Global Business Flashcards
Explain transnational company
A transnational company is a business with a head office in one country and branches or factories in a number of other countries
Head office controls the entire business
e.g Zara, Lidl, Marks & Spencer
Explain global company
A global company is a firm that operates and sells standardised products and services all over the world
They treat the world like one single country and focus on similarities between people globally to try satisfy the common needs and wants everywhere
Make products anywhere - usually cheap labour country
e.g McDonalds, Coca-Cola
Give four reasons for development of transnational companies
To spread their risk
Increase sales
Development of ICT
Overcoming trade barriers
Give five reasons why transnational companies set up in ireland
Low corporation tax (12.5%) EU membership Grants Well-educated workforce English speaking
Name the advantages of transnational companies to ireland
Job creation New technologies Increase competition Taxes Consumers of raw materials
Name the disadvanatges of transnational companies to Ireland
No loyalty
Too influential
Repatriate profits
Decisions are made abroad
Give six reasons for development of global companies
Increase sales Computer Aided Manufacture (CAM) Advances in communication methods The internet Deregulation Computer Aided Design (CAD)
Give five advantages of globalisation to ireland
Job creation New technologies Increase sales Taxes Economies of scale
Give four disadvantages of globalisation to ireland
Increased competition and threat for Irish businesses
Repatriate profits
Using Ireland as a ‘tax haven’
Too influential
Explain global marketing and the standardised marketing mix
Global marketing means selling the same product all over the world using a global marketing mix (4P’s)
Known as a ‘Standardised Marketing Mix’
Gloabal business concentrates on the similarities across world markets
Example: Coca-Cola
Explain the adapted marketing mix
Sometimes elements of the 4P’s must be changed to suit local tastes, cultures etc.
This called and ‘Adapted Marketing Mix’
Requires additional production, advertising and packaging costs
Example: Tesla making right hand drive cars for the Irish market
What is the importance of global marketing
Increased sales
Lower costs
Improved quality
Avoids alienating customers
Explain spreading their risk as a reason for the development of transnational companies
They dont want to become too dependent on one market
if there is a downturn in US economy Dell’s european sales will keep it in profit
Explain increase their sales as a reason for the development of transnational companies
Expand to different countries to increase sale
Sell products to many more customers than solely at home
Explain communcations technology as a reason for the development of transnational companies
Advances in transport makes it easier for businesses to expand overseas
Video conferencing makes transnational businesses easier to run
Explain trade barriers as a reason for the development of transnational companies
Overcoming trade barriers can occur with expansion
Ex: japanese car manufacturers set up factories in the EU to round EU quotas
Explain low corporation tax as a reason for transnational companies to come to Ireland
Only 12.5% - much lower than other countries
Set up here means they pay less tax on profits and have more profit for expansion and dividends
Explain EU member as a reason for transnational companies to come to Ireland
All goods in Ireland can be freely sold in the EU - biggest and richest trading bloc with no barriers to trade
Set up here to gain access to increase sales and profits
Explain Grants as a reason for transnational companies to come to Ireland
Irish government gives money to MNCs to help pay for things they need to set up here
Grants make it cheaper for MNCs to expand
Explain education as a reason for transnational companies to come to Ireland
Ireland has well-educated workforce
Most highly employable graduates in world
Companies attracted because they have plentiful supply of workers with skills needed ex: Intel employees country’s universities excellent compute graduates
Explain English as a reason for transnational companies to come to Ireland
Only english speaking country in Eurozone
Soon to be in EU
International language of business
Easy for them to do business here without communications barrier
Explain jobs as an advantage of transnational companies
MNCs employ over 200000 people in Irish branches
Reduces unemployment
Wages mean employees get higher standard of living and increased spending in economy
Ex: Dell and Intel created thousands of well-paid quality jobs for people in their factories
Explain new technology as an advantage of transnational companies
They train their irish workers in all these new skills
Increasing skill set of labour force and helps to make our economy more modern and technologically advanced
Ex: dell intel, facebook brought latest computer technology helping ireland develop into advanced knowledge based economy
Explain compeition as an advantage of transnational companies
Better quality and lower prices to compete with indigenous firms.
Consumers have more choice lower prices and better quality
ex: lidl and aldi increased competition in the Irish grocery markets
Explain taxes as an advantage of transnational companies
Corporation tax on profit and VAT on products sold here
they also pay PAYE, PRSI with employees wages
Amount of tax revenue for government to use improving the irish economy
Explain buy irish as an advantage of transnational companies
Helps Businesses to increase their sale and profits
Positive spin off effect on indigenous businesses
Tesco, lidl, aldi buy sector of the irish economy to flourish
Explain they leave as a disadvanatge of transnational companies
Have taken low grants and taxes and then left ireland for lower wage economies.
Very little notice, unemployment
Ex: Fruit of the loom a US transnational closed down its factory in Donegal to move to Morocco where wages are cheaper
Explain too much power as a disadvanatge of transnational companies
MNCs are very influential and can put pressure on government.
If laws are introduced they dont like they could threaten to pull out of Ireland
Influence over Irish government policy
Explain repatriate profits as a disadvanatge of transnational companies
Repatriate profits.
Sent home
Doesn’t necessarily benefit the Irish economy. Money made in the country goes out.
Explain decisions taken abroad as a disadvantage of transnational companies
Decisions made by head office
May not take irish interests into account
In the past US congress found Microsoft used its irish subsidiaries to reduce its US tax bill
Explain increase sales as a reason to develop a global company
Become global to increase sales globally
Means higher profits and leads to economies of scale for business so lower costs
Explain mass production as a reason to develop a global company
CAM makes it possible to mass produce enough products to satisfy global demand. CIM monitors entire production process - business can produce high quality goods anywhere in world
Explain communication as a reason to develop a global company
Advances makes it easier to run a global business
Video conferencing means managers can run business with no travel
Explain internet as a reason to develop a global company
Allows business to develop global brand - social networking sites mean can reach a global audiences
Ca form connection with consumers aroundt he world
Website can be used to create global awareness of and interest in it’s products
Explain deregulation as a reason to develop a global company
WTO deregulation has made global business possible.
Can enter markets previously denied to them to freer world trade
Ex: China only recently started trading with world recently
Explain CAD as a reason to develop a global company
Managers use CAD to design new products for business
Designed and made quickly an more cheaply
Business can respond rapidly to global market changes by helping it bring new products to the market quickly
Explain jobs as an advantage of global companies for ireland
Employ thousands in their irish branches
Reduces unemployment
Wages mean employees get higher standard of living and increased spending in economy
Ex: Dell and Intel created thousands of well-paid quality jobs for people in their factories
Explain New technology as an advantage of global companies for ireland
They train their irish workers in all these new skills
Also bring new technologies/management/skills to Ireland
Increasing skill set of labour force and helps to make our economy more modern and technologically advanced
Ex: dell intel, facebook brought latest computer technology helping ireland develop into advanced knowledge based economy
Explain increased sales as an advantage of global companies for ireland
Small market in Ireland for irish businesses but now irish businesses can sell their products to billions all over the world
Increased sales and profits
Ex: Baileys export
Explain economies of scale as an advantage of global companies for ireland
Greater numbers of products to export to the world gives irish businesses economies of scale that they would not get in Ireland
Becomes cheaper to make each product
Lower costs and increases their profits
Explain taxes as an advantage of global companies for ireland
Corporation tax on profit and VAT on products sold here
they also pay PAYE, PRSI with employees wages
Amount of tax revenue for government to use improving the irish economy
Explain threat as a disadvantage of globalisation for ireland
Major threat to Irish businesses - economies of scale mean can sell/ make products cheaply
Level of competition may force some irish businesses out of business if not as efficient and inventive
Irish businesses must develop a USP
Explain repatriate profits as a disadvantage of globalisation for ireland
Global business often repatriate profits
Send profits they make in Ireland back home
Money made in ireland doesn’t necessarily benefit the irish economy
Explain use ireland as a “tax haven”as a disadvantage of globalisation for ireland
Often set up to take advanatge of its attractive tax laws
Alleged that they do not pay their fair share of taxes to the government
ex: Evidence from apple executives that Apple paid rate of 2% corporation tax in Ireland
Explain too much power as a disadvantage of globalisation for ireland
Powerful and influential as they can put pressure on the government to give them their won way
If they were to introduce a law they didnt like could threaten to pull out of Ireland and take jobs with it
A lot of influence over irish government policy
Discuss Global product
Product sold throughout the world ex: coca-cola
To win global recognition business will try use same product brand name throughout the world
Same over world- easier for consumers to recognise when they travel and it helps business to save money as they can use same advertisements across the globe
May need to take local need and cultures into account -
McDonalds don’t sell beef burgers in India as cow is a sacred animal in the hindu religion.
Explain global price
Will attempt to charge the same price worldwide but price may vary because of standard of living, transport, taxes and tariffs and local rival firms
Explain why global price might vary
Standard of living - varies, price is higher in wealthier countries as they can afford more
Transport- further has to transport product more expensive it will be
Taxes and tariffs may need to be paid - exports and different levels of taxes in each country
Local rival firms charge different prices - Level of competition determines max price business can charge
Cant charge price wildly out of line with competition
Explain global promotion
Communicating with customers worldwide to let them know about the product and to persuade them to buy it
Will try use same promotion methods to reduce costs but may have to change to take account of difference in language culture and advertising law
Explain how global businesses promote globally - two methods
Use global events ex: Olympics - Reach a global market ex: coca cola were sponsor of 2020 games in Tokyo
Advertise online - internet means global audience and may help increase sales by exporting
Social media and websites - can form real connection with consumers around the world
Give example of when global promotion had to be changed
May offend locals and loss sales and may have to change to take into account differences in language culture and advertising law
Ex: Mobile phone company Orange advertised in UK using slogan “the future’s orange” - change as in N.Ireland “orange” refers to the orange order
Explain global place
The way the business distributes its products and services all over the world - Where the business sells and how it gets goods to the consumer
Will have to develop a global channel of distribution which can be complicated
Explain four ways global business can sell products to consumers
Sell direct with website - order online and post products. Selling direct minimises consumer cost as there is less step in distribution
Strategic alliance with local firm to distribute products - benefits both. Global business increase sales and distributor gets important client guaranteeing profit
Foreign subsidiaries - establish factories in countries. manufacture and distribute products from local factory
Use local agents and distributors to deliver products
Explain increased sales as an importance of global marketing
Marketing helps develop global brand name that customers know all over the world and trust
They will buy the name they know
Explain lower costs as an importance of global marketing
Global business enjoy lower costs - economies of scale as more products they make cheaper they become to make - competitive advantage
Explain improved quality as an importance of global marketing
Selling same product in hug quantities - becomes expert in making it
It becomes better than anyone else at making it
Can afford in invest in research and development on the product to make it the best in the world - world-class
Explain avoids alienating customers as an importance of global marketing
Globalisation is a trend but regional identities, customs and tastes are still as distinct as ever
Successful global businesses know a truly standardised marketing mix may not be appropriate or possible. They adapt their offering to local tastes so as not to alienate people and lose sales
