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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
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•
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•
Coca-Cola
Toyota
McDonalds
Nike………………
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.
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
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•
•
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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-importeragents 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
•
•
•
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•
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 between
TNC
&
State Owned Enterprise
Exam Questions
• Short
• Long
• 1999 Q. 10 TNC • 2009
• 2008
• 2007
• 2006
• 2004
• 2002
• 2000
Q 3. (b) Global Mkting
Q. 2. TNC
Q. 3. (b) GM
Q. 3. (c) GM
Q. 3. (a), (b) GM, TNC
Q. 3. (b) GM
Q. 3. (a) GM