Chapter 26: Global Business Flashcards
Explain global business with an example.
A global business operates and sells standardised products and services all over the world. They treat the world like one single country and focus on similar customers worldwide to try to satisfy the common needs and wants everywhere. They use a standardised marketing mix. E.g. McDonalds.
Give four reasons for the development of transnational companies.
Spreading Risk-Makes company less dependent on one market. E.g. Dell have a downturn in US market. Dell’s European sales will keep it in profit.
Increase their sales: Expand to different countries, sell more products than solely at home.
Improved Communication: Advances in transport easier to expand overseas. Video conferencing makes business easier to run.
Trade Barriers: Overcoming barriers can occur with expansion. E.g. Japanese car manufactures set up EU factories to round EU quotas.
Explain standardised marketing mix/global marketing.
Means selling the same product all over the world using a global marketing mix (4 P’s). Global business concentrates on the similarities across world markets. E.g. Coca-cola
Explain five reasons for the development of global companies.
Increase Profits: Target more consumers worldwide, leads to increased sales. Bigger size leads to better economies of scale so lower costs.
Mass Production-CAM makes it possible to produce enough products to satisfy global demand. CIM monitors whole production process so high quality goods can be produced anywhere in the world.
Communication: Advances make company easier to run worldwide with video conferencing eliminating the need for time consuming travel..
Internet: Allows business to develop a global brand through social media. Can form connections with global audiences and create global awareness through a website.
Deregulation: WTO deregulation makes it possible as companies can enter markets previously denied to them. E.g. China started trading with the world.
What are the advantages of global companies?
Job Creation: Global Companies create thousands of job which reduces unemployment rate in Ireland. Results in improved standard of living. E.g. Dell provide well-paid jobs.
New Technologies: Global Companies bring new technology, ideas and management skills to Ireland thus increasing skills of labour force. Makes Irish economy more modern. E.g. Google management style of laissez-faire.
Competition: Bring new competition to Ireland resulting in lower prices and better quality goods. EOS further reduces prices. This is good for consumer e.g. Lidl and Aldi
Corporation Tax: Pay tax on their profits which generates money for the revenue which can be used by the government to improve public services.
What are the disadvantages of global companies? (5)
No Loyalty: Global companies arrive to avail of grants and can close down with short notice to go to lower wage countries. Results in high unemployment. E.g. Apple may relocate to China for cheaper labour costs.
Closure of Irish Businesses: EOS means global business can make and sell products cheaper. If Irish cannot compete and adapt will be forced to close. E.g. New Lidl closes corner shop.
Repatriate Profits: Global companies often take profits back to their home country therefore it does not benefit Irish Economy. E.g. Apple profits go back to America.
Dominant: Global companies are large and can put pressure on government to get their own way. Threaten to pull out of Ireland taking jobs with them if new laws introduced. E.g. Regulation on social media companies in Ireland stopped by Facebook threat to leave country.
Decision Making: Global companies make decisions from Head Office and don’t take into account Irish interests. E.g. Apple makes decision from U.S. office.
Explain adapted marketing mix with an example.
Sometimes elements of 4P’s must be changed to suit local tastes, culture. Requires additional production, advertising and packaging costs. Necessary to ensure product sells as well in other cultures. E.g. McDonalds don’t sell beef burgers in India as cows are a sacred animal.
Explain global product with an example.
Product sold throughout the world. E.g. Coca-cola
Business uses same brand name worldwide for global recognition.
Easier for customers to recognise when they travel abroad.
Take local culture into account when designing product, product packaging and brand name.
E.g. McDonalds don’t sell beef burgers in India as cows are sacred.
Explain global price and why it often varies. (4)
Global price is charging same price worldwide. In reality price varies because:
1. Standard of Living-what locals can afford.
2. Transport-Further away, higher delivery costs
3. Taxes and Tarrifs-Increased costs. E.g. Jamesons costs more in U.S.
4. Local rival firms-Adidas lowers price in American market to compete.
Explain global promotion, give an example of when it has to be adapted.
Communicating with customers worldwide to let them know about a product and encourage them to buy it. Attempts to use standard promotion methods.
May have to be changed to avoid offending locals and losing sales. E.g. Mobile phone company Orange advertised with slogan “The Future’s Orange” had to change in NI as refers to Orange Order.
Explain two methods of global promotion.
Use global events-E.g. World Cup-Carlsberg official drinks partner.
Advertise online through social media-Internet reaches global audience which helps increase sales.
Explain global place.
The way a business distributes its product and services all over the world. Where the business sells and how it gets to consumers. Good channel of distribution needed.
