, reduce prices / costs of production – economic efficiency • Trade in goods and services, investment, intellectual property • There is fair competition and dispute resolution – doesn’t always work – e.g. Softwood Lumber – NAFTA said the U.S. was wrong but they still charged a tariff on softwood lumber

  10. FTAA – Free Trade Area of Americas • Goal was to start in 2005, but delayed presently • North, Central and South America free trade zone • 34 countries • Problems include; • the increasing gap between rich and poor (North vs. South) • Political tensions – Venezuela and U.S. • Opposition to Neo-Liberal trade philosophy • Nationalism – protectionism in the U.S. – concern over losing jobs • 9/11 – security issues and more border security • Economic problems in member countries – inflation, unstable currency • Complexity of harmonizing labour, manufacturing and environmental standards

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