Ch 25. Global Business

Question 1

TNC’s

Answer 1

Firms that produce and market goods in more than one country, e.g. Unilever

Question 2

A global company

Answer 2

Treats the world as a single, giant production location and marketplace

Question 3

Characteristics of global companies (4)

Answer 3

• Global market
• Standardised products
• Economies of scale
• Global branding

Question 4

Reasons for growth of global businesses (6)

Answer 4

• Own market saturation
• Spread risk
• Economies of scale
• Deregulation and opening up of global markets
• Faster transport and telecommunications links
• E-business

Question 5

Global marketing

Answer 5

Marketing a product globally with broadly the same marketing mix, as though the world were a single market place

Question 6

2 advantages of global marketing

Answer 6

• Cost savings

- Recognition

Question 7

Standardised global marketing mix

Answer 7

Using the same basic mix in different countries

Question 8

Adapted global marketing mix

Answer 8

Adjusting the mix to take account of cultural, geographic, economies and other differences in various countries

Question 9

Global product

Answer 9

A product that is the same all over the world

Question 10

Production sharing

Answer 10

Part of the product is made in one country, then shipped to another for further assembly, with the finished product sold in yet another country

Question 11

Reasons for change to a standardised global product (2)

Answer 11

• Product design may need to be slightly adapted to suit differences in culture and climate
• Brand names adapted to avoid confusion

Question 12

Factors that affect global pricing (5)

Answer 12

• Standards of living
• Transport costs
• Import and sales taxes
• Levels of consumption
• Laws and culture

Question 13

Channels of distribution (6)

Answer 13

• Export directly to customers
• Use distribution agents
• Licensing
• Joint venture
• Set up a foreign subsidy
• Use an export trading house

Question 14

An agent

Answer 14

An independent person or firm who will sell the goods in the target market in return for a commission on every sale

Question 15

Foreign Licensing arrangement

Answer 15

Is a deal that gives permission to a local firm to manufacture or distribute a global firm’s goods and services, or to use their global brand name

Question 16

Joint venture

Answer 16

Resources and capital are invested by both companies and profits are shared

Question 17

An export trading house

Answer 17

A company that buys goods in one country and then, like an international merchant, resells the goods at a profit in another country

Question 18

Types of global promotion (4)

Answer 18

• Global advertising
• Global public relations
• Internet
• Trade fair

Question 19

A trade fair

Answer 19

A business exhibition where suppliers in a particular industry display their products to potential customers

Question 20

Benefits of a business operating globally (4)

Answer 20

• Access to a global market
• Generate huge economies of scale by producing and selling the same standardised product globally
• Global brand recognition
• Expansion and business survival

Question 21

Risks of a business operating globally (3)

Answer 21

• Customer needs may not be properly met
• Diseconomies of scale
• Increased risk