Globalization
DEF: The integration of the world’s
economies in terms of economics, sociology and politics.
For Businesses this means an attempt by firms
to efficiently produce and sell the same products or services simultaneously in different countries.
I.e. McDonalds and Pizza hut gone global by opening franchises around the world
Honda and Toyota have gone global by setting up manufacturing plants in other countries.
What is the most recognized brand in the world??
Coke sells some 400 brands of soft drinks, sports drinks, coffees,
teas, bottled waters and fruit juices in over 200 countries. Some brands are only available in specific regions or countries of the world, target marketed based on the unique characteristics of local demand. Coca-Cola is the most valued brand name on the face of the earth ,
far surpassing its rival Pepsi. The world's number one soft-drink company, Coke owns four of the world's top five soft-drink brands:
Coca-Cola, Diet Coke, Fanta and Sprite. North American brands include Barq's, Minute Maid, POWERade and Dasani water. In international markets Coke sells Crush, Dr. Pepper and Schweppes.
Factors contributing to the growth in globalization Removal of global trade barriers led to
more trade in exports and imports.
Technological Progress – reduced the cost of information interchange
Deregulation of business activity – costs of transportation and distribution have fallen.
China removed trade restrictions on foreign
businesses
Cultural awareness and recognition
growth – consumers have similar tastes
Language- English is the official business language in many parts of the world
Effects of Globalization on business activity Increases level of competition
Meeting consumer expectations and needs is
more demanding.
Enjoy economies of scales if have a global presence Multinationals have greater choice of location
Apple IPOD are created in California and
assembled in China
Mergers, acquisitions and joint ventures allow
businesses to grow at a faster past
Increased customer base
Multinational Corporations (MNC)
DEF: Business organization that operates
in 2 or more countries.
Head Office based in one country.
Another name: transnational corporation
Why become a multinational company? Widen customer base - companies going into
China, how many customers can they gain??
Achieve Economies of Scale
Avoid Protectionist policies – by having factories in countries they can avoid tariffs, quotas set by country
Cheaper production costs – labor
Spread Risks
Globalization of markets – world is a smaller place Potential Problems of overseas expansion Lack of knowledge an experience
Storage, transportation and distribution
cost may increase
External factors
Political and economic conditions of a country Infrastructure
Effect on Host Country
Create Jobs
Increases national income of country
Standard of living may increase
Technology Transfer
New skills and technology introduced to
country
Create Competition in host country
Being social
