global business ch 31 Flashcards
TNC
transnational company: a business with a HQ in one country and branches of the firm in other countries e.g. coca cola
reasons for the development of TNCs
-improvements in transport
-free trade
-developments in ICT -> allow business to easily operate on global scale
-economies of scale allow TNCs to compete with larger competitors
-larger overseas markets -> increase profits + spread risk
why do TNCs locate in ireland
-12.5% corporation tax rate
-ireland’s reputation as a good place to do business
-skilled/educated workforce
-IDA ireland attracts FDI
-access to european single market (500 mil)
-> free movement of goods, capital, labour, services
-english language -> main international business language
-growing number of languages in ireland
Impact of TNCs on irish economy (opportunities)
-provide direct employment
-spin off businesses (multiplier effect)
-generates positive reputation when TNCs locate in ireland
-bring modern business expertise to ireland
-TNCs exporting has a pos. impact on BoP
impact of TNCs on irish economy (challenges)
-may not be loyal to ireland + move to low cost economies (footloose)
-repatriation of profits -> takes money out of irish economy
-tax avoidance -> use loopholes, tax rev is less than expected
-over reliance on TNCs for employment -> should focus on development of indigenous industry
-closure of irish firms -> unable to compete due to economies of scale
global business
business that sells its goods/services all over the world. views the world as one large market + uses global marketing strategy to build global brand
globalisation
the integration of societies, cultures and economies around the world. occurred due to increases in trade, communication, migration + transport between countries
reasons for the development of global business
-spread risk -> not dependent on one market
-economies of scale
-deregulation + trade agreements -> easier access to foreign markets
-ICT advancements -> quicker/easier communication
-e-commerce -> not necessary to set up stores in other countries
benefits of being a global business
-increased sales -> larger markets
-economies of scale
-easier to expand into new markets as consumers recognise global brand name -> awareness increased through standardised global marketing campaign
-spreads risk -> sales in one market can compensate for falling sales in another
risks of being a global business
-local consumers may not like standardised product -> time consuming + expensive to change
-must ensure product does not offend local customs
-laws make it difficult to trade globally e.g. restrictions on clothing from china
-complex structure can slow down decision making + communication -> unable to react quickly to changes
irish global businesses
kerry group, smurfit kappa
impact of technology on the growth on globalisation
-CAD makes design process faster + easier, can react quicker to changes in global market
-CAM used to control equipment + machinery with computers -> enables mass production
-internet aids decision making
-EDI can be used to manage stock levels around the world -> ensures optimal stock levels
-social media aids marketing -> advertise + increase consumer awareness + loyalty
-container transport + computer software programmes help with distribution + transport at lower cost
pos. effects of globalisation on irish economy
-economic growth -> sell to larger markets -> increased sales + higher GDP
-growth of labour force: demand for labour increases -> less emigration + more immigration
-employment -> direct + indirect, more disposable income creates more jobs
-greater range of products for consumers to choose from
neg. effects of globalisation on irish economy
-increased competition -> could lead to closure of smaller irish firms
-global businesses may have too much power over local govts -> pressure on govt to suit needs of business, may threaten to pull out of country e.g. military industrial complex
-repatriation of profits
-locate in ireland to pay less tax, may est. small scale operations -> few jobs created, minimal corp. tax
standardised marketing mix
when businesses use the same marketing mix in all markets
adapted marketing mix
when a business changes some elements of the marketing mix depending on the market. changes made to reflect differences in the market e.g. languages, cultures, economies
global product
global businesses aim to sell an undifferentiated product in all markets. designed to appeal to as many consumers as possible.
may need to be changed depending on:
-language
-culture e.g. nike hijabs
-tastes e.g. soy sauce kitkats
-may need to adapt brand name depending on market
global price
aims to charge the same price to consumers around the world. price in different markets affected by:
-cost of living + disp. income levels
-tax levels e.g. vat
-local price levels (in line with competitors)
-exchange rates
-costs e.g. production, distribution, transport, marketing different around the world
global place
goods/services distributed from producer to consumer via channels of distribution. global channels tend to be long due to distance between countries. often involves more intermediaries
channels of distribution
-direct export
-agent
-manufacturing abroad
-licensing
-joint venture
direct export
set up own website + sell direct to consumer
agent
independent person or business who sells the product in the local market in return for a commission payment e.g. sheehy motors
manufacturing abroad
est. manufacturing plant in another country to prod. goods. may reduce transport costs as closer to target market
licensing
firm gives local business permission to produce/distribute the product in a particular market in return for a fee
joint venture
sets up joint venture with local firm to produce for local market
global promotion
global firms tend to use same methods of promotion to market products worldwide. i.e. standardised promotional mix helps keep costs low, but minor changes may need to be made in different markets e.g. language
channels of promotion
-advertising -> must consider language/culture differences
-PR -> sponsor global events to increase awareness + brand exposure
-sales promotion e.g. worldwide competitions + free samples e.g. redbull
-personal selling -> train salespeople to share knowledge + expertise with consumers. improves loyalty
importance of global marketing
-increased sales -> increased awareness + consumers recognise brand name
-lower costs -> standardised product + economies of scale
-improved quality -> from R&D + producing many of the same product
-adapted marketing mix -> successful global firms know that aspects of mix need to be changed -> appeal to consumers in different markets, increase sales
