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BUSINESS AND MANAGEMENT

BUSINESS AND MANAGEMENT. MODULE 1 BUSINESS ORGANIZATIONS & ENVIRONMENT. Globalization. The integration of the world economies, sociology and politics The world economy is experiencing increased integration

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BUSINESS AND MANAGEMENT

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  1. BUSINESS AND MANAGEMENT MODULE 1 BUSINESS ORGANIZATIONS & ENVIRONMENT

  2. Globalization • The integration of the world economies, sociology and politics • The world economy is experiencing increased integration • The development of global trade now offers many interesting challenges to Canadian businesses • Why then is globalization increasing?

  3. Indicators of Globalization • More countries are trading with each other • Multinational business is becoming more influential and they are promoting their brands worldwide • Greater cultural awareness • Large scale enterprise is working to gain competitive advantage over its rivals and develop market presence in as many lucrative markets as possible

  4. Indicators of Globalization (continued) • Technology and its uses make trading over large distances and in more obscure locations easier • Transportation costs have fallen e.g. bulk ore and oil carriers • Business de-regulation that allows foreign enterprises to tender for contracts • More standardized consumer tastes • The growth of emerging markets

  5. The Impact of Globalization on Business • Increased competition • Greater awareness and reactions to customer needs • Economies of scale • Location flexibility • Increased mergers and joint ventures

  6. Multinational Corporations • The growth of multinationals has been rapid in recent years. • The importance of multinationals should not be underestimated. • The total value of MNC investment worldwide is over $1 trillion of which around two thirds is in the developed world. • It is even now true that of the top 100 largest organizations in the world 51 are now MNCs and 49 are countries.

  7. To put this in perspective, • General Motors is now bigger than Denmark; • DaimlerChrysler is bigger than Poland; • Royal Dutch/Shell is bigger than Venezuela; • IBM is bigger than Singapore; and • Sony is bigger than Pakistan. • The 1999 sales of each of the top five corporations (General Motors, Wal-Mart, Exxon • Mobil, Ford Motor, and DaimlerChrysler) are bigger than the GDP’s of 182 countries. • The Top 200 corporations’ combined sales are bigger than the combined economies of all countries minus the biggest 10.

  8. International Competitiveness • To trade in international markets companies need to develop a competitive cost base and other characteristics that will allow them to be attractive to consumers in other markets. • Case Study - McDonalds

  9. Effects of Globalization • The increase in the number of trading blocs • Costs of production • Corporate policies • Liberalization of trade • Management structure • Chains of command will lengthen. • Reporting and decision-making will slow. • Trust will have to be earned and given.

  10. Why Become a Multinational? • Avoidance of taxation, or at least rates on tax in the country of production • Lower costs and less regulation • Government aid • Lower distribution costs • Local knowledge • Opportunities for mergers • Widening the customer base – create a “first mover” advantage • Mitigation of risk

  11. Problems of Marketing Overseas • Lack of local knowledge • Storage and transportation costs will increase • External factors (outside the control of the business) • Political and economic climate • Infrastructure • Case Study - Carlsberg

  12. Effect of a MNC on the Host Country • Job creation • Boost the GDP • Introduce new skills and technology • Create more competition • Lack of social responsibility • Can cause unemployment • Exercise - Motorola

  13. Regional Trading Blocs • RTB’s eliminate the barriers on the movement of goods and services • Members enjoy mutual benefits from being involved in this freer trade • Examples of trading blocs include • CEPA – closer economic partnership agreements • FTA – free trade areas (NAFTA) • Common Market (EU)

  14. EU • The best known regional trading bloc in the world, its collective GDP is the largest in the world (over $14 trillion) • 27 countries; over 500 million people • Common currency in most countries (Euro)

  15. NAFTA • Canada, USA and Mexico • A free market of over 430 million people • More MNC’s than any other region in the world • Goal is to eliminate tariffs over a 10 year period

  16. Winners and Losers • Trade creation takes place when a country (in a trading bloc) switched from buying commodities from a high cost country to a low cost country • Canada buying TV’s from Mexico instead of Japan • Trade diversion takes place when a country (in a trading bloc) switches from buying commodities from a low-cost country to a high cost country • UK buying wool from France instead of New Zealand • Case – Asian Growth

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