Theme 4- Global Business

What is the main thing that we export in the UK?

Financial services and banking- v bad during financial crash! British exports tend to be price inelastic- good when appreciation (for exporters) but bad news if there is an depreciation- depreciation exports cheaper.

Which type of trade restriction would help to raise revenue for a government?

Tariffs

Labour Productivity

The amount of goods and services produced by one hour of labour.

What are some examples of campaigns by pressure groups?

*Greenpeace and palm oil campaigns- targets brands and encouraged companies to reduce- orangutans are no longer losing their natural habitat -PETA- they campaign for the ethical treatment of animals- experimenting, eat, wear or use for entertainment or abuse in anyway- they are not ours! They have taken action against various brands such as Chanel and furs and exotic skins. Made an impact on many brands and encouraged a healthy vegan diet- undercover investigations of pig breeding farms ec ->They protest loudly and publicly, giving caring people more they could do to provide ways to change society

What are the different forms of FDI?

-A joint venture -Strategic Alliances -Cross Border Mergers and Acquisitions -'Greenfield Facilities'

Cost Competitiveness for International Firms

-Achieve scale and scope economies -Allows the firm to deliver the same product or service as its competitors, but at a lower cost, which allows it to make more profits -Typically standardised, mass-produced items -E of S- largest reduction in average costs, good resources management, efficient production methods, waste minimisation- LEAN PRODUCTION (Just in time- no buffer stocks, TQM- getting it right first time, cell production- using space efficiently and feedback whats going good and bad) -A company may attempt to create the cheapest product on the market- cost leadership strategy- can be competitive advantage but firms must meet the minimum quality standards for the industry -Can invest this saving back into the business or lower prices EG Easyjet, Aldi & Lidl

What are the countries associated with being a high context culture?

-China -Korea -Japan -Vietnam

What are the disadvantages of using the Polycentric Approach?

-Cost incurred by the business in developing bespoke products and research and development- may be so high that the project itself is jeopardised EG- Tesco with their 'Fresh & Easy' US supermarket tailored to meet American demand but was not successful -Difficult to compete with well-established brands

Lobbying

Describes the process of directly trying to influence key political decision-makers to act in the best interests of a business.

What are the pull factors out of a country?

-Economies of Scale -Risk Spreading

What is the push factor of a saturated market?

-No scope- already got product or growth is limited -Lack of product innovation -Sales growth has stalled or is falling -Difficult for firms to grow revenues other than by taking competitor market share -Possibilities for businesses in this market is to differentiate within home market or sell their product to a market where there is still demand for it. -Eg a business may choose to find a new market in a country where their product hasn't entered yet- new product

What is the percentage GDP growth that is likely to come from emerging economies?

70%

Licensing

A contract to another firm to use its brand, intellectual property or to produce its product or service in return for a fee. EG- Disney licenses its brand name for merch

Localisation

A business tailors its products and services to local cultures and tastes. -Strategies that adjust products to fit with target customers

Human Development Index (HDI)

A collection of statistics that are combined into an index, ranking countries according to their human development. Combines life expectancy, education (mean years of schooling) and income (Gross National Income per capita) for any particular country into a single rankable value. Attempts to assess a country's people and skills. Helpful to assess and investigate a potential market or location for investment- assess customers can afford what they are selling, highlight places of potential skilled employees may be found, how many people would buy product in the future NORWAY= BEST

Free Trade Area (FTA)

A region where member states remove all trade barriers between themselves, but each member state nevertheless keeps different barriers against non-member states.

Subgroups

A smaller group of people who all have a special interest in common.

Economic Union

A type of trade bloc involving both a customs union and a common market.

Economic Growth

An increase in a country's productive capacity- goods and services. Rise in GDP, GNI.

What is China's economic growth rate?

Around 6.9%- over 2x UK!!

Reshoring

Bringing production back home after using foreign production facilities for a period of time.

What are the options of a business in response to pressure groups?

COMPLY, IGNORE, FIGHT AGAINST

What is the largest polluting country?

China USA & India (following)

Where does UK import mostly from?

China and Germany

Promotion

Communication by marketers that informs, persuades, and reminds potential buyers of a product in order to influence an opinion or elicit a response. -The marketing communication strategies and techniques all fall under the promotional heading, These may include advertising, sales promotions, special offers and public relations

Why is it more difficult to control MNC's?

Controlling MNC's is much more complex today- interconnected international market and globalised businesses Many modern global companies have huge economic power and can relocate their headquarters with relative ease, giving national governments less direct control over their behaviour -Footloose MNC's can simply threaten to relocate out of the country- take their FDI, tax revenues and employment with them -Who is in control of the actions of a company- the shareholders, managers, home or host governments? How is control enforced?

Division of Labour

Different workers specialising in different productive activities. By each worker focusing on a particular operation, output could be increased and more produced than if each worker made the entire product.

Product

Either a tangible good or an intangible service that meets a specific customer need or demand.

Joint Venture

Formal agreement between two separate businesses to work together for a fixed time on a specific project- instead of a change in ownership

Imports

Goods and services that are bought into one country from another. EG goods or services into UK and money leaves the UK.

Horizontal FDI

Horizontal FDI refers to producing the same products or services as is done at home. Eg takeover of British Bank TSB by the Spanish Bank Sabadell in 2015

Immigration

Movement of individuals into a population.

What is the difference between a nominal and a real figure?

Nominal is just the figure- Real is adjusted for inflation- Real GDP- takes into account price changes over time

Fixed Capital Formation

Term used to describe investment in long-term assets from roads to buildings

Saturation

The point when most of the customers who want to buy a product already have it, or there is limited remaining opportunity for growth in sales.

Product Life Cycle

The stages that many products go through; development, introduction, growth, maturity, decline.

What has NAFTA's trade bloc name changed to?

USMCA

Export Dumping

Where an overseas firm sells large quantities of a product below cost in the domestic market.

Vertical FDI

one firm is seeking to acquire materials or support for its own products or services e.g: opening a call centre in another country to deliver customer service or staffing support -Should help lower costs, allowing growth in revenue and profit

What are examples of stakeholder issues in different areas of the business? Consumers Employees Shareholders Countries or Communities

*Consumers- conflicts of interest- want ethical products, fair trade, renewable, sustainable, green. Customers may have to pay more than they otherwise would have- business manipulation of the market (different measure to report profit margins- increase in bills for example may seen justifiable), Product Safety- involving supply chain issues, Misleading advertising. When there is a corporate ethical issue, instead of focusing on protecting investors interests, it may be more important to focus on the public response - consumers have logic and will be judged in the eyes of the paying public not only the law.- balance needs of shareholders. *Owners- want high profits and high dividends *Managers- want job prospects, job security, profit linked bonuses and share issues *Employees- Employee safety- health and safety conditions, good working conditions, job security and a living wage- avoiding failings which may cause injury or death, Employee Redundancies- reduce staff numbers to regain profitability or may choose to outsource some work for cheaper returns, Pay and Conditions *Shareholders- conflicts of interest between management and shareholders, short term vs long term returns on shares, making decisions about how much profit to retain each year for investment and how much to return in dividends to the owners- the shareholders. Investing in new equipment or expanding its branches- financing future growth- cheapest way *Suppliers- want orders, contracts and payment on time *Government- want taxes and to ensure employment and emissions laws are not being broken *Countries/ Communities- SAFETY- people's wellbeing may be compromised, Environmental concerns where the activities of the business pollute or damage the environment, RESOURCE DEPLETION- company's extraction objectives conflict with the best possible future for that country- high profits however if depleted before they are able to be replenished or are exploited to the detriment of the country's environment- pollution associated with extraction in host country- essentially, they want low pollution, less industrial traffic like lorries, less visual blight, less noise and jobs

How might a multi-national business be operating within the law but acting unethically?

-Adherence to the weak environmental legislation of a specific country and only uses that -Politically- short term mineral extraction -Corporate tax avoidance- loopholes -Lobbying operations- to ensure laws drawn up are in their favour in the first place -Top executives claim to have no knowledge of suppliers

What are the negative aspects of using political influence to control MNC's?

-Allows/entrenches inefficient businesses to continue, such as the misallocation of capital and lack of research and development -Facilitates corruption -Sometimes difficult to prove that companies have not paid the right amount of tax -Businesses are footloose and can just go elsewhere if policies are too strict from the president/ Prime minister

Spreading Risk Over Different Countries- Reasons for JV or Global Mergers

-Attempts to protect the firm from the consequences of economic downturn or crisis by locating in markets where these risks are less likely to occur (or at least less likely to occur at the same time as the home market)- even businesses with strong balance sheets may face serious difficulties -Expand its presence Application Example- Tata Indian Company bought the two companies (Jaguar and Land Rover) from Ford and the purchase gave Tata the opportunity to expand its presence in the passenger car market beyond India- used brands for different markets and different countries

Natural Resources- Factor affecting country as a PRODUCTION LOCATION?

-Availability will play a role in businesses further back in the supply chain -Generally, companies that initially process raw materials at the start of the supply chain will need large quantities of relatively bulky resources -These will be expensive to transport over large distances (materials are bulky and heavy)- easier to set up in proximity to the required resources -Primary sector- mining, may need specific raw material abundant in specific country -This makes it logical for these firms to select locations near a plentiful supply of natural resources- otherwise would have to pay tariffs and quotas to import from elsewhere

What is the impact of MNC's on the national economy in terms of balance of payments?

-Balance of Payments- investment will have a positive impact on host nation's balance- there will be a double impact- initially, the flow of FDI when project is being established will improve balance as money flow into host nation's account. Then, when up and running, there may be a further boost- if any of the output from a new factory is sold abroad, there will be a further flow into the host's balance of payments (despite where the business came from- the value of sales is still represented by flow into host). This boost will help a host nation to 'pay its way' when trading internationally. For LEDC's this may be even more significant - impact on balance of payments, this is because they often find it difficult to get established in global markets and FDI allows them to boost sales of goods overseas. If MNC's purchase resources from overseas such as machinery etc, this will have a negative effect - this is because there will be a flow of money out of the country. There will also be a negative impact if profits are REPATRIATED to the MNC's base- flow of money away from the host country.

Why is the process of globalisation not complete?

-Because restrictions still exist and are being formed- particularly through Brexit -Many countries restrict the number of immigrants entering the country -There are also some trade barriers such as tariffs and quotas which make it more difficult to sell goods in certain countries

Likely Return on Investment- Factor affecting country as a PRODUCTION LOCATION?

-Boils down to this- cheaper locations will seem more attractive, since the initial investment will be lower and quicker return- receiving back from the input of resources -However, where a cheap location provides limitations to the likely future revenues the location can earn, this may be a false economy -Setting up production in another country is very expensive due to moving factory, setting up new production, buying machinery, hiring staff- investors (shareholders) need to know that these expenses will be returned by profits- INVESTMENT APPRAISAL- ARR, NPV, PAYBACK -A country where the investment is higher, may generate even higher revenues and will ultimately offer a better return on investment for firms that are willing to take a long-term view -Will it enhance the business' competitive advantage?

What are the advantages of quotas?

-Boosts local investment- plays essential role in trade as limits on goods create shortages that cause price fluctuations -Protects domestic businesses- the basic principle behind imposing quotas in trade is to restrict movement of goods in hope to protect domestic businesses from takeovers- some govs offer loans and subsidies to companies that lack the resources to compete with foreign competitors. -Country becomes more self -sufficient keeping quality levels high -Creates more job opportunities- when a company is gaining strength to compete with other foreign companies, quotas help safeguard it from stiff competition- as a result, this creates more job opportunities for domestic workers -Goods become less expensive- the prices of import goods becomes expensive so that customers choose to buy domestic goods - gov can get a steady source of revenue- which improves the economy in the process

Political Instability- Factor affecting country as a PRODUCTION LOCATION?

-Businesses expect to be able to plan for the future, something which is made impossible if governments change frequently and make drastic policy changes as a result -Important for manufacturing base rather than simply a market to sell to as higher levels of investment is needed to start producing , thus investments will take longer to pay back and generate a positive return on investment -Exposure to financial loss- if too high due to political tensions- corruption and bribery -Kidnappings- widely reported that Western business people are common targets - aiming to extract ransoms from employers or relatives

What are the drawbacks of using pressure groups and social media to control MNC's?

-Campaigns may be ill-informed or misguided -When info does go viral, difficult or even impossible for pressure groups to get original message out- distorted or distracted from main purpose- cannot influence the message that is ultimately communicated- the message needs to focused on being constructive and changing a particular aspect- may be difficult to control message -Direct action can lead to violence or miscarriages of justice -The company can have media/marketing campaigns to combat the bad publicity and may be unlikely to have a lasting impact- only for a short period of time and then issues move on ->May be unlikely to have a significant impact if brand loyalty is not essential to the company- cost MNC more to improve practices and low costs may be priority and far more important factor in strategic decision-making- more likely to influence business if laws enforced

What are the benefits of using laws to control MNC's?

-Can be used to improve domestic competition in the domestic market -Helps to check corporate power- do not drive out competition- enforcement may restrict the control that the MNC has over the gov and country -Facilitates consumer protection -Takes immediate effect- a specific issue may already be forbidden in some countries and thus the rules and regs implementation by simply reduce corporate power- less countries to move to- prevention of issue from becoming a severe ethical one

Maintaining or Increasing Global Competitiveness- Reasons for JV or Global Mergers

-Can provide bigger markets, scale and scope economies and cost savings- E of S- synergies, raise market share and brand recognition -This could make firm much more competitive in terms of its pricing power over customers and suppliers -May be a lot of competition or firm wants to be dominant player on global scale- may be part of successful strategy -Reduction in downward pressure on prices- reduced bargaining power of customers as merger gives fat market share to the businesses and cuts costs- in turn, this would allow for long term planning - R& D is hugely expensive -May bring product ranges together or services to increase overall sales and perhaps lower internal costs- eg cross selling- mergers of banks provide one contact point for customers to a range of financial services products -Geographically diverse collaboration can improve the firm's tax position- select merger partner who is located in a country where overall tax take is lower- merged firm can then relocate its headquarters to the lower tax venue in order to save money. The money saved from overall tax bills can be used to invest and further improve the firm's competitive position EG- British Airways merged with Spanish Airliner Iberia- fly to over 250 destinations- access to South America

What are the opportunities /benefits in globalisation for the UK businesses and the economies in which they operate?

-Cheaper imports from emerging market countries-increase standard of living leading to this -Gain entry to a vast customer base- increasing market share- more distribution channels -Cheaper costs of production- raw materials- find cheapest country- freer movement of labour (costs and skills- lower cost) - relocate and expand -Potential for increasing export sales- which markets do we have a competitive ad, gains from specialisation and trade-high output in focusing, opens up free trade -Opportunities for overseas investment- mergers and takeovers, new factories- outsourcing -Opportunities of rapid technological change • Competitive markets reduce monopoly profits and incentivise businesses to seek cost-reducing innovations • Enhanced growth has led to higher per capita incomes - and helped many of poorest countries to achieve faster economic growth and reduce extreme poverty measured as incomes • Customers now have access to products and services sold in any country across the world by using the internet- also gains from the sharing of ideas / skills / technologies across national borders • Competitive pressures of globalisation may prompt improved governance and better labour protection

What are the benefits of offshoring and outsourcing?

-Cheaper-employed on low wage and long hours- reduce costs -Access specialist resources and expertise -Increase flexibility- labour and production -Faster- specialising in specific area -Better quality? well educated and specialised -Focus on your core activities

How does the existence of a global supply chain create ethical issues?

-Cheapest destination- labour exploitation, working conditions, child labour -Environmental Issues- cannot be in control of all waste disposal/ Emissions -Standards may lapse -Business may break its code of business ethics- not transparent

Why is there a growing economic power of emerging countries that are not China?

-China are looking for suppliers that are not too far away- so cheaper transport costs- these countries represent a viable source of supply for China -China also build own manufacturing base there -Offer lower cost production than China, where increases in real wages and other costs are putting off some companies looking for cheap production locations

EXAM TIP- Assessment of a Country as a Production Location

-Choose main countries- or may be given a table -Choose 2 or 3 main factors that are particularly applicable to the business -Discuss a few positives in one paragraph- bringing 2 figures in with developed chains of reasoning -Use different figures from data table-Look at the nature of the business -Product it sells -The market it operates in 40% focus- costs- labour, land, energy 40% focus- conditions of the country-labour quality, sustainability and access to markets 20% focus- risk- natural disasters, energy & economic

Pay & Working Conditions- Is it ethical for workers in LEDC's to be paid less and accept possibly unsafe working conditions compared with equivalent workers in the UK?

-Complexities of global supply chains and the working conditions of employees in other countries ->Migrant workers, sub-suppliers and a continuous squeeze on costs, corporate leaders and their stakeholders are keenly aware of the risk of labour exploitation -Clear guidance regarding pay, condition, holiday entitlement etc does not always exist in many countries- safety abuses , sub-contracting out to slums -The business rationale for this is often the availability of cheap labour in LEDC's- such as Bangladesh and Vietnam. Several high profile MNCs like Nike and Apple have been caught out by this in the past -Some countries do not have the same level of legislation to protect countries such as the UK, the standard of working conditions is low -Work is primarily done by women, who are not necessarily paid a living wage as there i snow legal requirement to do so -Factories are often referred to as sweatshops and can be hazardous with poor ventilation, little space and in some cases, exposure to dangerous chemicals -The buildings themselves can be poorly built -MNC's can locate anywhere in the world, the market for their business is very competitive- so the practice of offering below minimum living wage can continue -Lower the wage, the less money the MNC needs to invest in that manufacturing area and so it can increase its revenues- has been international outcry about this. Some companies try to reduce the negative attention by annually publishing a list of the factories it uses and a audit of these factories' ethical practices -A number of initiatives and organisations are working to ensure fair working practices for all- The Ethical Trading Initiative is a British NGO concerned with employment practices of MNC and is supported by Marks n Spencer,Body Shop and Inditex -Pay can be an issue between different structural levels in companies aswell- managers in positions of power- the balance between interests is an important consideration, especially in relationship to for example, executive pay. The strong 'bonus culture' in financial services is a good example of this- CEO's paid many more times more than the average employees in the businesses This is a conflict of interest between not only business and employees but also involving customers being unhappy with its practices

EXAM TIP- GLOBAL NICHE MARKETS

-Consider why a business might want to extend its reach beyond its own national borders -Key benefit- ability to charge higher prices than an equivalent, mass market product -PRICE ELASTICITY OF DEMAND- this can be used to describe why customers in different countries are prepared to pay high prices - desirable with few subs due to quality or features, consumers less price sensitive- demand inelastic -Eg the iphone- niche appeal - high prices do not deter demand -Key to achieve low price elasticity of demand is to identify and fulfil global niches- this is a very appealing position for a business TAKE ACCOUNT OF APPROPRIATE CONTEXT- PRODUCT BEING CONSIDERED- EG COMPARING TO COMPETITORS OR REFERRING TO ALTERNATIVE PRODUCTS

What is the impact of MNC's on the national economy in terms of consumers?

-Consumers- likely to benefit- free to buy some goods that they produce. ->More choice- products supplied will add to choice available HOWEVER- not all MNC's produce consumer goods but may be components or providing services for other businesses ->Lower prices- arrival of MNC's is likely to increase competition in the host country. The products made by MNC's may be cheaper because they use modern and efficient production techniques. Costs will be lower- so offer products at lower priced. This competitive pressure may also force domestic producers to lower their prices. ->Improved Quality- if MNC's use 'state of the art' tech, modern materials and total quality management- the products may be better designed, more durable, more efficient and more aesthetically pleasing- all round better quality ->Better living standards- benefit from employment opportunities and then enjoy higher incomes, may have more choice and enjoy access to cheaper and better quality products. If products are generally cheaper then they will have more income left over to fund other expenditure HOWEVER- -Domestic producers may have to leave the market due to intense competition- could result in less choice in the long term -If MNC's left with little or no competition, they may come to dominate the market and exploit consumers.

What are the factors to consider in assessment of a country as a PRODUCTION LOCATION?

-Cost of Production -Skills and Availability of workforce -Infrastructure -Location in a Trading Bloc -Government Incentives -Ease of Doing Business -Political Stability -Natural Resources -Likely Return on Investment -Exchange Rates- usually a depreciation of the exchange rate helps to improve the price competitiveness of domestic producers facing competition from imports and also exporters trying to sell in world markets.

What is the most common trade barrier (tariffs or quotas)?

-Countries seem to favour tariffs over import quotas -Typically, the tariff is seen as a more efficient way to place limits on the inflow of international goods without placing undue hardship on producers who import goods -For many, tariffs represent the best approach to supporting the domestic economy, providing consumers with a wider choice, and promoting genuine competition between businesses

Why might job prospects in MNC's be criticised?

-Creating low value jobs- majority of jobs in a factory may be unskilled, requiring little training or expertise -Where there is need for highly skilled personnel, some MNC's transfer or recruit staff from their home countries. -As a result, often limited opportunities for local workers to develop high-level skills -Some MNC's in past have been criticised for exploiting people in local economies- factories- mistreatment and exploitation at the hands of MNC's. Incidents, correct safety measures not being followed- workers forced to work standing up and even physically and verbally abused -When MNC's are made aware of these issues the backlash can be rightfully harsh- often instigate immediate reviews of the situation and make pledges around future working.

Marketing Considerations- Promotional actives and labelling will have to be altered to some degree around the specifics of an individual market. This will depend on the characteristics of the country the business is trying to sell to and the nature of the product. Price fixes- collusion with other businesses

-Dependent on type of business, type of product and specific market- Particularly in pricing -MISLEADING LABELLING- customers need to be able to make a fully informed choice as to whether to purchase products and how to use them once bought- Trade Descriptions Act in the UK & enforced by Trading Standards Agency. Labels must be accurate so cannot contain false info on price, quantity or size, materials made of, what it can do or who might have endorsed it- also explain if any part of the product is hazardous -Businesses need to be aware of local legislation and ensure that they comply with the laws that apply in different countries- if there is no law governing labelling, there is published guidance in UN economic and social council- food labelling in particular false labelling not permitted- misleading info may differ from culture to culture- distinguishing between- for example what does natural mean? -INAPPROPRIATE PROMOTIONAL ACTIVITIES- product and business promotion can cover broad range of different activities- advertising, publicity and direct marketing. These can be considered inappropriate if actually illegal or offensive- such as sexualising kids in marketing- American Apparel -May be bribery and gift-giving etc- in China, gift giving and doing favours and traditional- In England, may be deemed unethical and illegal -Businesses acknowledge that these cultural aspects are part of their business context when operating in a global environment

Differing Tastes- International Business

-Depending on the product and country, few or more adaptations may be needed - referring to the cultural and social differences between the countries (UK products to Australian market would require fewer adaptations than to Chinese market -Some differences in taste are due to local variants- eg Coke has the same base concentrate in every country but is mixed with water in some countries which leads to a slight variation in taste which is the sort of adaptation that the business cannot control and not something they would implement themselves -Religious beliefs- halal meat- whatever prevailing beliefs of the country are- need to respect them and cater to their market in these countries, businesses ensure they adapt sufficiently to gain a market share from local businesses who may be better suited to understand the regional specifications -Legal Requirements- many products banned for use within EU- if brands want to transfer goods, they need to adapt them to meet the necessary legal requirements- eg additives removed EG- McDonalds vary their range in different parts of the world to cater for religious beliefs and the tastes of the country- eg Japanese branches offer a Chicken Katsu Burger

Gaining Access to Intellectual Property- Reasons for JV or Global Mergers

-Developing IP internally- R&D is lengthy and involves lots of financial risk -IP involves creation of the mind, such as invention, literary work, artwork that law protects from unauthorised use by others -Since establishing IP can be expensive, often easier to gain access to IP by buying it in acquisition or JV ->Patents for inventions ->Copyrights for literary works or computer programs ->Trademarks for brand names or designs

What are the disadvantages of Global Marketing?

-Differences in consumer needs, wants and usage patterns for products -Differences in consumer response to marketing mix elements -Differences in brand and product development and the competitive environment -Differences in the legal environment, some o which may conflict with those of the market -Local culture not considered- this may in fact open up opportunities for the business

What are the drawbacks of using laws to control MNC's?

-Difficult to achieve consistent legal practice between countries, so businesses have the incentive to find the most friendly legal environment where the laws and tax policies are best for them -Easy for footloose international companies to move to friendly environments and avoid treatment and laws that are unfavourable to them- losing positive benefits of MNC's to that economy -Even when there is an agreement over laws, policies and standards they are difficult to enforce- may be part of the culture and difficult to change-eg child labour enforced in some families- dependent on that extra income- the MNC may not even know- outsourcing etc

What are the factors to consider in assessment of a country as a MARKET?

-Disposable Income -Ease of Doing Business >How easy it is to get a profit >Trade across the border >Start up >Obtain Money -Infrastructure- whether business can transfer goods effectively into the country and around it >Measured using global infrastructure index >Transportation- trains, roads, ports- landlocked? Airports- domestic, international, access to electricity? -Political Stability- same gov for a while? Terrorism (fragile states index)? Laws? encourage FDI? Open to foreign markets? -Exchange Rates >How stable- how much does it fluctuate? >Fixed Rate- eurozone is very stable

What are the negative aspects of MNC's for the countries they operate in?

-Domestic businesses may not be able to compete with MNCs and some will fail- MNC's may even attract labour away from local businesses by offering better wages and conditions • MNCs may not feel that they need to meet the host country expectations for acting ethically and/or in a socially-responsible way- cultural and social issues- criticised for using 'slave labour'- workers who are paid a pittance by Western standards- often the low skilled jobs go to the host country's population and the highly skilled ones are brought from the head office country ->Labour employed by MNC's may not be protected by the same rights as workers would be in the MNC's country ->It is difficult to regulate the international activity of many MNC's ->Locals in the LEDC may not be able to afford the products produced by the MNC, leading to feelings of exploitation • MNCs may be accused of imposing their culture on the host country, perhaps at the expense of the richness of local culture- loss of national identity- becomes westernised • Profits earned by MNCs may be remitted back to the MNC's base country - REPATRIATION-balance of payments comes out- rather than reinvested in the host economy-this minimises the impact of the MULTIPLIER EFFECT MNC's are often interested in profits at the expense of the customer- often they have monopoly power which enables them to make excess profit- the country may already be dominated by MNC's and be dependent on them- less influence -Their market dominance makes it difficult for small local firms to thrive- for example it is argued that big supermarkets are squeezing the margins of local corner shops which leads to less diversity -Can use their EofS to push local firms out of business -If employees being paid higher wages, prices begin to rise for goods -Footloose- no loyalty to country- can destroy all of the positive impacts- of labour etc- Pull out quickly in times of recession or low sales -Poor safety record- issues with pollution- extraction of a material- increasing urbanisation (more people from rural areas to the city)- some governments are willing to turn a blind eye to breaking the standards that exist -Political power- tax aversion and avoidance -Often they contribute to the pollution and the use of non-renewable resources which is putting the environment under threat- the host country may suffer from a high loss of natural resources as a result of MNC activity • MNCs may make use of transfer pricing and other tax avoidance measures to significant reduce the profits on which they pay tax to the government in the host country

What are the advantages of tariffs?

-Domestic produced goods do not incur the tariff and so are likely to be cheaper -Tariff protection allows domestic businesses to sell more because they gain a price advantage compared to imports -It can ensure better job security for those employed by domestic businesses -It can protect infant industries from being swamped by international competition from MNE's -It can aid economic growth by improving GDP -It can raise important tax revenue for government which can be spent possibly on infrastructure -It reduces imports so improves balance of trade

What are the key features of an Emerging Economy?

-Economies making a transition -Likely to grow more quickly than more mature markets - investors like them- a business should be able to increase profits and dividends. -Going through a process of rapid industrialisation- development of secondary/tertiary sectors -Have potential to become developed economies -Enjoy faster long-term economic growth than most developed economies -Many inhabitants still in poverty, though economic growth is taking many out of poverty -Domestic businesses still struggle to access global markets (e.g. trade barriers)

What are the advantages of using the ethnocentric approach?

-Economies of Scale- product is standardised across markets, the scale of production is much larger and so savings can be made on raw materials -No development costs/ Lower costs of production- involved in adapting the products for different markets- may otherwise involve market research, product development to identify and develop products that would suit local demand. Due to this not required, average costs reduced and this can lead to lower prices and increased competitiveness- also savings on marketing as well as production -Also the standardisation means that products have a uniformity- customers assured that wherever they go, the product will have the same benefits- Levis ->Desire to keep a clear brand image and signature products and reputation

How has China and other EE's increased its global manufacturing output (GDP)?

-Efficient suppliers -Excellent infrastructure -Lower cost labour- throughout south-east asia etc -Consumers are spending more each year- driving increases in demand and reinforcing local production and distribution -Others such as South America are creating big international companies that increasingly challenge the dominance of firms from other regions.

Why is product important in the marketing mix?

-Either a tangible good or an intangible service- meets a specific customer need or demand -All products follow a logical product lifecycle and it is vital for marketers to understand and plan for the various stages and their unique challenges -It is key to understand those problems that the product is attempting to solve -The benefits offered by the product and all its features need to be right for the niche market -The product may be designed for a very specific customer in mind

What does the significance of changes in the exchange rate on a business depend upon?

-Elasticity of Demand- if there is a depreciation in the value of the pound, the effect on a business dependent on the elasticity of its goods or services- inelastic- the fall in price would only have a small increase in demand, if demand for exports was price elastic, then a bigger increase in demand -Economic Growth-if pound depreciated in value which would encourage demand- exports at lower prices but may be unlikely to change demand if other countries buying the goods in recession- won't have GDP or spending power to purchase anyhow -Inflation- depreciation can cause inflation and this will lead to uncertainty in business (steady price increase= prices up= looks expensive) -Significance of the cause of the fluctuation in exchange rate- appreciation of the pound due to improvements in efficiency and productivity, businesses will be able to absorb the stronger pound more easily. However if it is due to speculation or due to weakness in other countries, then businesses could be uncompetitive as rise in pound is not related to either improved competitiveness or productivity.- weaknesses in other countries is not positive as you want them to buy ya stuff! -Raw materials- effect of appreciation and depreciation depends upon how many raw materials the business buys -Competition- effect of appreciation or depreciation depends on how competitive the market is that the business trades in- if monopoly- wouldn't have much of an affect on demand

What are the factors which The Ethical Trading Initiative is interested in?

-Employment is freely chosen -Freedom of association and collective bargaining is freely chosen -Working conditions are safe and hygienic -Child labour is not used -Living wages are paid -Working hours are not excessive -No discrimination is practiced -Regular employment is provided -No harsh or inhumane treatment is allowed

What are the positive aspects of using pressure groups and social media to control MNC's?

-Enlists committed people including volunteers -Where social media is involved, activists can be enlisted incredibly quickly to engage in information gathering (petitions for example) or protests -May be more likely to impact supply chain decisions of an MNC more than laws would- as brand rep may be significant in western sales -Raises issues that may otherwise not become public knowledge- helps issue to spread- viral- collection of info is very easy- increases social awareness- can turn a product scare into a national crisis within hours- greater transparency -Online mags, podcasts, social media -Alerts politicians and authorities to issues of concern to the public -Platform to share and amplify their voice

Why might MNC's be bad for the local communities?

-Environmental damage, communities may be left struggling to survive in areas where farming and other subsistence activities are almost impossible -Mining industries in particular can have an impact if oil spills that lead to environmental harm from oil pollution -Significant impact on the health and activities of local people, especially farming and fishing

What makes exporting and importing a little risky?

-Exchange Rate Fluctuations- consequences of this can be financially very serious -Governments can impose barriers to imports that limit the firm's access to the market -May be conflicts with agents or distributors that are difficult to resolve from outside the country

What are two risks with being involved with exporting and importing?

-Exchange are liable to change -Will have to pay tariffs and imports

What two ways can businesses tackle a skills shortage?

-Expand production abroad- locate premises offshore -Apprenticeship programmes- attract talent

What are the key impacts of MNC's on the national economy?

-FDI Flows- increase in income, increase in tax revenues, increase in employment, reduction of national debt -Balance of Payments -Technology & Skills Transfer -Consumers- more choice, lower prices, improved quality, better living standards -Business Culture -Tax Revenues & Transfer Pricing

Increased Investment Flows- Factors Affecting Globalisation

-FDI- in the form of construction or the purchase of shares in a foreign business (10% or more) -Mostly undertaken by MNC -Businesses in the UK may see expansion abroad as a means of raising the financial performance of the business- despite it having substantial numbers of overseas stores -The desire of businesses to benefit from lower unit labour costs and other favourable production factors abroad has encouraged countries to adjust their tax systems to attract foreign direct investment (FDI). Many countries have become engaged in tax competition between each other in a bid to win lucrative foreign investment projects. -FDI is also helpful in contributing to the development of emerging nations such as India- creating jobs and helping to boost local economic activity -FDI spreads business activity, job creation and wealth all over the globe- making a huge contribution to globalisation -FDI also allows businesses to penetrate markets where trade barriers exist. Countries are more likely to welcome a foreign business building a factory than one that just wants to sell products

What does the UK mostly export?

-Financial Services- with London being the world's largest financial centre -Pharmaceutical Industry

What methods might a firm use to expand globally?

-Franchising- a business model in which a business (the franchisor) allows another operator (the franchisee) to trade under their name -Agent- An agent is someone who acts on your behalf to negotiate sales of your products or services, and can bind you legally. -Licensing Product- A business arrangement in which one company gives another company permission to manufacture its product for a specified payment- may also give permission to use intellectual property and branding -Foreign Direct Investment- occurs when a business purchases non-current assets in another country -Joint Ventures- a formal agreement between two separate businesses to work together for a fixed time on a specific project -Outsourcing- Contracting another business to perform the business function on the business' behalf- frequently production- located in a low cost country -Mergers & Takeovers- two businesses come together whether it be through an agreement or buying a controlling interest in another in a different country

What are the opportunities for businesses in operating as a member in expanding trading bloc?

-Freedom to Trade- sell goods and services freely across the whole of the EU with no trade barriers among member states- free access to markets which were protected by tariffs and quotas. May allow individual members to specialise in line with their country's comparative advantage -Enlarged Market- larger market to sell to, EofS- allows greater efficiencies, lower average costs possible- moving to somewhere with lower labour costs, sales rise from higher volume of customers- this increased competition from external businesses may act as an incentive for increased efficiency and and innovation and standards resulting in lower costs- not keeping inefficient firms going- good for consumer! -Protection from International Competition outside of the BLOC by an external business, this protection allows a business to be sheltered by potentially damaging effect of competition such as price wars- counterbalance against globalisation- protection from predatory competitors from more economically powerful regions- may negotiate better deals in global market because of being in the trade bloc -More opportunities for mergers and joint ventures across countries to expand and grow business -The encouragement of inward investment in non EU countries -such as Toyota establishing themselves within the tariff wall -Free Movement of people- can employ talented people across Europe- easier to trade and travel within a trading bloc- can live anywhere in bloc- you can also vote in any country you live in. Also free movement of the appropriate factors of production- a British firm may purchase cheap land in Southern Portugal for a new factory location, skilled designers from Italy and equipment from France- resources easy to source and labour to recruit -Logistics costs would be cheaper- cheaper to transport goods shorter distances and cultural ties and familiarity with nearby market reinforce regional trading preferences -All member countries have consistent standards across the trading bloc- qualifications gained in a certain country are relevant in any other state in the bloc -Greater Choice for consumers- products are services not previously available enter the market -May be able to have lower average wages- moving to somewhere with lower labour costs, volume of customers and sale rises- potential to benefit from bulk buying- increased competition

What are indicators of growth?

-GDP per capita- measure pf total output of a country's economy, dividing this by population adjusts to per capita, Purchasing Power Parity- further adjustment that factors in differences int he cost of living -HDI- an attempt to provide a single measure of economic development encompassing income, education and health- KEY FACTORS ARE MISSED THO= debate over relative importance of different factors -Literacy- literate workforce will be more productive, capable of performing tasks that add more value to production (technical jobs), thus hastening further econ development -Health- selling to old generation, life expectancy- economic development leads to healthier living -Standard of living- illustrates the wealth of a nation so may be useful to assess the locl wages rates for investors- or the going-prices for firms looking for new markets

What are the countries associated with being a low context culture?

-Germany -Switzerland -Scandinavia -North America

Unintended Meanings & Body Language- International Business

-Gestures that are common in one region may have differing meanings in other regions and cultures eg- Thumbs up meaning well done may be considered offensive in Australia, Greece and Middle east

Growth of The Global Labour Force- Factors Affecting Globalisation

-Global Labour Force has grown substantially -May be accounted for by an increase in the global population, an increasing number of women entering into the market and people living longer and working longer as well as the effects of migration -A bigger global labour market helps to drive global demand because people in employment earn money which can be spent on goods or services. Some of this extra demand will be directed at imports sold by MNC's and other exporters. Millions of people in some countries lifted out of poverty and making significant contributions to global demand -The rising numbers of people making themselves available for work has acted as a drag on labour costs, especially in developed countries. This is because the rising supply of labour forces wages down - helping to keep costs down and encouraging businesses to expand their activities more widely -Some of the people moving into the labour market will set up their own businesses once they have gained work experience. This will boost the number of businesses globally, some of which may grow and develop their activities around the world adding another lift to globalisation

What are the key reasons for the emergence in MNC's?

-Global brands seeking to drive revenue and profit growth in emerging economies (in particularly seeking rising demand from increasingly affluent consumers) -Domestic market is saturated and profits from expansion overseas is tempting -May be an extension strategy for the product life cycle -Reduction in trade barriers- increase in free trade- WTO negotiations -GLOBALISATION -Increased efficiencies in transportations- containerisation -Better infrastructure -Enhance competitive advantage -Increased market power to crush competitors • The search for economies of scale, to reduce unit costs by concentrating production in a few key international locations- especially if products can be standardised across markets • The perceived need to supplement relatively weak demand in existing, developed economies • The need to operate in many countries to avoid protectionism • Increased takeover activity that has built businesses with widespread international operations

Why are customers prepared to pay higher prices for global brands rather than local equivalents?

-Global nature of the world economy- transmission of desirability ->The internet and e-commerce- important marketing tool and opportunity to spread info. With this, businesses have been able to spread into foreign markets, and create and meet local demands that would otherwise have been impossible ->Social Media- rise of platforms have led to new brand of commentators 'bloggers' who can comment on a variety of topics and crucially products. Vloggers are a growing group who promote niche brands to subscribers ->Ease of Travel- facilitated by low-cost airlines, world has almost become a smaller place- visitors to foreign countries are exposed to well-known global brands- in places far away from their home country

What are the key features of Globalisation?

-Goods and services are traded throughout the world- can sell their products easily -Many people are able to live and work in a country of their choice- resulted in more multi-cultural societies where people from many different nations live and work together -There is a high level of interdependence between countries. This means that the events of one economy are likely to affect other economies- eg financial crisis in the US -Capital flows freely between different countries- this means for instance that a business or consumer in Australia can put their savings into a bank in the UK- Investors can also buy shares in foreign companies and businesses can buy companies that operate in other countries- FDI and cross border M&A's -There is an interchange of technology and intellectual property across borders- increasingly, for instance, patents granted in the US are recognised in other countries • Rising number of global brands - including from emerging countries • Deeper specialization of labour - components come from many nations • Global supply chains & new trade and investment routes e.g. South-South trade • Increasing levels of international labour migration and migration within countries • Increasing connectivity of people and businesses through mobile and Wi-Fi networks

Increased Significance of Global (transnational) Companies- Factors Affecting Globalisation

-Growing number of large firms have developed significant business interests overseas- some very powerful -Sell G&S onto global markets and have production plants and other operating facilities all over the world -Use cheapest global labour- like LEDCs China and Africa to mass produce goods for a global market- lack of minimum wage= costs kept low which gives TNC's productive efficiency +high profits -Use this to invest in new tech and product innovation to crush and drive out local competition with their superior E of S- hence, nations are integrated as they rely on foreign imports and labour -Domestic businesses fail to flourish in the same industries -MNC spread globalisation through heavy global advertising -Very powerful and have influence over local governments -Transnational flows of goods and capital is possible by gradual lowering of barriers to trade and investment across national borders- thus allowing for the expansion of the global economy -Multinational companies play huge and growing role in the world economy- making significant contributions to GDP and represent 2/3 of global exports, huge global investments in research and development. This contribution is likely to continue growing, corporations under pressure to increase returns to their owners and consequently they will expand their current activities and search for new business opportunities anywhere in the world wherever it is cost-effective. Small businesses also play a role contributing and benefiting from globalisation- also many play a role as suppliers to multinationals.

What are the opportunities of Emerging Economies?

-Growing numbers of educated middle class consumers - = growing consumer spending -Cultural shifts - e.g. higher demand for personal products, private education & healthcare -Demand for infrastructure and other products & services from developed economies -Source of high-skilled but low-cost labour (outsourcing / offshoring) -Great potential for joint ventures and acquisitions

What is the growth rate of the UK economy compared to Emerging Economies?

-Growth rates of emerging economies is expected to exceed those of the more developed economies, including the UK- as a trend. -UK products are more competitive than ever before and UK has a strong and growing service sector, however emerging economies produce most of the manufactured goods that are globally consumed. -Increasing overall economic power of many of emerging countries - strong growth -China, according to some measures has the largest economy in the world in 2015- exporter and destination for FDI- this power means it is also biggest investor in other countries -70% of world GDP growth is likely to come from emerging market economies China and India= 40-50% of this figure By 2020, China could be on the same level as America- dominate Western economies.

EXAM TIP- APPRECIATING/DEPRECIATING CURRENCY

-HOW MUCH BY- SIGNIFICANT? -IS IT PERMANENT? -WHAT PERCENTAGE OF GOODS ETC DO THEY SOURCE FROM ELSEWHERE? -WHAT IS THE PED OF THE PRODUCT? -DEPENDS ON THE EFFECTS OF THE OTHER COSTS -DEPENDS ON THE QUANTITY IMPORTED AS OPPOSED TO BOUGHT IN THE UK -DEPENDSIF THEY EXPORT DON'T NEED TO PUT A DISADVANTAGE- JUST A REASON WHY IT WOULDN'T BE IMPORTANT- SIZE/SPEED OF APPRECIATION

Why might a business choose to invest directly in other countries?

-Has a high potential for making a profit if it invests in a new location -Needs to maintain control over its subsidiaries in the new market- smaller brands parent company has control over -Is trying to acquire direct knowledge of the local market -Is attempting to avoid barriers to the market -Managers want to keep tight control over operations in the other countries - the business may need to share a common culture or communications systems, or they may want to ensure that agreements are enforced -A firm wants to protect its intellectual property (such as patents) -It needs to be close to customers -Its products incur high transportation and logistics costs -It faces trade barriers or political opposition

How can Ansoffs's Matrix be applied to Global Marketing Strategy?

-Help businesses achieve growth and can be applied to global markets and help to inform decisions around marketing strategy -Four possible strategies that a business might adopt -Risk can become greater- pronounced when business is extending into international markets where expertise of local conditions and tastes might be less secure -Global Marketing= focused on new or existing products into new markets that may have national and cultural differences Market Penetration- McDonalds already operates in Japan- by developing and launching burgers in this existing market Market Development- existing products in new markets- complex as customers from different regions not just countries may have different tastes. This strategy relies heavily on understanding local habits, tastes and needs. Even if appropriate or successful, it may still be necessary to make modifications to suit new market- language and labelling e.g. Diversification- occurs when new products developed in new markets

Romania- Country as a Market Location

-High pop- 21 million -An expanding economy- access to the Black Sea and Asia -Opportunities for business with G&S which meet growing private demand or contribute to the country's development priorities -Well qualified labour force -Political Instability?

Owner- Stakeholder Conflicts

-High profits means keeping the wages low which means that workers may not be paid a living wage -High profits means keeping costs as low as possible so working conditions may suffer -Labour laws may not be kept to -Work may be subcontracted out to third parties who use child labour or forced labour

What are the disadvantages of using the Geocentric Approach?

-Higher cost of product development- incurred by the business in developing bespoke products and research and development- may be so high that the project itself is jeopardised EG- Tesco with their 'Fresh & Easy' US supermarket tailored to meet American demand but was not successful

What are the features of global niche markets?

-Higher prices can be charged for products in niche markets- may not be able to charge this in home country, but countries abroad may be prepared to pay! -A clear understanding of the needs and wants of the market segment- premium/luxury demand -An emphasis on quality/ specialist expertise -Excellent customer service -Expertise in a product area -Prioritising profit rather than market share -Innovation -Distinctive branding -Specialist Distribution -Cultural Differences

What is the introduction of laws as a method of controlling MNC's?

-If a country introduces laws to reduce pollution or protect children from child labour then this will all cost the MMC money to improve their practices eg reduce pollution This means that the MNC may simply move production to a country where there are less laws and restrictions- Footloose -The host nation do not want to lose the economic input of the MNC so this deters laws being passed -May be expensive if laws put in place but the businesses may just move -COMPETITIONS POLICY -TAXATION POLICY TAX AVOIDANCE+ AVASION

Why does specialisation make sense?

-If each country specialises, total economic output can be increased across the global economy • Providing that a good price can be found from buyers, then specialisation should focus on those goods and services that provide the best value • In many countries, competitive advantage is shifting towards specialising in and exporting high-technology manufactured goods and high knowledge services which get a higher price • As a country develops more capabilities, then it can produce a wider range of closely-linked goods and services • Countries such as South Korea, Japan, Germany, the USA and UK all have a highly diversified pattern of exports • Nations at a lower stage of development tend to have fewer capabilities and thus export a narrower range of products

Why might the high tariffs on imported goods not affect the business?

-If niche market with a strong brand image- price inelastic- eg 'best of british' high brand reputation- foreign countries are still willing to pay the even higher price

Skills and Availability of Workforce- Factor affecting country as a PRODUCTION LOCATION?

-Important consideration for those looking for production base -Transport and utilities must be up to scratch for a modern manufacturing facility to be able to reliably service the markets it is designed to serve -Explains why some multi-nationals will take responsibility for improving local infrastructure in a location they choose, as well as building their own production facilities -Quality of human capital -need skills required to maintain quality standards even if offshoring, there is cheap labour in high unemployment countries but businesses may Reshore if quality is reducing. -Cannot afford the consequences of poor quality work- workers may be poorly skilled and poorly educated - thus, may have to invest substantial sums in training unless the work on offer is unskilled. -May be good to begin with (such as China) and then later production quality decline -A large unemployed pop means a large pool of candidates for every position -This will depend on what skills the business needs to succeed -The business that located production in particular country will need to ensure they have enough workers near the chosen site- and enough workers in the future if the facilities needed to expand- may find recruitment difficult in long term- eg one child policy in China- shortage of workers- workers may not want to work in manufacturing or exporters due to quality standards more challenging than domestic market produced goods -If it is following a differentiation strategy- it may need more skilled staff than a low cost strategy -Says number of years in education, HOWEVER- not the quality! -Labour productivity can be measured by GDP per hour worked and per worker, and growth in GDP per hour worked. -With the UK outside the EU, there is no doubt that attractiveness as a production location for global businesses will be reduced without tariff-free access to the single market, FDI flows may fall considerably -Can the UK maintain tariff-free access to the single European market?

How do tariffs work?

-Increase price so imports more expensive -This reduces demand for imports and increases demand for goods produced at home. Can be used by governments to raise revenue and restrict imports -Discourage demand for imports- raising their price above domestically produced subs -Likely to raise the final price to the consumer- therefore a fall in demand for the goods- tend to pass cost on so profit margins don't suffer -So, consumers will switch consumption to domestic goods -However, may only have a limited impact if demand for import is price inelastic- demand will not fall in proportion to the price increase- the fall in demand will be proportionately less -Tariffs also raise revenue for the gov -The US imposed tariffs on solar products coming from China and Taiwan- antidumping duties

What are the two key opportunities for British businesses in India and China?

-India - shared past in British Colony- more likely there than with China-(cultural similarities different here), British firms may stand more chance in India- offers opportunities already missed in China -China's economy continues to develop= service sector higher growth rates!!

Entering New Markets & Trade Blocs- Reasons for JV or Global Mergers

-Instead of organic growth, businesses can take shorter route to international growth through mergers and acquisitions -Firms in maturing industries may find that the only way is to grow through merging or acquiring firms in other markets -Quest for new markets and for E of S- many cross border mergers -May not always be easy to access markets that are growing - eg limits that governments place on foreign firms entering market - in order to gain access to vast market, this arrangement may be very successful and appropriate -Business doesn't have to start from scratch- buying someone is easier if there are high barriers to entry- and may have access to new trading blocs and new markets in terms of geographical location -Ferrero purchasing Thortons to expand its business into the UK

What is the method of using social media in controlling MNCs'?

-Interaction between electronic and mobile devices, applications and people, that allows users to create content -The public can have both a positive effect in supporting businesses with a good ethical stance and also a negative impact by raising to the public the ethical concerns they may have -Online magazines, weblogs, Social Blogs (Twitter), Podcasts and Wikis (youtube and wikipedia), Social Networking (Facebook, Instagram) -Social media can act as a means of controlling businesses like businesses use it as a tool for the promotion of business objectives -Computer-mediated tools that allow people to create, share or exchange information, ideas, and pictures/videos in virtual communities and networks -Social Media such as Twitter, Instagram, Facebook can cause MOBILIZATION OF PUBLIC OPINION ->makes the collection of information from a variety of sources easier ->Increasing social awareness through communication ->Ensuring greater transparency ->Bringing together people in order to create a kind of social authority to challenge the power of large companies EG- Greenpeace used social media extensively in its 'Save the Arctic' Campaign which included efforts to thwart Lego's partnership with the oil company Shell- animated film showing the arctic being flooded with oil

Reduced Cost of Transport & Communication- Factor Affecting Globalisation

-International transport networks have improved considerably in recent years -Cost of flying has fallen - people can easily travel to business meetings more easily and goods can be transported more cheaply -Eg low cost airlines- Easyjet, Flybe affordable to majority -Modern tech allows firms to transfer complex data instantly to any part of the world- more people can work from home, or any other location they choose- do not have to be office-based- easier for firms to have operations all over the world- reduced cost of communicating the information- work successfully on any issues and disputes easily. Knowledge improves decision making- constructive. Maintaining strong relationships with existing partners in the future- negotiating import and export agreements- vital -The internet also allows consumers to gather info and buy goods online from businesses located in different parts of the world -Businesses both large and small can reach out to global markets through promoting their activities and products using the internet -Containerisation has made significant contribution- uniform metal boxes which can be loaded and unloaded easily/mechanically off ships, lorries and trains- provide a flexible means of transporting goods- reduced the cost of transportation significantly. EXPORT PRICES ARE MORE SIMILAR TO THE PRICES PAID WITHIN A COUNTRY- makes markets more contestable. The loss to theft has decreased massively due to containers being locked- in turn, reduced insurance costs. The speed of loading has increased drastically, cutting costs- less labour for more loading (fewer dock workers- less bargaining power so reducing number of strikes), ships have got bigger and spend less time in ports. Loading ports have decreased due to how easy it is to distribute goods by lorry- flexibility of containers. CAPACITY UTILISATION

Why are quotas imposed?

-It allows a country to be sure of the amount of a good imported from the foreign country -When there is a tariff, if the supply curve of the foreign country is unknown, the quantity of the good imported may not be predictable -Import quotas protect jobs of domestic producers -Also imposed as a bargaining chip to be used in negotiations in trade -Protect strategic industries such as defence and agriculture. In market environments where imports are on the rise, quotas are more protective than tariffs

Why should GDP not be used on its own to measure development of a country?

-It does not take living standards into account -Doesn't take the distribution of wealth into account- GDP per capita- roughly income per person, people on different levels of wealth- not 100% representative

What are the disadvantages of Joint Ventures globally?

-It is only temporary- A joint venture is only a temporary arrangement between your company and another. By definition, you won't be committing to it long term. May be unequal share of support and commitment and difficult to exit -Clash of cultures and management styles may result in poor co-operation and integration. People with different beliefs, tastes, and preferences can get in the way big time if left unchecked. -Need clear communication- objectives of the venture need to be clear and communicated to all those involved and A lot of research and planning are necessary- the success of a joint venture highly depends on thorough research and analysis of the objectives. -Legislation- widely varied overseas and business must adhere to local laws

Cost of Production- Factor affecting country as a PRODUCTION LOCATION?

-Key driver behind decisions to move- low production costs- may gain competitive edge in the market -Usually a lot lower in Asia than in many other parts of the world -Labour intensive- low wage costs are crucial -Costs in China that were traditionally low, have now set to rise and look to continue in an upward trend -Often lowest wage places such as Burma have a developing infrastructure and political instability -The rising cost of energy and land is having an increasing impact on the location plans of some businesses- impact business location decisions -The assumed reason for lower costs in many countries is low wages however this factor can be overstated, the key is to consider how labour intensive the production process is- for many products, even in lowest cost country, production will be capital intensive -Often the cost differential between countries will be down to the ability to source materials and components more cheaply abroad, along with lower costs of land and business services -Does country have a minimum wage? -UK- expensive to produce as import great deal of raw materials that do not naturally occur in this country- eg cocoa- high standard of living, national minimum wage, may keep head office in UK but use another country for offshoring

Why are employment patterns in different countries an important indicator of the health of an economy?

-Labour costs are likely to be higher- patterns are helpful to monitor - low unemployment often means higher wage demands. One of the best indicators of the health of an economy. Also shows productivity and educational qualifications. Offshore activities rather than use UK labour ->when people are out of work, they don't have much money to spend or save consequently if high level of unemployment- may not be a good time to consider exporting there but could use cheap labour- looking for jobs.

What is the impact of skill shortages on international competitiveness?

-Lack of workers with the right qualifications in the industry -Businesses who operate in differentiation strategy are more vulnerable to skills shortages- require more skilled staff -Skills are a key driver of productivity and source of competitive ad -Industries with long term access to low cost and skilled labour have an advantage over competitors- own this in home market- produce and export more effectively than its competitors -Expanding production and locating abroad- would need to replicate this to keep competitive advantage or enhance its compet ad- innovation and quality

What are the problems/issues with going global for businesses?

-Language problems- language barriers make it difficult for business to market its products effectively- developing culture savvy makes it easier for business to reach a great number of people -Currency Problems- unpredictable and affect both expenses and profit- varying exchange rates can destroy profits made- may make products and services expensive -Cultural Problems- different practices- influences the way you communicate in a professional context- needs to understand the local cultural influences in order to sell the products effectively- need to be familiar with rules of country- translate accurately, address specific regional needs - need for stronger customer engagement -Political Risks- unstable gov may reverse income forecasts- may lead to difficult laws. Set of rules are unpredictable and adaptable, if stable, but if policies are difficult it would affect profits. Need to forecast risks -Legal differences- legislation varies widely overseas and will affect how you sell to them. A business needs to make sure it adheres to local laws. Also issues regarding intellectual property- need to protect company's interests- expensive legal mistakes - also employee rights such as holiday and minimum wage -Communication & Transportation- length and complexity of supply chains may increase change of working with suppliers who are unethical or even illegal in business practices- tech diffierences

What are the 4 methods suggested to try and control the negative actions of MNC's?

-Legal Control- regulation, competition laws and taxation policies- court cases, rulings brought by govs to change behaviour. Also trade restrictions such as tariffs and quotas increases the cost or restricts the quantity of imports into a country, thereby protecting domestic firms from international rivals -Pressure Groups- damage publicity and forcing compliance; public opinion and boycotts which impact sales and bring pressure to bear; pressure groups that launch a campaign against the actions of a MNC to change behaviour. Taking direct action- publicity stunts, marches, protests -Social Media- adverse media coverage that mobilises public opinion against the MNC; use social networks to orchestrate a boycott that could hit sales -Political Influence

What would be the result of the Mexican Peso strengthening against the British Pound?

-Less Peso buy more Pound -This makes imports more expensive for us and exports to Mexico cheaper -This makes imports cheaper for them and exports out of Mexico dearer -Mexico would therefore buy more goods if we are exporting as it appears cheaper for them-therefore exporting firms would benefit

What is Africa like?-FOCUS ON SUB-SAHARAN AFRICA

-Less economically developed than other parts -Huge reserves of natural resources are yet to be exploited -There are difficulties in maintaining reliable stable gov (not true for all countries) -Corruption - significant disincentive for FDI -Many countries experiencing strong econ growth- 5% -Major FDI from China and Japan -Broad improvement in governance, with fewer civil wars and slow growth in democracy

How is Health measured in a country?

-Life expectancy at birth -Infant and Maternal Mortality -Pollution Exposure -Access to clean water The world health organisation evaluates broad range of statistics

What are the key impacts of MNC's on the local economy?

-Local labour and job creation -Wages and Working Conditions -Local Businesses -The Local Community & Environment-infrastructure, contribs to local gov taxes, help in local communities

Why might off-shoring be controversial?

-Lots of jobs are lost in the home country -This could potentially damage the firm's reputation -There may be complications caused by language or cultural differences -Political, economic, technological and intellectual property risks associated with the host country -May fail due to increased management costs, reduction in efficiency or quality, exposure of firms to corruption, loss of intellectual property- even end up too expensive to continue

Why is Asia so cheap for costs of production?

-Low wage costs -Low energy costs -Low Raw materials costs -Land costs low -Fossil fuels low

What are the disadvantages of licensing globally?

-Lower income than in other entry methods -Loss of control over licensee manufacture- may be loss of quality- relying on licensee's ability to effectively commercialise your patent- risk of poor strategy and execution damaging the product success- poor qual management could damage brand and product rep- eg-grant the licensee the right to assign the license to someone else. A big company buys up the licensee and, they assign themselves the right to use your process. Another possibility is that the licensee goes bankrupt. In the bankruptcy hearing, the license could easily be assigned to one of its creditors. Negotiate to prevent this. For example, you can insist that if the company becomes insolvent or bankrupt, the license automatically expires. -Risk of having trademark ruined by incompetent partner

What are the advantages of FDI globally?

-Lower operating costs -Offers opportunity to grow into a profitable market abroad -Avoiding problems involving exporting- tariffs and quota costs-Many countries have import tariffs that must be paid for goods and services. Import/Export businesses can struggle to keep products at affordable prices for customers because of these taxes. Through FDI, it becomes possible to limit or eliminate these tariffs since a minimum stake in a foreign organization occurs. That gives the local business more control over the market while maintaining price competition. -Access to the country's natural resources -It provides local economic benefits in multiple locations-the companies or individuals that participate in FDI can stimulate community economic growth -profits are often reinvested into workers or increasing organizational opportunities, which can create new jobs, which then creates new FDI opportunities. The investments do the same for the home market of the foreign organization as well. Employment and econ boost- new jobs and build new economies -FDI is encouraged, many governments have placed tax incentives on this type of investment. That makes more money available to work for a foreign company without disrupting the investing agency's budget dramatically. These incentives make it easier to accomplish goals because the money involved can be directed toward resources instead of government coffers. At the same time, the gap between cost and revenue is reduced, providing more opportunities to find profit streams.

Briefly describe the role of lower transport costs in the speed of globalisation?

-Lower transport costs means a higher quantity of goods may be transported via containerisation and this would lead to a decrease in costs and increase profit margins of businesses and thus businesses are more likely to move into more countries as a result of the lower costs

What is the negative effect on local businesses of MNC's?

-MNC's lure workers away from other businesses by offering better conditions or higher wages -May supply products which directly compete with those produced by local businesses- taking trade away from local rivals- who may struggle to compete and be forced out of business- leading to people losing their jobs -However- the competition to local businesses if directly competing could put pressure on them to make improvements- eg longer term benefits such as more efficient and more innovative local enterprises

What are the positive aspects of MNC's for the countries they operate in?

-MNCs are a beacon of capitalism- provide significant employment and training to the labour force in the host country-income- pulls people out of poverty and new technologies to poorer countries- driving up incomes and aiding development. In return, wealthier countries benefit from being able to buy cheaper goods- cheaper costs of production MULTIPLIER EFFECT- more money so spend more in local economy ->The increase in employment makes the country look more attractive- reduced economic inactivity ->Moreover, it spurs on efficiency and entrepreneurship in the LEDC- as the mnc activity leading to greater competition -Better for consumers- better quality, lower prices and more choice- better standards of living for the local community- may be a completely new product or service which makes life easier -A country is likely to benefit from an MNC if it is operating in a country which has a rare resource - since the MNC does not have the choice to operate in another country -Raises country's profile- known worldwide and the movement into a particular country is a statement about its pro-business environment and political stability -A country is likely to benefit more from a company which has a labour intensive operation- unlikely for expatriot labour will be used- such as textiles. • Transfer of skills and expertise, helping to develop the quality of the host labour force- pushes up qualifications of local staff- also there is a transfer of technologies to local businesses ->many MNC's operate training schemes for local people to learn how to use machinery- such skills also attract other firms to the country -Often the working conditions are good in MNC's- new facilities, buildings and offices- (improves communications etc) stable and working properly- the brand doesn't want negative publicity- internationally recognised health and safety • MNCs add to the host country GDP through their spending, for example with local suppliers and through capital investment- FDI and money spent in the country boosts the economy and balance of payments- increase exports, pay taxes to government to improve infrastructure • Competition from MNCs acts as an incentive to domestic firms in the host country to improve their competitiveness, perhaps by raising quality and/or efficiency • Profitable MNCs are a source of significant tax revenues for the host economy (for example on profits earned as well as payroll and sales-related taxes)

What is the impact of MNC's on the national economy in terms of FDI flows?

-Majority of governments around the world are in favour of MNC's setting up operations in their countries due to employment, wealth and prosperity -FDI Flows- overseas business locates a new facility in a foreign country, the amount of money spent on establishing the facilities is FDI. The inflow of money from an overseas business into the country is likely to be welcomed by the host country- national economy will benefit: ->Increase in income- flows of FDI generally should result in higher levels of GDP(total level of income for a country) for the host nation. The extra output and employment resulting from new FDI will increase economic growth and should help to raise the living standards for people in the host country ->Increase in tax revenue- profits made by MNC's are taxed by the host nation. This increases tax revenue for the government. This money can be spent on improving government services, such as healthcare, education, housing and transport networks ->Increase in employment- flow of FDI creates new jobs in the host nation. This helps to reduce unemployment and save money that would otherwise be paid out in benefits to the unemployed. Businesses in the host country may also get a boost when the MNC invests in a project- because a range of local suppliers will be needed- components, distribution/commercial services etc etc. Such demands will help to sustain and expand businesses- creating even more jobs in the national economy ->Reduce national debt- some of money received by the gov from FDI might be used to reduce national debt. Positive impact on country's finances -Reducing debt sends message across the world that it is more financially stable- as a result, interest payments might be reduced and the country should find it easier to borrow in the future

Importing

-Many countries try to limit the importation of goods by placing trade barriers in the way -These barriers often involve tariffs -Trade liberalisation- through hundreds of treaties as well as through monitoring by the World Trade Organisation- have reduced the use of tariffs or limited the the levels of tariffs that can be levied.

What are the advantages of using Franchising globally?

-Market entry carries less financial risk, legal and politically aswell- responsibility is on the franchisee who are likely to be motivated to make their own profits- lower risk due to entering with an established product-- take advantage of new markets that are unfamiliar with your business model- benefits of first mover advantage= profits - proven idea -In addition to entering new overseas markets with additional customers, international franchising can also offer what is called foreign master franchise owners. These individuals are typically a native of the country and understand the political and bureaucratic problems in his/her country far better than any outsider. May overcome any cultural differences -E of S are achievable through ordering with owner and other franchisees -Increased brand awareness across borders -Lower capital requirements- more favourable gov regulations

What are two drawbacks of trading blocs on businesses?

-Market saturation -Limitations of growth to expand outside of trade bloc- do trade with countries outside of it

What are the disadvantages of FDI globally?

-May be risky- Political instability around the world means that the business environment can change at a moment's notice. Although companies and individuals choose foreign organizations that have little risk, there can never be a complete elimination of risk from the transaction. In some countries, the political risk factors could be so high that a foreign direct investment doesn't make sense. -It can affect currency exchange rates. A developing country with a struggling currency may see a surge of popularity after a foreign direct investment. People and companies see an investment as a sign of stability, creating additional interest in the market being examined. That higher level of interest can lead to a better monetary value for the foreign nation, which may destabilize exchange rates. -Imperative to prepare sufficient money to set up- can be hidden costs -Business may become less ethical- unethical access to local markets- may exploit workers wages

Acquiring National & International Brand Names & Patents

-May lack brand recognition or a patent which prevents other businesses copying product or producing similar products -By purchasing a business or a product with a strong well known brand name, it could obtain both quickly- competitive edge- unique -Effective ways of gaining reputational foothold or to get access to intellectual property Benefits: ->Likely to be strong brand recognition ->There will be brand loyalty ->It limits the competition for the product ->A business will not face the high risk, cost and uncertainty of launching a new product >Much easier than to start from scratch -HOWEVER, brand must have care taken post-merger to ensure employee morale and customer satisfaction are looked after EG- Ben & Jerry's- bought by Unilever- kept brand the same

What are the drawbacks of businesses in operating in an expanding trading bloc?

-May lead to tensions with other regions-there may be retaliation from the tariffs and quotas-further harming global trade- you may want to trade with a country outside of your bloc -Protectionist measures by a single country in the bloc are not permitted (hence threat of competition from other firms in the bloc domestic countries)- may be flooding market- already produced in country would lose industry if cheaper coming in elsewhere- can't compete on price because inefficient- unit cost is higher than rivals- may reduce market share due to free access to domestic market- put pressure on pricing strategies- not beneficial for small firms -Lose competitive Advantage- trade internationally with any countries and may lose ability to trade good at a low cost can no longer source the cheapest goods from around the world- have to pay more- TRADE DIVERSION- would have to pay high costs for imports from cheap labour countries so would be undesirable -Business cannot trade with countries outside of the trading bloc because they would be unable to import raw materials without incurring high costs due to taxation and quotas- have to source within trading bloc to stay competitive and lower costs -The free movement of workers has led to a reduction of wages as there is higher demand for jobs -The common currency reduced the control a country has over its economy- if one country is struggling or collapses, the others have to support it which can be a hindrance for the countries- affecting the economies of all of the other countries- the taxes from successful countries have to be used to support countries with a failing economy -Protection from external competition and tariffs could mean the businesses are sheltered from it inside the trade bloc and may lead to less incentive to increase efficiency- diverting trade away from more efficient producers- harming customers- do not have to compete as fiercly -Business may have to adapt their marketing strategies to suit the different countries within the EU -Increase legislation and technical standards to be met -Low wages in other countries attract businesses to locate in other countries and therefore investment- FDI -Cost implications in trying to meet harmonised standards -Most laws made by the trade bloc and must be adhered to- cannot make a law of a country's own even if don't agree have to abide by them -You cannot stop people immigrating to your country- generally negative in terms of gov, but also good for cheap labour for businesses. If there is unemployment in one country, people may choose to move in search of work- good for them, bad for gov.

Location In A Trading Bloc- Factor affecting country as a PRODUCTION LOCATION?

-May start production in a country as a way into a trading bloc -May avoid trade barriers in this way- siting a plant inside a bloc- sold to any member of bloc -Manufacturing plants in the UK to gain access to lucrative and developed market for cars in EU -EU is the world's largest trading bloc -Distribute products tariff and quota free -Stable exchange rate

Migration- Factors Affecting Globalisation

-Migration can take place within a country- from one region to another or by moving between different countries-> therefore, growth of labour force- this migration has been helped by Trade Blocs such as EU- free movement of factors of production such as labour -May move into inland regions of the country in search of jobs and new opportunities that are not available in rural areas- Chinese Migrants- domestic migrants- movement as a result of international investment and the development of the manufacturing sector- many overseas businesses invested in this- land and labour are CHEAP= globalisation boosted -Migrants often import their cultures into their new environment- along with this often comes the importation of goods from their home countries- specialist shops to cater for these people- imported from their country -Migrants often provide a supply of low-cost labour to the nation- as a result, businesses can lower their costs and gain a competitive edge in overseas markets- helps them to sell more overseas -A significant proportion of the money earned by migrants is sent back to their place of birth - this money is usually spent on their families and helps to generate demand in these countries. Transnationals (MNC) are likely to benefit from this increase in demand so economic activity is spread around the globe by migrants -Some migrants are highly-skilled such as lawyers and doctors so they can help to fill 'skills gaps' and therefore make big contributions to businesses and national income -Although beneficial for boosting global wealth, some countries worried that migration= social instability- may blame for domestic problems such as overcrowding and unemployment- as a result, gov's are under pressure to reduce flows into country

Inappropriate Branding & Promotion- International Business

-Mistakes made involving the language, mistranslations and unintended meanings when businesses operate abroad- due to laziness or poor efforts to check with native speakers if translation is correct MAY OFFEND PEOPLE'S SENSITIVITIES IN PARTICULAR COUNTRIES -Some languages may not have a direct translation for particular words - transferring brand names can cause issues- cultural , dialectal and grammatical differences can all be a barrier to the bran name being accepted and not becoming a joke -Promotions must also be versioned across different international markets- many brands want to create a global image + become an internationally recognised brand - marketing campaigns may not always work successfully in al countries though -Audience is key- when crafting marketing campaigns- cultural norms of the audience -Not considering the new market would be costly-outlay on advertising campaigns or packaging costs, but also there can be a greater cost to the business if sales of the product are adversely affected in that country for its entire lifecycle Eg- African products include an image of what is found inside the product due to illiteracy levels high- don't do what Nestle did and put a baby on the front

Exporting

-Most common route for a firm into the international market as it is the easiest mode of entry -A business continues to produce in its home market but exports some of what it makes to foreign market -Exporting has become easier owing to rade liberation- which has reduced tariffs and quotas that may otherwise have limited the imports into a country -Exporting often involves physical goods but may be services- including mining, manufacturing and agriculture- tourism, transport is also exported -Less risky -May be indirect- another person or firm takes the responsibility or direct- distributes and sells its own products -A firm can test the water and limit the amount of money it spends- see if there is a good level of demand for its products

What is the impact of MNC's on the national economy in terms of tax revenues and transfer pricing?

-Multinationals pay taxes to national economies, this can then pay for gov spending in areas such as health and education -MNC's often accused of paying as little tax as possible and seeking out locations where it is low -Common way of avoiding tax on profits is transfer pricing- if MNC has to make a product in a certain country A which charges high taxes on profits, the business will therefore want to make as little profit as possible in that country. The business may also have profits in another country B which charges low taxes on profits -By selling product made in country A at an artificially low price to its operations in Country B it can minimize its profits in country A. It then sells the product in country B at the market price - perhaps even back to customers in country A but then makes high profits in country B because it has bought the good at an artificially low price in Country A . Still has to pay taxes in country B but its overall tax liability in countries A and B is lower because of transfer pricing -Businesses want to set up where there are low taxes -Governments need to therefore weigh up the benefits of attracting investment by offering lower taxes against loss of tax revenues- also need to be robust in their dealings with MNC's to ensure that they pay their fair share of taxes

Ease of Doing Business- Factor affecting choice of business as a MARKET

-Need to be able to enter a country, set up premises and deal with everyday trading activities -Problems may cause delays with sales, increased costs and potentially affect other parts of the business in the distribution chain -The higher on the rankings, the easier it is to start and operate a business in a country- based on quantitative judgements -World Bank produced statistics measuring the time taken for many business activities such as > days to start a business > days to get electricity > days to import item > total tax rate as a % of profit > days to enforce a contract >Effectiveness of institutions Protection of property rights, rule of law, corruption

What are the negative aspects of specialisation?

-Over-reliant on one industry- risk is not spread out -Other countries may become cheaper in the same industry- making it harder to compete -If it grows too big, it may suffer Disecons of scale through lack of communication and coordination -Loss of domestic industries- negative impact on the range of industries in an economy Eg Santander brought call centres back to UK following complaints from when in India

What techniques and decision making processes are used when choosing a location?

-PESTLE -SWOT -Quantitative techniques- aid evaluation of costs and benefits of investing

Debt Bondages

-Paying people up front and making them pay for it- an individual in an LEDC see seeking work contacts a recruiter- charging employee fees to find them a jobbed once position is found they will be paid back- 'bonded labour'- binds worker to the employer until the hefty debt and interest is repaid

What are popular outsourcing examples?

-Payroll -Purchasing and maintaining info systems -Delivery- large businesses contract rather than own fleet

Why is place important in the marketing mix?

-Place or placement has to do with how the product will be provided to the customer -Distribution is a key element of placement the placement strategy will help assess what channel is the most suited to a product -How a product is accessed by the end user also needs to compliment the rest of the product strategy -Niche products can meet a global audience through websites -Agents may also be used to sell in new countries to keep costs down

Cultural Differences In China

-Place values and principles above money and expediency (what is practical) -Business meetings often start with pleasantries (preamble) such as tea and general conversation about trip to country, family and accomodation -The Chinese host will give appropriate indication for when the meeting is about to begin and when the meeting is over -Once the Chinese decide who and what is best, they tend to stick to decisions- although slow in formulating a plan of action once get started, make fairly good progress

How do quotas work?

-Placing a physical limit on amount allowed into the country leads to a restriction on quantity of imports- domestic producers facing less of a threat- more market for themselves -However quotas will raise prices because fewer of the cheaper imports are available- low supply increases price. -Placing physical limits on the flow of imports means that some demand for those goods will be met by domestic producers - increase share of the market is available -Reduce the share of of the market which can be accounted for by imports -This will help to protect or increase domestic employment -At the same time, quotas help to prevent domestic or imported goods from overpowering the market- this improves customer choice China retains its quota of foreign films - 34 per year coming into the country- China;s film industry is the second largest in the world after the US

Ease of Doing Business- Factor affecting country as a PRODUCTION LOCATION?

-Planning to operate in a new country will need to assess how much regulation, government interference and bureaucratic inefficiency it may suffer from: >The ease with which businesses can be started and closed down >The efficiency with which contracts are enforced >The amount of bureaucracy- ease of which permits may be obtained for construction projects >Availability of trade credit >The efficiency of tax collection >Ease of resolving insolvency -The WTO ranking may be useful guide for looking for a suitable location -Gov of countreies may use measures to improve their ranking- if concerned with FDI flows into country -Ease of doing business= commercial environment -May be bureaucracy and red tape, collection of tax and gov may even take land back -How easy it is to acquire a store- language etc

What are the weaknesses facing Indian economy?

-Poor infrastructure- democratic system of government (China is not a democracy)- the gov cannot force a policy onto population whereas China's gov can dictate that a certain amount of money goes to infrastructure- India's road system is far worse than China -Narrow Education System- education for the masses is poor - only 29% literate, not be able to take higher skilled jobs -Balance of payments deficit- Indian customers buying more imports than foreigners want to buy Indian exports

What impact might exchange rate fluctuations have on investment decisions?

-Postpone business investments -Investment more risky

What is the pressure group method of controlling MNC's?

-Pressure groups, formed by concerned individuals to attempt to change the behaviour of the MNC- EXTERNAL STAKEHOLDERS -Pressure groups campaign for changes in the law or new legislation in specific areas- directly against the business themselves -Raises issues that may not otherwise be public knowledge -Alerts issues of concern- authorities can act -They have a strong influence on public opinion and behaviour of MNC if they want to avoid a PR disaster- threaten to damage the reputation of the firm -Pressure groups can even change the behaviour of a business by writing letters to MPs, Contacting the press, organising marches and running campaigns -Examples such as Greenpeace, WWF, Friends of the Earth, War on Want -Protest march -Publicity stunts to draw attention to the problems -Consumer boycott -Set up campaigns to change public opinion -Naming and shaming-business ethics can be promoted through this publicising of behaviour which is unethical as widely as possible and thereby threatening the business's repute- eg Starbucks, Google and Amazon have been names and shamed in British Media for what some have seen as complex tax avoidance schemes in which they paid less than their fair share. Nestle also through aggressive marketing of their baby milk formula in LEDC's- breast milk is actually better and more safe considering the sanitation issues associated with making the formula -Direct Action- use of demonstrations, strikes and even sabotage to achieve a political or social goal. Environmental protection can receive a boost from pressure groups such as Greenpeace which use it. Interventions have included using its ships to interfere with whaling. Direct Action can be controversial -Lobbying- demand change- this is the taking of issues directly to the government in an effort to influence change, the World Development Movement frequently lobby on human rights and development issues in addition to publishing their own research- also make detailed suggestions for addressing the issues of concern, actively lobbying for change. Many businesses also engage in lobbying- lobby politicians on issues of importance to them

What are the advantages of global niche marketing?

-Prices are higher than in mass markets- specialist products reduce PED and thus demand is more price inelastic- premium prices v possible -Less competition and greater consumer loyalty in niche markets -Risk may be reduced -Fixed costs are higher for niche businesses and thus selling across the world would reduce the average costs and spread them over more units sold- increasing number of people selling it to- break even would be lower -The product is distributed through specialist retailers or directly to the consumer. Advantages in terms of image. -With careful marketing, operations and leadership, a local niche market can be translated to a global niche- for example Gordon Ramsay- quality overseen by him, being well-known, was successfully applied to New York restaurant

What is Cultural Diversity in association with global niche?

-Problems with languages- english not main or second language in most countries- thus preventing businesses - however EU expansion has led to widespread English speaking helping to somewhat solve this -One cultural difference may influence the way a product is marketed- eg a product name suitable in one country may have a completely different meaning in another -Some products would not be successful in some countries- eg neck ties - some cultures and traditions don't have this at all so expanding is unlikely to be successful -Colours have different meanings -The meaning of 'bribes' is different- common business practice or may be illegal- payments to industry officials etc may be required to get things done -Gestures, body language -Different body shapes -Colloquialisms- changes of dialect across one country

What are the advantages of using the Polycentric Approach?

-Product is likely to sell well- tailoring products to suit specific customer needs- the product can be targeted precisely within the particular market- targeted products for different markets leads to higher sales and maximise revenue

What are the disadvantages of using the ethnocentric approach?

-Product may not sell well if it is not adapted to the local market- marketing mix not geared to local market so business may be taking a risk about the appeal to a new market -Does not take account of national/cultural differences- damaging reputation if bad PR/ publicity- may also miss opportunities to adapt and get higher sales

What are the disadvantages of global niche marketing?

-Products sell in relatively low volumes (compared with mass markets) so profits need to be high enough to make it worthwhile-Some of the possible global economies of scale may not be achievable as each market will need individual attention ->Some products may require unique aspects or production techniques, reducing the scope for economies of scale ->-Involves high levels of spending on R&D and innovation and expenses on specialising the marketing strategy to different countries- specifically if have to adapt the brand -Co-ordinations and communications may be more difficult across differing brands and markets -The niche market must be large enough support the business and specialist distribution. The small size may prevent economies of scale that compete with larger competitors -Some of the possible global economies of scale may not be achievable as each market will need individual attention -To what extent should a business seek to extend a niche product into a global market? The fact that it is successful in one country is no guarantee of success globally- may have just identified a need for domestic customers and meets this need with a bespoke product- eg may have build up a strong reputation for quality using local food on a regional setting but may not be able to be translated to another

What is the impact of MNC's on the national economy in terms of business culture?

-Proliferation (raid increase) in MNC's can have an impact of business culture in countries where set up operations -People who are employed by MNC's may eventually leave their jobs and start their own businesses: ->Individuals may have saved some money from employment which can be used for start-up capital ->Workers may have developed skills that they think could be put to better use working for themselves ->Multinationals may encourage workers to set up businesses and become suppliers- if quality standards can be maintained, MNC's may welcome this development because it can provide them with more flexibility -As the pace of globalisation accelerates through MNC's developing enterprises throughout the world, it will become more culturally acceptable for people in range of countries to set up a new business -Possible that business cultures in the host country will be influenced by that in the MNC- businesses influenced by efficient practices of new businesses moving into country - leading to a change in corporate cultures- EG- Japanese MNC's building in UK- Uk organisations become open and less confrontations, managers recognising the wider talents of their emplouees- impact on workplace culture

Why might some countries try to limit imports?

-Protect domestic jobs and industries -Help a domestic firm be more competitive when trying to export overseas -Every country in the world, including the United States, maintains high tariffs on at least a handful of products for which domestic producers are thought to be vulnerable to foreign competition. This so-called tariff protection is typically imposed early in an industry's life or at moments of weakness or decline, when the threat from more efficient foreign producers is thought to be particularly severe. Once imposed, tariff protection is very difficult to remove, because the enterprises and workers who benefit from it work hard to keep it in place. -Governments use import restrictions to protect domestic health or safety. A government sometimes bans all imports of a particular good when it has reason to believe it could harm public safety or health- not at minimum standard

Why do countries restrict trade?

-Protect jobs in domestic industries - unemployment is undesirable and a gov may be criticised if jobs are being lost due to cheap imports -To protect infant industries - up and coming ones who don't have economies of scale to compete- low priced imports= no chance. They need time to grow, become established and gain e of s -To prevent dumping- unfair competition for domestic producers -To raise revenue- taxes and infrastructure- money spent on gov services to improve living standards -To prevent entry of harmful or undesirable goods -To improve the balance of payment deficit- if very large balance of payments deficit (spending on imports exceeds income on exports)-is when imports higher than exports- if deficit gets out of control, action may be needed. A gov may try to reduce imports and increase exports at the same time to reduce the deficit. -May be used a bargaining method

What is the pull factor of Labour productivity?

-Quest for lower labour costs- not simply that a worker can be paid a lower wage, but rather that each worker costs less per unit of output that they produce -Many factors may affect the productivity of a worker- including skills & qualifications, working conditions and tech support as well as rules and regulations

What are the advantages of licensing globally?

-Quick and easy way of getting into foreign markets- fast way to generate income and grow a business get innovation to the market faster You don't need to find money to commercialise your product - The licensee will be responsible for costs of manufacturing, distribution, packaging, marketing and sales, etc. you're not committing your own money and time to producing the goods. The licensee does, while you receive royalty payments. That can be an excellent deal, particularly if actual manufacturing is outside your company's skill-set. Licensing lets you profit from the process while keeping your company focused on what it does best. -You don't need to find money to commercialise your product - The licensee will be responsible for costs of manufacturing, distribution, packaging, marketing and sales, etc. -Reach new markets which may otherwise be inaccessible-depending on the deal and the licensee, you may be able to access markets that are closed to imports, avoid export taxes or mitigate risks associated with international expansion. -Shows way for future investments- open up opportunities for this -Political Risk- is decreased as licensee is usually local

What are the advantages of outsourcing?

-Reduce costs- less expensive -Focus on key competancies of the business-more time to focus on core business process by outsourcing supporting processes-Expertise: specialize in their field. The outsourced vendors also have specific equipment and technical expertise, most of the times better than the ones at the outsourcing organization. Effectively the tasks can be completed faster and with better quality output. Focus on its strengths, allowing your staff to concentrate on their main tasks and on the future strategy -Improve speed, flexibility and quality-increased efficiency - choosing an outsourcing company that specialises in the process or service you want them to carry out for you can help you achieve a more productive, efficient service, often of greater quality -Controlled costs - cost-savings achieved by outsourcing can help you release capital for investment in other areas of your business --Easy to comply with rules and regulations- ensure they are adhered to

What are the advantages of Joint Ventures globally?

-Reduced risk- shared with a joint venture partner- increased finance and experience -provides the opportunity to gain new insights and expertise. The market is now way easier for you to understand given the short-term partnership that you have forged. -Better resources- forming a joint venture will give you access to better resources, such as specialized staff and technology. All the equipment and capital that you needed for your project can now be used. You get to save money by sharing advertising and marketing costs. And that works for a lot of other types of costs. Starting a joint venture is a great way to save money and/or split costs. -Can be flexible- only have a limited lifespan -You are more likely to succeed Your chances of success will become higher as you are already riding with a renowned brand. As a result of this, your credibility will also vastly improve.-You will build relationships and networks Even though your partnership is only for a specific goal, this move will enable you to create long-lasting business relationships. -Can effectively tap into a boom for a certain product and receive high revenues

What are the more subtle ways of protecting domestic producers?

-Regulations and specifications-'technical barriers to trade' (set out specific characteristics of a product such as its size, shape, design, functions and performance - or the way a product is packaged and labelled before it enters market place)- legislation can be passed to prevent entry- product strict quality requirements restricting certain products that don't meet the standards required -Administrative Barriers- fail to reach health and safety quality standards, environmental standards, cultural standards- some products cannot be imported into the EU- for some others there are restrictions such as legal import ans to protect customers from dangerous goods- radioactivity in food in Japan fears of contamination- earthquake and tsunami damage to nuclear power stations -Gov purchasing policies- favour any kind of contracts with country in protect industries, even if not best value

What are the factors to consider before outsourcing or offshoring?

-Relative cost of inputs (inputs= staff in productivity) -Security of supply -Reliability of the supplier -HR implications -Likely to out-source non-critical activities- if customer service was key then wouldn't outsource call centres -May outsource if super low cost -Activities that are crucial to the firm- competitive advantage need control over- key differentiation over competitors

What are the problems with trade barriers?

-Retaliation when barriers are imposed- eg one country may impose a tariff on another country's goods in return to block goods coming in- could escalate a trade war (restricts the volume of trade)where trade between countries eventually stops. With similar "protectionist" trade policies instituted by foreign governments, thereby limiting opportunities for growing firms to expand into those markets. When one country uses quotas, its trading partners do the same and cite the same reasons- the end result is less exporting opportunity for all producers and higher prices for all consumers- COULD CAUSE TARIFFS (HIGHER COSTS) FOR EXPORTERS Infant Industry Theory recognises that these protections must be scaled back so these new industries adapt themselves to produce, compete and survive on a level playing field in the international market. -Gov have a poor record in identifying the industries with potential-infant industry protection may not be successful -Increased prices for consumers-particularly arising from import tariffs or import quotas that restrict market supply -Tariffs may also be ineffective if demand for imports is INELASTIC- eg increasing the price of an import by 20% due to tax, demand may only fall by 2 % if price elasticity is -0.1- therefore the imposition would only have a limited impact. If consumers spend more on this, less disposable income to spend on domestic goods and services- reducing the improvement to the economy- HIGH IMPORT PRICES WON'T PUT MANY OFF- INCREASE PRICES FOR CONSUMERS- through cost-benefit analysis, some businesses may feel that this market is providing such high demand that it is worth a lower profit margin for the still maintained profits -Tariffs may also be bypassed by FDI investment and PED- no substitutes would keep buying it -Import quotas are there to protect infant industries but often the quotas last long after the industry has matured -Quotas are also complex for the country that uses them- they require a lot of paperwork indicating exact amounts of products for each country facing the quota -Difficult to measure the precise degree of protection quotas offer -SUBSIDIES- allows firms to be inefficient - business may become reliant

What is the difference between royalties and licensing fees?

-Royalties are usage-based payments made to the owner of property for using their intellectual property for a certain period of time. Basically, it is percentage of gross revenue or net profit brought in by an owner's asset.The licensee agrees to pay a variable or fixed amount to the licensor. The owner earns a profit percent without having to do any work and the minor earns a profit without having to raise capital to buy the entire business agreement, copyright or patent. -Licensing fee is an amount of money paid by an individual or business to the licensor, which is mostly government, for enjoying the privilege of being licensed to use someone else property. When a licensor and licensee signs for license agreement, a fixed amount of money is paid under the terms and conditions of the agreement, which in place allows the licensee to use the tangible property for a certain lease period.

Securing Resources & Suppliers- Reasons for JV or Global Mergers

-Secure resources or supplier further back in the supply chain- backward vertical integration ->The resources used in the creation of its product or service are scarce and hard to acquire and it needs to ensure reliable sourcing ->It needs to ensure that the inputs are of a suitable quality or price EG- Shell has bought BG with the halving of the price of crude oil- get hands on Brazilian reserves

What are the disadvantages of outsourcing?

-Severance and costs related to layoffs of local employees who will not be relocated internationally, etc. Even simply managing the offshore relationship can prove challenging due to time zones, different languages or cultural preferences. -Handing over direct control- they are in charge of customer relationships- service delivery may fall below expectation -Management difficulties- communication and friction -Lack of flexibility- the contract may prove too rigid to accommodate change -Hidden costs: Although outsourcing most of the times is cost-effective at times the hidden costs involved in signing a contract while signing a contract across international boundaries may pose a serious threat -Confidentiality and security - which may be at risk

How might a country try to improve the competitiveness of it workforce?

-Skills • Workplace training to increase people's occupational mobility and increase the flexibility of the labour market -Enterprise • Programs for start-ups e.g. Start-Up Chile, Young Innovative Companies in France, Entrepreneurship First (UK) -Mobility • Housing market reforms to improve affordability and geographical mobility -STEM • Investment in improved access to and quality of teaching in STEM subjects (Science, Technology, Engineering and Maths)

Why are host nations over reliant on MNC's?

-Some MNC's have higher revenue levels than the GDP level of host nations- gives them a formidable presence -Domestic producers may have to leave the market due to intense competition- could result in less choice in the long term -If MNC's left with little or no competition, they may come to dominate the market and exploit consumers. -Making host very vulnerable- overreliance on MNC's for economic benefits such as job and wealth creation -Other institutions and other ways exist that attempt to control the actions of MNC's - including political and legal measures as well as pressure groups and the ever growing importance of social media.

What is it important to remember about every investment decision?

-Specific to the firm involved and the particular circumstances that each firm faces -The personal role that senior managers play also needs to be considered, taking into account factors of confidence or uncertainty

What are the reasons for global mergers or joint ventures?

-Spreading risk over different countries or regions -Entering new markets and trade blocs -Acquiring national and international brand names or patents -Gaining access to intellectual property -Securing resources or supplies -Maintaining or increasing global competitiveness

What is political influence over MNC's?

-State ownership is very effective of control, as political power can be used to create, manage and end business- governments can apply pressure to change the behaviour of the MNC. -The spread of e-commerce and the odd nature of international corporate tax rules have left governments trailing behind MNC's as they shift profits around the globe -Elected officials address areas of concern -Allows ineffective businesses to keep going -Subsidies and tax breaks so domestic firms are protected -Indirect or direct ownership- doesn't allow domestic businesses to be over-taken by foreign firms -Eg George Osbourne has joined forces with German finance minister in order to prevent tax avoidance from MNC's such as Amazon and eBay -Governments around the world have an uneasy relationship with MNCs. They want investment into domestic economies (FDI) to create employment and economic growth but there is a struggle with the economic power wielded by major global businesses Political influence on MNC activity appears to be growing, focusing areas such as: • Tax avoidance • Business ethics • Dominant market positions

Structural Change- Factors Affecting Globalisation

-Structure of economies over time is likely to change Eg most western economies there is a huge growth in services (tertiary sector) that has provided most of the income, employment and wealth - movement away from traditional sectors- that allows business and economies to flourish- (returns on capital invested in many service industries are often higher) QUARTERNARY (knowledge-based) + TERTIARY (services industry)- easier to export/offshore via technology -Rise in new economic powers has been driven by a shift for less developed countries to secondary sector activities (from primary sector activities such as mining and agriculture)- Manufacturing is ften labour intensive which generates jobs, income and demand for nation -Development of knowledge based industries that has helped countries to improve the standard of living for their citizens -These structural changes have contributed to globalisation because most of these industries are export-orientated- as a result, in addition to selling these services abroad, these industries are likely to set up operations in a range of countries, recruit high quality staff from anywhere in the world and try to foster global presence -Internet and social media have helped to deliver these services to global markets- both large and small businesses can use the internet and social media to raise their profiles, communicate with potential customers and sell products -Many industries in the tertiary sector can locate anywhere, provided there is a market -They aren't tied to any specific geographical locations or influenced by other locational factors - eg chain store such as M&S can locate anywhere in the world- provided there are people within close proximity who want to go shopping

What is the impact of MNC's on the national economy in terms of jobs and skills transfer?

-Technology & Skills Transfer- MNC investment often means new tech and modern work practices are introduced into host nation- transfer of technologies and knowledge to local businesses- transfer may be horizontal or vertical. ->Horizontal= when knowledge is transferred across the same industry- copied by other businesses in the same ->Vertical= forward or backward- eg MNC's often provide technical assistance, training and other info to their suppliers located in the host country- many assist local suppliers in purchasing resources and modernising production facilities. Forward vertical- business in the host nation purchase goods and services from the MNC's eg domestic businesses may use components made by MNC- may adopt and adapt tech, working practices and managerial methods used by MNC -Thus, transfer will help to improve efficiency and productivity- help to make domestic producers more competitive and generate sales both at home and abroad if the improvements are significant- the copying of practices etc can make domestic producers posing a real threat to MNC's in their markets. Reverse Engineering process, some businesses analyse a rival's product very closely by taking it apart and seeing how it can be produced- identifying features of the product worth copying

Environmental Considerations- Should MNC's be allowed to follow less stringent environmental legislation in LEDC's compared with countries such as the UK?

-The effect on all stakeholders- the ramifications of increasing government regulation and how to reduce operating costs- businesses evaluate the level of concern for host governments and of consumers- as well as how environmental issues will affect the firm's operations in short, medium and long term -ETHICAL SOURCING- don't deplete world's natural resources -MNCs like Ikea and Unilever have sought to use sustainability as a core part of their approach to doing business around the world. -EMISSIONS- climate change is an important international issue- emissions cross borders, it involves many institutions and stakeholders -There is strict legislation in the UK governing the environmental output of a business- Uk businesses report on greenhouse gas emissions. This sort of legislation does not always exist in LEDs where many MNC's base their manufacturing industry- as creating employment environment not key concern -Highly urbanised areas that develop around industry of LEDC's suffer bad air pollution and issues with waste disposal -WASTE DISPOSAL- UK gov enforces legislation into how dispose of waste- often missing or not enforced in LEDC's -May be barriers to efficient waste disposal as well such as a lack of proper infrastructure to allow for efficient waste removal- poor roads= not able to remove waste effectively -May be waste with toxic elements (discarded electrical products) that deteriorate over time and are being dumped illegally in LEDC's- causing huge concerns- risking health of local people

Differentiation for International Firms

-The firm selects certain attributes of its products and services and then tries to match this with specific customers -May be same product but key differences that set it aside from competition -The firm may then command a higher price for creating this unique product- premium price to its market segment - KOTLER suggested these features: -Performance, style, design, consistency, durability... -Barriers to entry are constructed through the brand recognition and innovation, and protection of this intellectual property and protected supply and distribution chains EG- Mercedes style and performance, Dyson- functionality and quality

What are the disadvantages of using Franchising globally?

-The franchisee is in control of operations- may damage reputation of the business -Have to provide training and resources -Profits are lower for both the owner and the franchisee -Cultural differences- may be barriers and what is popular in one country may not be in another- may not be able to accurately predict whether they will purchase the product or service- market research required to minimise risk

Why is promotion important in the marketing mix?

-The marketing communication strategies and techniques all fall under the promotional heading, These may include advertising, sales promotions, special offers and public relations -Whatever the channel used, it is necessary for it to be suitable for the product, the price and the end user it is being marketed to -It is important to differentiate between marketing and promotion- promotion is just the communications spect of the entire marketing function -In a global niche market the promotion may be ore targeted and subtle than in a mass market. Brands have to be careful not to devalue the brand image by discounting

What are some conditions which determine the amount to which the host country benefits from MNC's?

-The type of business- whether it uses labour or capital intensive production- unlikely for ex-patriot labour to be used -Although best practice transfer is limited due to skill level of work, there could be a substantial decrease in unemployment in the LEDC

What is the problem/threats of emerging economies?

-They encounter many risks that might seriously affect economic performance, moreover, countries differ in how vulnerable they are to these risks- how well cope. -Threats- competition with UK businesses due to large pool of skilled, but low cost labour -May pose risks to UK businesses entering: ->Political instability ->Cultural differences / sensitivities ->Variable approaches to financial & legal dealings (e.g. contractual law) ->Corruption and bureaucracy still an issue ->Emerging markets becoming major exporters and have state subsidy to make them more competitive globally, also undervalued currencies make their exports cheaper ->Low-cost production makes developed economies uncompetitive in some markets ->Inadequate protection of brand and other intellectual property

What are the opportunities and threats of a business wishing to sell to a market within a FTA or PTA trading bloc from a country not in it?

-This business may choose the country with the cheapest barrier and after finding the lowest quota and tariff, goods can go to that country that is a member, once there the goods and services may be transported to all member countries of the trade bloc- can still get to members. - less likely in customs unions as adopt a common set of barriers

Why are employment patterns one of the most important indicators of the health of an economy?

-Those in employment will be able to pay taxes to the government- increasing the spending of infrastructure which will improve business -Those in employment will be contributing to the overall GDP of the country

What are the six forced labour indicators according to the International Labour Organisation?

-Threats or actual physical harm to the worker -Restriction of movement or confinement to the workplace -Debt Bondages -Withholding of wages or excessive wage reductions -Retention of identity documents -Threat of denunciations to the authorities

Examples to Some Cultural Differences

-Time Differences- B2B Trading -In some countries- call by first names -Give gifts- bigger for senior members, equal gifts for employees -Colour implication- black and white not used in business- red means luck -Holidays- may be at different times of year -Language Barriers -Local Knowledge -Body Language -UK vs Germany sense of humour- sarcasm

What are 2 reasons why a country might impose trade barriers?

-To prevent dumping by other countries -Small/ domestic businesses are protected

What are the key reasons why MNC's need controlling?

-To protect against exploitation by MNCs • To discourage resource depletion by MNCs • To ensure local culture is protected from MNCs • To discourage abuse of market power by MNCs • To protect domestic businesses from MNCs

What is the impact of tariffs on businesses?

-To protect fledgling domestic industries from foreign competition -To protect ageing and inefficient domestic industries from foreign competition -Foreign producers who face tariffs cut production due to reduced demand- may have to increase prices -A reduction in production can mean loss of jobs

What are the factors contributing to increased globalisation?

-Trade Liberalisation -Political Change -Reduced cost of transport and communication -Increased significance of global (transnational) companies -Increased investment flows- FDI -Migration (within or between economies) -Growth of the global labour force -Structural Change

What are the implications of economic growth for individuals and businesses?

-Trade Opportunities-if economy is growing, consumption is aswell- good for those looking to invest or sell their products or services. New export opportunities, UK businesses may discover new markets to which they can export- particularly as economies reach the latter stages of development, the demand for services grows- meaning that UK exporters should be targeting China! -Offshoring Production- Opened facilities in developing countries- the goal is to exploit lower production costs, boost profit margins, even if transport costs rise as a result. Particularly service industries - call centres, complaint handling -Increased domestic competition- as countries develop, entrepreneurs, increasingly able to access capital and credit, will start up businesses that may be so successful that they can start exporting to countries such as the UK- this leads to increased competition for UK businesses - both globally and in home market -Means that disposable income is also rising- more money in pocket to spend, increasing overall demand for goods and services- may become income elastic so YED is higher. Demand likely to become inelastic, providing greater opportunities for increased revenue and profit - may be produced domestically or imported from abroad- many opportunities for trade -Employment Patterns-labour costs are likely to be higher- patterns are helpful to monitor - low unemployment often means higher wage demands. One of the best indicators of the health of an economy. Also shows productivity and educational qualifications. ->when people are out of work, they don't have much money to spend or save consequently if high level of unemployment- may not be a good time to consider exporting there but could use cheap labour- looking for jobs. New tech may mean fewer workers required to manufacture goods. EU has had persistent unemployment -Greece and Spain at or above 25%- weakness in their economies -As economy and GDP grows, there is increasing demand for a service sector - cleaners, hairdressers- latter stage -Strong Infrastructure- allows businesses to have good communication and transport/supply lines to reach consumer

In what sense is there is global consumer culture?

-Trade continued to expand and businesses see expanding into international markets as an opportunity to find new resources and markets for their goods, as well as producing their goods and services at a lower cost, thereby making them more money or extending the life cycle of their products or services

What are the key negatives of international trade

-Transport costs e.g. emissions from food miles- expensive - so the firm needs to locate closer to where it sells or hopes to sell in the future • Negative externalities from production and consumption • Structural unemployment as patterns of trade change • Rising inequality - uneven gains from trade • Pressure on wages and working conditions • Risks from global (external) shocks -Governments may limit the importation of products and services- making exporting unviable- so the firm may have to find other avenues to get its products to markets in other countriess- quicker routes into international market such as buying or merging with a firm already operating in a certain country. Internet companies may already be global.

What are the implications of economic growth on individuals?

-Types of jobs change- initial stages see agriculture moving into manufacturing - cause and effect of development- manufacturing processes ass more value than primary sector jobs, stimulating growth -Change in employment patterns will lead to ->Rural to urban migration ->Increased need for managers, expanding the middle class ->Increasing skill levels within the economy -Businesses can start up and grow that depend on increasing disposable incomes

Language- International Business

-Understanding other languages makes communication much easier and helps to cement relationships -Over-reliance on one language is also risky- may lead to miscommunication and less sensitivity to other cultures -Communication is much more than simple language- differences in the nature of it between high context and low context cultures LOW CONTEXT- North America and much of Europe- tend to say what they mean- in discussions what is said can usually be taken at face value- firms get down to business and view socialising as being for after the deal is done- documentation etc are relied upon during negotiations as well as after completion HIGH CONTEXT CULTURES- Arab and Asian communication- Saudi Arabia in Middle East for example, I agree can mean I hear you. This has big implications for conducting business. A seemingly positive response may simply be no, but in Japanese culture- a high context culture, they never use the word no in negotiations. Initial meetings are there to build trust and socialising is used to create relationships for the next stage of negotiations- very different for others

Why might emerging economies enjoy faster economic growth compared to most developed economies?

-Urbanisation process continues -Industrialisation - especially in East Asia and SS Africa -Proximity to markets growing in size -Access to low cost labour -Often good infrastructure- lots of ports available -Access to natural resources -Population growth -FDI -Workforce improve skills and become more productive -Per capita income growth= rise of middle classes and consumer society (allows people to spend more on both imports and domestically produced goods and services- thus, encouraging the growth of domestic firms with market power and allowing them to compete internationally whilst increasing the profitability of more developed economies and making the emerging market more attractive to new entrants- lots of demand -Technological innovation in many emerging markets (especially in Korea, China, India)

EXAM TIP GLOBAL COMPETITIVENESS QS

-Use basic concepts and definitions for small businesses! MNC's face problems and opportunities in trading in different currencies and comes down to supply and demand, pricing strategies, cash flow and managing risk -Competitive ad relied upon to grow is more complex- derived from same sources however as domestic firms and the same is true for threats- all businesses need suitable employees if businesses are to succeed and grow

In what way might businesses counter fluctuations in exchange rate?

-Use fixed contracts as a way to counter or overcome any changes in exchange rate- temporary changes in the rate will have a smaller impact -The price of raw materials is often set 12-18 months in the future- eg an importing business, in receiving a guaranteed high level of business, may create a fixed contract -Fixed contracts help to lessen the uncertainty about exchange fluctuations -Also means time lags between the change in exchange rate and the impact on business

Why may there be a discrepancy (compared to PPP)/ inaccurate GDP figure?

-Usually uses market exchange rates to compare between countries but foreign exchange markets are constantly changing- change rapidly over time, use figures over a period of time to draw reliable conclusions. -Goods and services tend to be more expensive in countries that are high-income, as a result GDP figures for those countries may overstate what people can actually buy there- prefer PPP.

Can China outstrip America?

-Wages are rising as economy develops- most of China's growth has come because it offers low wage manufacturing- MNC may pull out- question is whether enough higher added value manufacturing can be attracted to sustain overall growth -China's GDP overtaken US- if measured by Purchasing Power Parity(cost of living- prices in US significantly higher than in China) -Emissions are a major concern- lack of environmental legislation and regulation- are taking active steps GDP AND GDP PER CAPITA ARE DIFFERENT- GDP WOULD OUTSTRIP U.S BUT CHINA'S POP 4X U.S SO NOT GD PER CAPITA

What are the opportunities for business in Africa?

-Wealth in top few percent of pop- this wealth can be attracted by British retailers etc- high end, public schools etc -Middle class will begin to emerge -Consumer goods markets are beginning to mature- international brands beginning to make mark

How might the product life cycle be extended by selling in multiple markets?

-When a product reaches the decline stage, with falling sales, market saturation and a decline in profits, a firm may decide to leave market or extend -Moving production to new markets in order to reduce costs would allow the firm to increase margins or could explore selling to new markets -A product in the mature stage in one market may be at an introductory stage elsewhere and so the firm can sell a product in new market and extend -When doing this, a firm has to make a decision whether to modify or adapt the product for the new markets or whether to standardise it for global use -Lifecycles of products can vary considerably- fashion=shorter whilst luxury goods- longer ones ->Some products may defeat the curve - repositioning, add new attributes, sell in multiple markets, convince customers that a new offering is different, certain positioning can make it ageless- cartoon characters on simpsons

What are the factors to consider in trading blocs?

-Where to produce? locate in neighbouring country where costs are favourable and then ship goods across member countries -Where to sell? may view a trading bloc as one big market for goods and services- opportunities and also threats -How to enter the market? joint ventures or mergers or adapted according to opportunities presented by the FTAS or common market -Business Strategy? can export without trade barriers

EXAM TIP- MARKETING

-Wide range of knowledge and concepts included from course -Expanding immediately= economies of scale- one key benefit of lower unit costs achieved by operating on a larger scale- more purchases (bulk buying) or having one head office serving different markets. CONCEPTS TO INCLUDE: Ansoff Marketing Mix- 4p's Markets- Supply & Demand PED & YED- pricing decisions Recruitment- presence or lack of skilled staff Ethical Considerations Legislation The Importance of The Internet in Marketing

What are the key drivers behind economic development for the countries that have developed significantly in recent years?

-Willingness to accept inward investment from MNC's -More enterprising behaviour from local businesses -More stable government -Easier access to export markets due to improvements in communication and transport- globalisation

Cultural Differences- International Business

-Working across differing national cultures can add levels of complexity -Each step in conducting business needs to be carefully prepared for and considered to take differences into account and build trust -Companies need to think about each level of the business relationship- introductions (eg elaborate formal or informal procedures that have developed over time in terms of first meeting- can cause much offence), negotiations and communicating on a day-to-day level -Every country in every region will have its own norms governing instructions- important to conduct research before first meeting EG- Asian cultures, a person is expected to shake using both hands when first entering a room- business cards are also of prime importance - done with a great deal of formality- failure to treat business card with respect can cause offence

Why are some countries better at producing goods and services than others?

1. The relative opportunity cost of production for a good or service is lower than in another country 2. A country is relatively more productively efficient than another

Growth Rate of UK Economy

1.8%

What percentage does China and India have in the GDP growth figure for emerging economies?

40-50%

Life Expectancy

A figure indicating how long, on average, a person may be expected to live. Reflects quality of healthcare and social systems. Japan= highest

Gross Domestic Product (GDP)

A measure of economic activity, including all of the goods and services produced within a country in a year. Per capita= divided by the number of people in the country- shown as a percentage.

Purchasing Power Parity (PPP)

A measure of real growth that uses the price of purchasing a standardized basket of goods and services in order to compare prices across economies. -Good substitute for GDP - an investor has a good idea of what buyers in different countries can afford- what their overall welfare may be in real terms

Supply Chain Considerations- Is it in the best interests of the MNC to exploit the supply chain and child labour?

A multinational business cannot claim to be ethical firm if it ignores unethical practices by its suppliers- including Suppliers, Contractors, Distributors, Sales agents -Increasing complexity involved in global sourcing and logistics- may cause damaging protests -Some rare and valuable minerals are sources in Democratic Republic of Congo- conflict zones, illegal armed gangs etc- businesses reluctant to look closely due to costs of doing so -EXPLOITATION OF LABOUR- common throughout the world. A life as a 'modern slave' often begins when an individual in an LEDC see seeking work contacts a recruiter- charging employee fees to find them a jobbed once position is found they will be paid back- 'bonded labour'- binds worker to the employer until the hefty debt and interest is repaid CHILD LABOUR- many businesses who outsource production overseas rely on local suppliers who follow local traditions and norms, some of which are not acceptable practice in developed economies. -May be agricultural, manufacturing, in domestic service, types of construction, scavenging and begging-some may be trapped in forms of slavery in armed conflicts- may even be linked to organised crime- organised begging -In most cases, child labour has nothing to do with MNCs but is commonplace in local area businesses and on farms where young children are put to work as soon as able Child labour is unacceptable in Britain however there can be undesirable consequences- Bangladesh- stopped employing children in some factories, the result was 7000 young girls becoming prostitutes instead -Issue is not clear cut, banning forms of child labour in developing countries can lead to damaging families who rely on child's income as a key source and the loss may be devastating. May not be education and force children in worse circumstances -MNC's may locate in places where child labour is unacceptable or, like IKEA, help families to support their children by providing working mothers with a good wage and children an education whilst they work

Low-Context Cultures

Cultures such as those of North America and much of Europe, that tend to say what they mean. A communication style that relies heavily on explicit and direct language.

High-Context Cultures

Cultures, including much of the Middle East, Asia, Africa and South America, that are relational, collectivist, intuitive and contemplative. This means that people in these cultures emphasise interpersonal relationships. Developing trust is an important first step to any business transaction.

What is the effect of the exchange rate fluctuations on businesses?

Important for businesses that export or import goods or services -SPICED- Depreciation In Exchange Rate: Exports Cheaper- exporters could benefit as demand for exports is high as cheap- increased market share and more revenue from extra sales -Lower the buying power of the pound- higher price for raw materials- lower profit margin- so with the increase in demand, the cost of making the good is higher. May keep the price the same and take the hit, or raise the price in relation to the increased prices for the business + ensure quality is really high Appreciation In The Exchange Rate: -Exports More Expensive- will have an impact on the competitiveness of exporting firms -If an exported good to another country is too expensive, they may choose to buy elsewhere to keep the costs down. ->So the domestic firm may choose to keep its product competitive so that customers in certain country continue to buy it. ->EITHER- It could keep its price the same and ensure that its quality remains an advantage- even though the high price may cost it sales. Or it could lower its price for a certain market and make a smaller profit margin -The appreciation of the currency would cause the rising buying power of the pound, buying more raw materials imported for the same price- lower price than before to make products, lower variable cost- higher profit margin - may choose to decrease prices or maintain profit margin.

Infant Industry Theory

Infant Industry Theory recognizes that a level playing field (i.e. free trade) provides benefit to the stronger competitor and that may not always be beneficial to infant domestic industries. Using protective tariffs and taxes adds cost for the foreign competitor sales process, and while it may give the infant industry a chance to get started, it also tends to disrupt the economics of production and pricing as the industry grows. -Young or "infant" industries are weak and vulnerable to a variety of market challenges and economic pressures. For example, they usually lack a skilled workforce, efficient production processes, experienced managers, and established sales channels and market share even in their own domestic markets. During this start-up phase for new industries, young firms often find it difficult, if not impossible, to compete with the established international competitors- need protection until they can attain similar economies of scale -In practice, governments use a variety of tools, such as tariffs, quotas, and duty taxes, to keep international competitors from being able to match or beat the prices of a new or infant industry. These tariffs and taxes have the effect of increasing the costs to the competitor and giving the infant industry the chance to build an efficient operation and establish its presence in the market. During this period, the new firm or industry is given a chance to grow up. -At the same time, if tariffs are left in place too long, similar "protectionist" trade policies may be instituted by foreign governments, thereby limiting opportunities for growing firms to expand into those markets. As a result, Infant Industry Theory recognizes that these protections must be scaled back so these new industry adapts itself to produce, compete and survive on a level playing field in the international market.

What are the quantitative methods for choosing a production location (Return on Investment)

Initial cost of the move Any cost savings made each year compared to the existing site -It is assumed that after 5 years, the business will be relocating again so no cost savings taken into account after this ->PAYBACK- how long to recoup ->AVERAGE RATE OF RETURN- expressed as a % ->DISCOUNTED CASH FLOW- money worth less- the net present value of the cost savings falls further into the future it occurs. May not cover initial investment so would be unprofitable or may outweigh and be profitable

Differentiation

Rather than focusing on costs, differentiation is when a firm selects certain attributes of its products and services and tries to match these with specific customers. The business may then try to command a higher price for creating this differentiated product.

Infrastructure

The basic systems, facilities, services and capital equipment required for a country's economy to function, which might include its roads, communication systems and power services.

What are the factors to take into account when creating a foreign subsidiary (staying the same brand and moving) or buying an existing global player in that place?

*Brand Management ->Buying existing business is harder than subsidiary as business has complete control of what the brand is used for *Cultural Issues- may be a clash of culture with existing business but easier to work around as people already have the experience. Sub- difficult if don't understand traditions- create or move own culture *Time Implications- Mergers etc are quicker, however negotiations may take some time. Doing own= less pressure, do it in own time. *Cost Implications- Sub= R&D, building and running costs could be high etc. Existing- purchase price of the company may be high and integration costs have to be paid- redundancies however could be super profitable *Risks- subs- no foothold, barriers to entry, new to market- risky, takes time to establish the brand- bear all legal and financial risk. Existing- massive investment costs, job losses, big short term costs- possible damage to share price , disecons of scale- management control- culture conflict

What are some reasons why MNC's have low levels of public trust?

*Tax avoidance by MNCs- MNCs are accused of using sophisticated tax planning schemes to avoid paying taxes on their activities. A challenge of addressing MNC tax avoidance is that they operate across so many different countries *Exploitation of workers & supply chains- some MNCs are accused of exploitation of working conditions in developing economies in search of low production costs. The complexity of international supply chains makes it hard for MNCs to control & monitor all aspects of their production *Are MNCs damaging domestic firms? Uber is one of the fastest-growing MNCs and has faced significant resistance from national markets it has entered. However, in many national markets, domestic firms are proving able to compete effectively with MNCs -particularly in China

What is ASEAN?

- The Association of South East Asian Nations -10 member states : Indonesia, Malyasia,Singapore, Thailand, Laos, Cambodia, Vietnam, Vietenam, Phillipines, Brunei and Myanmor - Population of 600 million people living in the region -Regional peace and stability- social progress -Common market- promotes free flow of goods and services , investment, labour and capital -Free trade agreement with member states and and other countries such as China- and eased travel in the region

What are the different types of protection for IP?

->Patents for inventions ->Copyrights for literary works or computer programs ->Trademarks for brand names or designs

What is the push factor of competition?

-A rise or high levels of competition in the domestic market may force a business to sell abroad- new entrants who take market share -Competition may drive down prices due to lowered costs, or their may be a declining demand for a product- due to changes in tastes, availability of substitutes or superseding technologies -Result is lower revenues in the domestic market- incentive to pursue revenue elswhere -Competitors could be selling similar or sub products at a lower price or higher quality which may make selling the original product difficult or unprofitable -The business may change the product to meet the tastes of customers abroad -EG- mobile phone industry- highly competitive - all brands competing, business forced to differentiate or move to market where competition is less fierce for reasons of price, quality or novelty

Why is price important in the marketing mix?

-Actual amount the end user is expected to pay for a product. How a product is priced will directly affect how much it sells. -If product is priced higher or lower than its perceived value, then it will not sell -Important to understand how the customer sees what the business is selling- if positive customer value, then a product may be successfully priced higher than its objective monetary value -Also, if a product has little value in the eyes of the consumer, then it may need to be under-priced in order to sell. Price may also be affected by distribution plans, value chain costs and mark-ups and how competitors price a rival product

Cultural Differences In Russia

-Build personal relationships with partners- where there are contract disputes, there is little protection for the aggrieved party because of the time and effort needed to legally enforce the agreement - legal system is super difficult -Use local consultants- because of the rules of business have changed so much in recent years, it pays to have a good Russian consultant working with the company -Ethical behaviour in the UK is not always the same in Russia- eg it is traditional to give gifts to those with whom one wants to transact business in Russia -Be Patient- in order to get something done it takes months of waiting

Infrastructure- Factor affecting country as a PRODUCTION LOCATION?

-Adequate road, rail, sea, air transport systems so goods can be exported and imported easily?- need to support large production facility -Does the country have suitable premises and building where the goods can be manufactured -Reliable power systems are also crucial -Internet connection increasingly important- may be slow or unreliable ->Slows transportation if inadequately maintained- finished goods to customer and raw materials from suppliers -Some areas may be prone to natural disasters- breaks in supply for vital materials -Need to transport personnel to and from production facility and ship goods out of country- airports and ports -Railways- need them so bulky or heavy goods can be transported in large quantities -Quality of schools and hospitals- affecting quality of human capital

What are the benefits of using political influence to control MNC's?

-Can allow elected officials to challenge the power of businesses and to address issues of concern such as ethics and the environment -Can create, challenge and end a business

What are the push factors out of a country?

-Competition -Saturated Market

Give an example of when a political change has contributed to globalisation?

-End of communist China -Split of the Soviet Union

What are the export advantages of India over China?

-English is widely spoken -The outstanding top end of the education system turns out world class managers and software engineers

What are the advantages of Global Marketing?

-EOS in production and distribution -Lower average marketing costs- same to all -Power in the market as your brand is known -Consistency in brand image -Ability to leverage good ideas quickly and efficiently -Uniformity of marketing practices

What are the three different marketing approaches?

-Ethnocentric (Domestic) Approach -Polycentric (International) Approach -Geocentric (Mixed) Approach

What is the impact of MNC's on the local economy?

-Generally welcomed- new factories are likely to create employment, provide work for businesses in the supply chain, give a boost to the local economy and provide an opportunity for people to learn new skills. -Local labour and job creation- opportunity to work for a large MNC is welcomed and valued. Full time jobs with the possibility of training, regular income, financial security and the opportunity to build a career is very appealing. Particularly where unemployment is high. ->THIS DEPENDS ON THE TYPE OF BUSINESS- if specialised labour, they may use expatriot staff who have already been trained- in such a way, sourcing labour from elsewhere is unlikely to lower the employment rate significantly and would not benefit the local economy or people -Wages & Working Conditions- When large new business is opened, wages in the locality may rise. This is because the demand for workers in the local economy is likely to drive up rates. If unemployment is relatively low, and if other employment opportunities already exist in the area, wages are much more likely to go up. Also possible that the jobs created will have favourable working conditions- MNC's have a more modern approach business development- facilities new and up to date, adopting latest tech- working practices modern and efficient. Most adopt internationally recognised standards of health and safety and employee welfare. HOWEVER- may be increased congestion, pollution, disruption when improving the infrastructure -Local Businesses- positive impact, initially local businesses will be involved in the construction of the new plant- there may be jobs for builders, electricians and welders. Once up and running, need for supply of materials, components, commercial services and utilities. In area may see increase in trade, higher revenues and more profit. May also need to recruit more workers of their own to meet demand. People who take up MNC jobs would have increased disposable income to spendin the local area- increasing demand for local businesses in general- retailers, restaurants etc. -The competition to local businesses if directly competing could put pressure on them to make improvements- eg longer term benefits such as more efficient and more innovative local enterprises -The local community and environment- residents are likely to welcome provided the benefits outweigh the drawbacks, employment opportunities and a boost in local economy- may also lead to ->Improvements in infrastructure- MNC's may invest some of own money to help develop roads, electricity, water and gas suppliers, schools, hospitals and other public amenities. Also may help to build trust with the community, but also better infrastructure is likely to improve the quality of human capital in the area. Better roads and improved transport links ->Contributions to local government taxes- pay rates to the authorities- the money can be used by local governments to help fund spending in the area ->Help in local communities- some MNC's make an effort to build strong links with local community- participate in local cultural or sporting events- give money to local charities, organise fundraising events or give locals access to the company's facilities.

What are the benefits of specialisation?

-Increased productivity and output= reduced average costs and economies of scale -As more resources devoted to specific industry, rather than being spread out, the scale of production can be increased to gain EOS -Gives comparative advantage over the next best country -The increased productivity will lead to GDP growth and increasing sales will boost economic growth -Results in greater efficiency because focus on the skill and speed with which a task can be done- saving time

Cultural Differences In India

-It is important to been time for meetings -Personal questions should not be asked unless the other individual is a close friend or close associate -Titles are important, so people who are doctors and professors should be addressed accordingly -Public displays of affection are considered to be inappropriate, so one should refrain from backslapping or touching others

What are the 2 main forms of foreign investment for international companies?

-Joint Ventures -Cross border mergers or acquisitions

KFC EXAMPLE OF CULTURAL/SOCIAL FACTORS

-KFC- FINGER LICKING GOOD- EAT YOUR FINGERS OFF

What are the 3 measurements that compose an HDI index?

-Life Expectancy -Mean Years of Schooling -Gross National Income Per Capita

What impact do trading blocs have on businesses? (2)

-May put domestic producers out of business -More competition- saturated market? -Often easier trade

Why do some countries try to limit imports?

-Population will purchase goods and services from the businesses in that country and therefore encouraging domestic businesses and keeping smaller businesses running

Why are tariffs imposed?

-Raise tax revenue- if a country produces no oil, levying tax on oil imports will raise money as importers have no alternative but to pay import tariff- price inelastic -Environmental reasons- a tariff could be placed on goods which may have negative externalities -Protectionism- to allow domestic firms and infant business a chance to grow without being swamped by international competitors. It also protects the balance of trade.

What are the general disads of offshoring and outsourcing?

-Security breach? info leakages -Loss of control and communication issues -Lack of quality assurance- not doing it -Loss of jobs in home country -Reliable -Ethical concerns- child labour

What are the advantages of using the Geocentric Approach?

-Tailoring products to local tastes and needs= higher sales -Maintain and promote global brand name

What are the main methods of protectionism?

-Tariffs- import taxes -Quotas- Limit of number of imports allowed -Domestic subsidies- a gov payment to encourage domestic production by lowering their costs -Government Legislation- different legal and technical standards and different labour market regulations.

What is a particular positive of non members of trading blocs?

-The encouragement of inward investment in non EU countries -such as Toyota establishing themselves within the tariff wall

What are limitations of HDI?

-The standard HDI measure does not take into account qualitative factors, such as cultural identity and political freedoms (human security, gender opportunities and human rights for example) -The GDP per capita figure - and consequently the HDI figure - takes no account of income distribution. -If income is unevenly distributed, GDP per capita will be an inaccurate measure of people's monetary well-being -Purchasing power parity (PPP) values used to adjust GDP data change quickly and can be inaccurate or misleading

Considerations When Assessing a Country as a Market- BIG QUESTION

-What type of good is it? Luxury or necessity? Inferior or normal good? PED inelastic or elastic?-- better for inferior goods if low DI -Price of the product? In relation to income levels? -Spread of wealth across the population-middle class? or just very wealthy or very poor? -The costs associated with extended lengths of time setting up business- ease of doing business- may be cheaper in tariffs and quotas but more expensive in this way -Has the infrastructure costs decreased because the country has already developed this? -Are there benefits of an extended market if moving into a certain country?- eg ease of transport across all areas of the US. -Growth potential in years to come- long term? -Population number? Vast pop= high demand? -Suppliers already established in China- strategies sorted? LOOK AT SOME CASE STUDIES

EXAM TIP-Protectionism

-When looking at the effects- look at short term and long term short term protectionism= reduce imports and help domestic industries long term protectionism= stifle competition, protect ailing and inefficient industries, provoke retaliation and possibly lead to a trade war

Best Practice Transfer

-Where a company brings the good working practices and training to build skills in the new workforce of the country- this is unlikely if the work is low-skilled.

What has the growth rate of the UK averaged at for the past 200 years?

2.25%- size of economy doubles every 30 years or so.

What is the average economic growth of the UK?

2.5%

How many million people are victims of forced labour?

21 million

What is the growth rate of Bangladesh, China, India (average annual)?

3.8%- Bangladesh 9.4%- China 5%- India

Corporate Social Responsibility (CSR)

A business's concern for the welfare of society. -A simple rush for short-run profits if often both damaging in the long run and ethically wrong -CSR is a way of recognising that a company has a variety of stakeholders, each of whom have different objectives -CSR obliges businesses to consider more than just profit, to take account of the interests of workers, suppliers, customers and the wider community as well as stakeholders -They are generally expected to respect the environment, to treat people fairly and to give something back to the local community -Some businesses treat CSR as a public relations exercise, giving more priority to looking good than to doing well. -Improve brand image- Innocent -Cost leadership/focus is not suitable- as have to pay higher wages, good conditions, R&D costs for inventive ways of disposing of waste COOP- fairly traded own brand products- premium price M&S- show responsibility

Glocalisation

A combination of the words 'globalisation' and 'localisation' and involves the development and sale of products to customers around the world which reflect specific local customs, tastes and traditions. -Personalizing where required to local market but trying to keep marketing approaches consistent across all markets -Adapting to local expectations in order to succeed THINK GLOBAL, ACT LOCAL- aim to reach potential customers around the world but business must take local tastes and customs into account to be successful, and be sensitive to the specific preferences of the different markets in which they want to operate in

Embargo

A complete ban on international trade- usually for political reasons. -An extreme form of quota is an embargo- imports are completely banned from a country -Most embargos are imposed for political reasons A number of embargos exist between Russia and the EU as a result of Russia's involvement in the war between Ukriane and Russian speaking Rebels

Cost Leadership

A concept developed by the economist and Harvard Prof Michael Porter, used in business strategy. It describes a way to establish the competitive advantage and essentially means the lowest cost of operation in the industry.

Trade Bloc

A group of countries situated in the same region that join together and enjoy trade free of tariffs, quotas and other forms of trade barrier.

Trading Bloc

A group of countries that has signed a regional trade agreement to reduce or eliminate tariffs, quotas and other protectionist barriers between themselves. Intergovernmental agreement to reduce regional trade barriers. Depending on how closely the members wish to integrate their economies they may form different types of trading blocs such as free trade areas, customs unions, common markets and full economic and monetary union. Trade blocs act as a single market inside the group and a customs union outside the group.- common protectionism outside but free trade inside

Subculture

A group of people with common interests or hobbies. -Specific range of people- niche

Multi-National Company

A large corporation with activities in different countries- when the potential competitive advantages such as ownership of resources, locations and internal organisation combine, a firm may benefit from becoming a multinational and invest directly in other countries -Sometimes referred to as a transnational corporation- owns or controls production or service facilities in more than one country- usually 2+ MNE- Multi National Enterprise is the same thing MNC

Single Market

A market where almost all trade barriers between members have been removed and common laws or policies aim to make the movement of goods and services, labour and capital between countries as easy as the movement within each country.

Common Market

A market where goods, labour and capital can move freely across the member states; tariffs are generally removed and non-tariff barriers eliminated, or at the least reduced.

Reverse Engineering

A method of analyzing a product's design by taking it apart.

Import Quota

A physical limit on the quantity of imports allowed into a country. -Imposing a limit on the quantity of goods imported will increase the share of the market available for domestic products

Intellectual Property

A product that is a creation of the mind, such as invention, literary work or artwork, that the law protects from unauthorized use by others. Types include patents, copyrights and trademarks.

Specialisation

A production strategy where a business focuses on a limited scope of products and services. This results in greater efficiency, allowing for goods and services to be produced at a lower cost per unit. -In turn, allowing businesses to reduce prices or to increase profit margins- both of which lead to business growth -Businesses should specialise in what they do well and can 'add value' to make a profit abroad -Increases the speed and skill with which a task can be done and also saves time thereby improving efficiency- as the market becomes larger, the opportunities for specialisation become greater and narrower. Eg- India specialises in IT due to a huge number of IT graduates from its universities- this means they can set up call centres for overseas companies staffed by English speaking grads for a fraction of the wage required in UK

Code of Conduct

A set of rules outlining the proper practices of an organisation that contributes to the welfare of key shareholders and respects the rights of all affected by its operations. -These are adopted by the business as a means of how to respond should an ethical issue arise- guide employees in making decisions which fit with the moral principles of the firm -CSR policy brochure to stakeholders

Rules of Origin

A system of allocating certificates whereby a defined amount of a product or service must be certified as being created within that region.

Transfer Pricing

A system operated by MNC's. It is an attempt to avoid relatively high tax rates through the prices which one subsidiary charges another for components and finished goods.

Concession

A thing that is granted, especially in response to demands; a thing conceded. A foreign government being influenced by MNC's to gain concessions.

Preferential Trading Area (PTA)

A type of trading bloc where certain types of products from participating countries receive a reduced tariff rate.

Customs Union

A union where member states remove all trade barriers between themselves and members adopt a common set of barriers against non-members.

Push Factors

Adverse factors in the existing market that encourage an organisation to seek international opportunities. Business feels that it has to expand due to domestic market issues. ->seek overseas markets where the business can sell their products ->A firm may be looking to overcome weaknesses in existing market or look to lower costs -Push factors include rise of competition- direct competition (reduced profits) and saturated markets, low growth opportunities, end of product lifecycle at home- extension strategies exhausted and decline stage

Joint Venture FDI

An agreement between two or more companies (may be from different countries- FDI) to share a business project. Collaborative agreement to invest in a business and share ownership and control.

Regional Trade Agreement (RTA)

An agreement made by two or more countries within a geographical region, which is designed to facilitate trade by bringing down trade barriers. Several arrangements include several varieties of agreement to remove various barriers- shaping patterns of business expansion

Protectionism

An approach used by a government to protect domestic producers. In order to protect domestic jobs and industries, governments may use protectionist policies such as tariffs (a duty on imports) or quotas (a limit on number of imports) Other trade barriers may include gov legislation where strict regulations on imported goods can restrict the amount entering the country Subsidies- giving subsidies to domestic producers- such as a grant or interest free loan- this can lower production costs (they have to spend the money on this) and help improve innovation, which can help a domestic firm be more competitive when trying to export overseas

Economic and Monetary Union

An economic union that uses a common currency.

Multiplier Effect

An effect in economics in which an increase in spending produces an increase in national income and consumption greater than the initial amount spent.

World Trade Organisation

An international organisation that promotes free trade by persuading countries to abolish tariffs and other barriers. It polices free trade agreements, settles trade disputes between governments and organises trade negotiations +ensures trade flows smoothly, predictably and freely as possible.

Inward FDI

An investment into a country by a company from another country.E.g. an overseas business decides to build a manufacturing factory in the UK A foreign retail firm invests to open new stores in the UK

Outward FDI

An investment made by a domestic company into companies in other countries. E.g. an UK business expands into an overseas market by opening a new production facility A UK business completes a takeover of a business based in another country

EXAM TIP- Reasons for JV or Global Mergers

Assess or Evaluate- both require you to consider a variety of factors and make judgement -Whether the merger or venture has been a success or failure depending on the data provided about the business involved -Might bring in another business merger that was more successful if appropriate data is provided -May be asked to consider the reasons- consider the main influences from the data provided and then make a judgement about the most important influences or those that have the greatest effect -May be also asked to assess the costs and benefits of a particular type of merger or JV- consider the main costs and benefits to the firms involved and make a judgement on which have had the most effect - then indicating whether the costs outweigh the benefits.

EXAM TIP- ASSESSMENT OF COUNTRY MARKET- Exam Technique

Assess- what factors would influence and which is most important, whether it is worth exporting or setting up business in -Weigh up and come to a conclusion backed up by judgement -20 Markers- 2 figures and chains of reasoning in each paragraph

Strategic Alliances FDI

Collaborations created when firms contract to share resources (often intellectual property) or certain skills (such as cultural understanding or managerial expertise)- Airline alliance- member airlines operations and booking done through a central hub- the other business.

What does BRIC stand for?

Collective group of emerging economies. Brazil, Russia, India, China= trade agreement with each other

What does MINT stand for?

Collective group of emerging economies. Mexico, Indonesia, Nigeria, Turkey

Transnational Companies/ Multi-National Companies

Companies that own or control production or service facilities outside the country in which they are based.

Multi-National Corporation

Companies that produce and sell their goods and services all over the world- have retail or production facilities in more than one country.

What are the problems doing business with Africa?

Corruption-costs can rise for businesses-for licenses and permission to do business, companies that value CSR cannot condone conducting business in corrupt manner Poor Infrastructure- electricity, road, rail and waste disposal facilities -Investor concern about stability- gov collapse, inconsistent application of the rule of law, health epidemics, terrorist insurgents -Major investments take time to pay off and the continent is changing so rapidly which brings uncertainty- investors hate- several problematic factors working together

Global Niche Market

Customers who live in more than one country and have particular needs that are not met fully by the global mass market. SMALL SPECIALISED PARTS OF GLOBAL MARKET- SUBSET of global -Still a specific range of people but they live in more than one country- Subculture -Within an individual country these markets may be relatively small, but combining them over several countries provides a large enough market for a business to enjoy significant demand and be profitable -Business will need to develop a marketing strategy (4 p's) which is suitable for global niche market -Highly specialised and is characterised by very loyal customers and premium prices- adding value -High spending on R&D and innovation -PROFIT OVER MARKET SHARE -KEY TO NICHES- It doesn't matter whether the customer who is prepared to pay a higher price is in the home country or abroad -Global niches exist where the local market for a product is so small to be profitable but on a global scale the market is very viable -These trends may be present due to international perceptions about certain goods being the same- eg agreement that Mercedes is a good car -FIRMS LARGE AND SMALL- may exploit these niches as part of global marketing strategy -Niches are particularly present in high-end goods or high-tech medical or computing goods

What is the Ethnocentric Approach?

DOMESTIC- overseas markets are seen as identical or similar to domestic markets and approach assumes that what is good for domestic market is good for global. Little or no attempt to adapt the product for different markets Success story in one can translate to all other countries in which it operates -Foreign operations are subordinate to domestic markets -Products sold without adaptation -Ethnocentrism= belief in superiority of one's personal ethnic group EXAMPLES: -Pizza Express -Apple -Rolls Royce

EXAM TIP- CULTURAL AND SOCIAL DIFFERENCES

Define what I mean by culture in particular contexts and also need to show a balanced understanding of how a variety of cultures and societies may differ from your own.

Give three factors a business might take into account when choosing a country as a market?

Disposable Income Exchange Rates Political Stability Ease of Doing Business

Global Supply Chain

Dynamic worldwide network when a company produces or uses goods or services from overseas- people, info, processes, resources involved in production.

Franchising

Establishing a long term co-operative relationship whereby one party, the franchisor, contracts with another, the franchisee, to run its business. Mcdonalds is a well known example of this as a franchise.

Ethical Trade

Ethical trade means that retailers, brands and their suppliers take responsibility for improving the working conditions of the people who make the products they sell. Aims to ensure the avoidance of ethical issues in global supply chains. -Most of these workers are employed by supplier companies around the world, many of them based in poor countries where laws designed to protect workers' rights are inadequate or not enforced.

What is the EU?

European Union- common market (AKA a single market)and also an economic and monetary union- use a common currency other than Britain- the euro- not complete, have separate currencies, also seem to be culturally distinct - separate languages and customs -Free trade between member countries should be as easy as trade within a country- no protectionism-Businesses do not have to send their goods through customs controls or pay taxes when taking goods from England to Scotland- like that. Since 1973- no taxes or tariffs or customs controls

International Trade

Exchange of goods or services. Exporting (selling abroad) and importing (buying from abroad). Exports and imports generate revenue for businesses in different countries and contribute to business growth. • Trade doesn't take place between countries, it takes place between the economic agents of that country, such as businesses, governments or consumers • When conditions are right, international trade brings benefits to all countries involved and it can be a powerful driver for sustained GDP growth, employment and rising living standards -A firm can import and export directly - whereby it distributes and sells its own products - usually by hiring someone to be its local agent -Can also operate indirectly - getting another firm or person to prepare the documents and take on all of the responsibility for selling and distributing the products or services for them -Firms may expand abroad in stages- gradually increasing involvement in foreign markets as they gain knowledge and experience

Exchange Rates- Factor affecting choice of business as a MARKET

Exchange rates fluctuate -Although currencies may gain or lose strength in the long term, perhaps dependent upon long-term economic performance, the volatility of exchange rates makes them seem a factor that is hard to assess usefully -Exchange Rates- are unlikely to affect a decision as to whether to enter a new market - important consideration -Businesses may not be concerned with short term fluctuations, only if overall trend is undesirable -Eurozone countries enjoy a fixed rate -Businesses may not be concerned about short term fluctuations unless overall trend is undesirable -If a business was going to build in another country + pound was appreciating, the overall cost of purchase may be lower over time -Protection- from adverse movements in price of currencies- taking out insurance to protect financial loss. Using financial instruments to hedge against risk -EG- Mexican Peso appreciated to British Pound >This would make imports more expensive for Britain and exports to Mexico cheaper >Mexico would have cheaper imports and exports out of the country made dearer >Mexico buy more goods if we are exporting as it appears cheaper to them- therefore exporting firms would benefit

Pull Factors

Factors that entice firms into new markets and are the opportunities that businesses can take advantage of when selling into overseas markets. Business finds a market attractive- growth Common attractions are: -New or bigger markets- emerging economies -Can exploit competitive advantage in new markets -Make marketing appealing to huge customer base -Lower-cost or secure resources such as minerals, land or labour -Lower cost of transportation- cheaper to move abroad than import certain resources -Technological expertise- including research facilities -Managerial or financial expertise -Organisational skills -Assets such as brands, patents or other intellectual property -Product lifecycle may be intro stage or growth in another country- opportunities A firm may choose these factors as they help achieve E of S or spread its risks.

Barriers to Entry

Factors that make it difficult for a company to enter an industry or type of business and compete effectively. These can include the incumbents' high capital investment and strong economies of scale, restrictive government policies, and labour unions.

Subsidy

Financial support given to a domestic producer (exporting producers) to help compete with overseas firms- fierce competition with imports -Such as a grant or interest free loan, tax breaks- this can lower production costs and increase supply(they have to spend the money on this) so can make the goods cheaper and help improve innovation, which can help a domestic firm be more competitive when trying to export overseas. -Forces equilibrium price down- if given to exporters it makes it easier for home businesses to break into foreign markets -May contravene free trade agreements- influence the flow of exports and imports -This artificially raises the price of foreign goods relative to domestic goods therefore reducing demand for them -Keeps jobs KEY DOWNSIDE- become reliant on subsidies so keeps industries in economy, not very efficient Eg- movement of production to Mexico as subsidies on Mexican sugar mean that Mondelez (the manufacturer of oreos) would benefit

Where does the UK mostly export to?

France Switzerland US Germany A lot going out to Europe

What is meant by Free Trade Agreements?

Free trade agreements are where a group of countries make the decision to abolish any barriers to trade such as tariffs and quotas that might otherwise restrict the imports and exports into and out of a country. Free movement of goods and services.

How is a country's economic growth measured?

GDP- Gross Domestic Product

What is the difference between GNI and GDP?

GNI measures all income of a country's residents and businesses, regardless of where it's produced. Gross domestic product measures the income of anyone within a country's boundaries. GDP measures production while GNI measures income

Pressure Groups

Generally voluntary organisations that operate at all levels of society, including international levels and aim to change either political or commercial decision-making. -A group that tries to influence others viewpoints and decisions to align them with their own- influence public policy in the interest of a particular cause. -Either influencing the business or the government

What is the difference between Glocalisation and Localisation?

Glocalisation- development and sale of products to customers around the world which reflect specific local customs, tastes and traditions Localisation- Strategies that adjust the products to fit with target customers.

Exports

Goods or services that a firm produces in its home, but sells in a foreign market. EG goods and services go out of the UK and money comes into the UK.

Factors of Production

Goods, labor, and capital The three groups of resources that are used to make all goods and services A common/ single market enables this.

Competitions Policy

Government policy that exists to promote competition and ensure that firms don't abuse their market power, do not attempt to fix prices or use pricing strategies to drive out competition, and do not collude against other producers or the consumer. ->So markets operate as efficiently as possible

Gross National Income Per Capita (GNI)

Gross national income is a measurement of a country's income. It includes all the income earned by a country's residents and businesses, including any income earned abroad. Divided by the population. Relative wealth of the population

Stakeholders

Groups or individuals who can affect or be affected by the actions of a business.

What are the key differences between High Context Cultures and Low Context Cultures?

HIGH: -Establishes social trust first -Value personal relations and good will -Agreement by general trust -Negotiations slow and ritualistic -Don't often say exactly what they mean LOW: -Get down to business first -Value expertise and performance -Agreement by specific, legalistic contract -Negotiations efficient as possible -Blunt and say it how it is

What is the main benefits of being a multi-national corporation?

Help an enterprise to develop competitive advantages that are not open to single-nation companies: -Access much bigger economies of scale- global sourcing, better prices from different places as buying in bulk- cheaper -More scope to find the best quality sources at the right prices -Global operations allow companies to get closer to their international customers- both before and after sales -Can tap into a much bigger range of knowledge and scope for innovation -Diversify risk

What is the Polycentric Approach?

INTERNATIONAL- -Businesses adapt their product to the local markets in which they plan to sell the product- eg Coca Cola- makes product sweeter for some markets to take into account local tastes -This involves developing and marketing different products for the demands of the local customers in different markets -Each host country is unique -Each subsidiary business in each country should develop its own marketing strategy -Polycentic= having more than one centre -Spread out the appeal of their products and services among multiple countries- broaden operations and focus on sales outside of home country EG- Car manufacturers adapt cars and model names to meet the expectations of their local market Unilever adapts many of its products for each individual market

Economies of Scale

Increasing the scale of production leads to a lower cost per unit of output. Increasing the size or speed increases the efficiency and lowers costs (Savings facilitated by an increased level of production)

What is the pull factor of economies of scale?

Increasing the scale of production leads to lower cost per unit of output. If a factory were to increase its size, many of its fixed costs would decline relative to output. -The firm could buy supplies in bulk, usually at a discount- standardisation + global supply chains -It could apply relatively expensive technology to automate its processes and train its workers in ever more specialist tasks -Beyond a certain size however, unit costs can rise and resources may be spread too thinly- diseconomies

What are the threats/drawbacks/risks of globalisation?

In UK: -Threats to the manufacturing industries- low cost competition and 'dumping'- cheaply made and put into UK -Unemployment -Social tensions from migration (language problems etc see issues with going global) -Inequality: Globalisation has been linked to rising inequalities in income and wealth. Evidence for this is the growing rural-urban divide in countries such as China, India and Brazil. This leads to political and social tensions and financial instability that will constrain growth. Many of the world's poorest people do not have access to basic technologies and public goods. They are excluded from the benefits. • Inflation: Strong demand for food and energy has caused a steep rise in commodity prices. Food price inflation has placed millions of the world's poorest people at great risk. • Vulnerability to external economic shocks - national economies are more connected and interdependent; this increases the risk of contagion i.e. an external event somewhere else in the world coming back to affect you has risen / making a country more vulnerable to macro-economic problems elsewhere • Threats to the environment: Irreversible damage to ecosystems, land degradation, deforestation, loss of bio-diversity and the fears of a permanent shortage of water afflict millions of the world's most vulnerable • Race to the bottom - nations desperate to attract inward investment may be tempted to lower corporate taxes, allow lax health and safety laws and limit basic welfare safety nets with damaging social consequences • Trade imbalances: Global trade has grown but so too have trade imbalances. Some countries are running big trade surpluses and these imbalances are creating tensions and pressures to introduce protectionist policies such as new forms of import control. Many developing countries fall victim to export dumping by producers in advanced nations (dumping is selling excess output at a price below the unit cost of supply.)

What are the top three most attractive destinations for off-shoring?

India China Malaysia

Infrastructure- Factor affecting choice of business as a MARKET

Infrastructure describes the services needed to make modern life function: roads, railways, running water, reliable electricity, WiFi connection. The basic systems, facilities and capital equipment required for a country;s economy to function. Transport networks and basic services are crucial for entering market- the speed with which goods can be transported has a major operational impact, while for service providers as well as manufacturers- basic utilities are key -This is crucial if G&S are to be made and delivered to buyer, with good levels of communication and transport links- affect other parts of distribution chain -If undeveloped or unreliable, (incomplete road networks etc), costs may rise for company in terms of production and operating costs -Delay or failure to deliver can lead to lost sales and high costs, making the market less attractive to businesses -Communication is crucial- businesses need to coordinate production, sales and distribution and this is best done electronically- internet coverage required

Foreign Direct Investment (FDI)

Investing by setting up operations or buying assets in businesses in another country. Becoming a multi-national firm. Inflow of money from abroad resulting from it EG- outsourcing, new outlets or takeover/joint venture -Allows the firm to grow organically and externally- buying=external, building= organic and collaborating= external- -Method of expansion into other markets -FDI creates stable, direct and long-lasting links between economies- encouraging the transfer of technology and know-how between countries- allows the host economy to promote its products more widely in international markets -Important in development of the economy of a country -Most complicated and expensive form of involvement in a country- also the most risky -Far more than mere 'capital', it is a uniquely potent bundle of capital, contacts and managerial and technical knowledge - cutting edge of globalisation -The country getting investment= increase GDP and econ growth- gov's often make GDP look good to attract investors -The United Nations considers FDI to occur when a firm takes an equity stake of more than 10% in a foreign enterprise -Not the same as a foreign portfolio investment- which refers to holding stocks or bonds -Main identifying aspect if CONTROL- preference over exporting or licensing -Firms engaged in FDI used to come mainly from developed countries but the number and size of MNC's coming from emerging market countries such as Brazil is increasing.

What is an example of an MNC which has a status and revenue higher than the GDP of the nation itself?

Ireland and Apple- host nation cannot really afford to upset the wealthy MNC in their country- brings so much money into the country.

Ex-patriot

Is a person temporarily or permanently residing in a country other than their native country- labour from the company's home country moving abroad to work.

Quaternary sector

Jobs that deal with the handling and processing of knowledge and information.

Despite the similarities, why is China ahead of India in faster growth?

Largely, as result of investment in construction and infrastructure, allied with huge export growth- manufactured goods- high proportion of high tech products ->Gov spending- households, schools, hospitals, railways- spending on these areas helps to reinforce the growth path on which the Chinese economy continues to travel ->FDI- building factories to make use of the low wage costs India has lagged on this kind of fixed capital formation

What is the most dangerous place for kidnapping?

Latin America

What is the Geocentric Approach?

MIXED Business may use a combo of ethnocentric and polycentric marketing approaches- used by many multi-national corporations. The strategy is to maintain and promote global brand name, but tailor its products to local markets -May have some benefits of a standardised approach- E of S, whilst also catering for the needs of individual markets to max sales -Worldwide approach- operations become global- management establishes manufacturing and processing facilities around the world in order to servce the various regional and national markets through complicated but well-coordinated system of distribution network McDonalds is a good example of this- maintains a global brand but adapts the menu for each country. Making sure the BigMac tastes the same in every country but provide specific food for specific cultures and tastes

What is the most popular country for manufacturing?

Malaysia

What does it mean by a figure adjusted to purchasing power?

Means that the value of each country's GDP has been altered to take account of differences in the cost of living between different nations

Trade Barriers

Measures designed to restrict trade- tariffs/ quotas.

Ethics

Moral rules and principles of behaviour should guide members of profession or organisation and make them deal honestly and fairly with each other and with their stakeholders. -Considerations of society- MORAL RIGHTS & WRONGS -Respecting human rights and local traditions but avoiding corruption- (using public power for personal benefit) -Govern behaviour -Trade off between profit and ethics - how ethics may affect pay and rewards -International level- ethics may or may not be reflected in a country's laws or regulations. If establishing in a country, business has to work within the INSTITUTIONAL FRAMEWORK of both the home and host country -Consequently, may be acting within the law in one country but this varies- even if matching the ethics of home country or abroad its activities could breach the ethics of its domestic base or new country.

Cross-Border M&A's

Most M&A are actually acquisitions with 90% of cross border ventures involving the purchase of the entire target business. This is the main way that businesses undertake FDI.

Why are international firms at such an economic risk?

Most serious long term risk is that the strategy of locating in a low-cost production area is undermined by the appreciation of the country's currency- if costs of production are low in a country and cost savings could be made- appreciation of the currency would erode the low-cost advantages -Threatens future cash flows -and this forms the basis of a business's overall value- consequently managing economic risk= careful analysis of political, regulatory and cultural environments affecting the currency over time

Name Three Trading Blocs

NAFTA ASEAN EU

Government Incentives- Factor affecting country as a PRODUCTION LOCATION?

National governments may well be keen to attract foreign companies to set up production facilities due to: >support of economic development >job creation- local employment >A boost for local suppliers >Increasing skills levels among local labour force >Extra tax revenues >Increased income >Potential for a positive impact on the balance of payments In order to attract businesses to their country, governments will use a variety of possible incentives such as (usually tax related financial incentives- tax holidays etc) -Grants to help purchase land and machinery -Tax breaks -Lower rates of company tax -Interest free loans -Cheap land -Investment in local infrastructure -Investment in local training

What is organic growth as opposed to JV and Global Mergers?

Naturally expand- -Opening up new outlets -Export Products -License Products These methods are slow process- to rapidly increase revenue and profit, businesses may choose external growth - merge, acquire or JV- to become more competitive and generate significant returns

Greenfield Activities

New factories, power plants, airports which are built from scratch on greenfield land. ->The business may not have been able to collaborate or find another firm to buy or where it is too expensive ->Many local governments may prevent certain acquisitions in order to protect competition

Infant Industries

New industries that have yet to establish themselves.

Non-Tariff Barriers

Non tax methods of increasing the cost or reducing the volume of imported goods. These practices such as giving subsidies to local firms, putting numerical limits (quotas) on imports and creating rules about how much of product must be made in the country

What is NAFTA?

North American Free Trade Agreement- Canada mexico and US free trade zone -Covers environmental and labour issues as well as trade and investment -Recent American protectionism may have an impact on the rest of the countries. Free trade zone- eliminate tariffs- treat as if domestic investors - do not share a common external trade policy- still negotiate independently with countries outside trade bloc

What is the country highest on the HDI index?

Norway Uk Cuba

Why might Outsourcing be controversial?

Not as controversial as off-shoring, -Reliance on third parties can leave firm vulnerable through loss of expertise or knowledge -Parties' interests may not remain aligned so efficiencies sought by shifting the jobs are not as great as expected -Poor communication issues- disruptive and indirectly expensive to the business

What is the difference between off-shoring and out-sourcing?

Offshoring- shifting of JOBS to another country (work done overseas) - moving manufacturing or service industries to a location with lower costs eg UK- call centres in India- well educated, good english, employed on low wage and long hours (cheaper). This reduces costs and the business can hire workers with particular skills -Outsourcing- function or project to specialist external provider- does work for us -Many large firms outsources info technology or payroll functions, accounting etc In turn reduces costs, specialises in areas of the business (the business can focus on core competencies rather than support functions) and improve speed, flexibility or quality, comply with laws and regulations

What are the types of integrated economy (Regional Trade Agreements- trading bloc forms)?

Performance/Preferential trading areas- countries agree to give lower tariffs on certain trade- beginning of integration- over time may become closer Free Trade Area- eliminate trade barriers between themselves but continue to operate trade barriers to non-members. In order to protect the region- countries may use a system of allocating certificates (rules of origin) for it being created in that region Customs Union- eliminate trade barriers between themselves and establish uniform (common set of) barriers against non-members and a common external tariff- when a product is shipped from outside union only one set of rules apply and then the product can move freely throughout the countries in the union Common Market AKA Single Market- free movement of factors of production (people and capital) across national boundaries, tariffs are generally removed and non tariff barriers eliminated or at least reduced - workers can reallocate without restriction- must work together on development of policies. Single market- as easy as movement in the country between countries- borders, standards and taxes- The EU - single market and also an economic and monetary union Monetary Union- Eurozone- common market that also have a common currency - international bank An Economic Union- A monetary union which also provides for the unification of the members general objectives in respect of economic growth and harmonization of monetary, fiscal and other policies- closer ties with economic, political and cultural aspects.

Place

Place or placement has to do with how the product will be provided to the customer.

Political Stability- Factor affecting choice of business as a MARKET

Political decisions and events which have a significant impact on the business environment and can cost investors some or all of the value of their investment. -Covers issues such as political instability, tax regulations, labour regulations, government bureaucracy, corruption. The level of political stability is vital in the planning process for any business. -The more stable and calm a potential market's political climate- free market friendly, the more confident a business will feel about forecasts of its future performance in that market. -Some firms will favour stability over other factors- while more entrepreneurial businesses may be willing to accept the risks involved in instability if other factors make a market attractive. -A business needs to risk-assess the likelihood of issues such as- nature of gov + relationship with business -Relationship with major national institutions etc -Legal orientation -Future elections -Could be corruption and instability which may be difficult to gauge when entering a market but can look at stat measurement websites

Ubiquitous

Present or existing everywhere- good to use in Marketing Strategy Unit.

What is the application and adaption of the marketing mix to suit global niche markets?

Product- global nice products often place an emphasis on quality- eg luxury products which are exclusive and desirable- differentiation from standard products to meet needs of specific customers Price- Niche- charge higher prices by providing a product to intended for a mass market- charge a premium for differentiation Promotion- strategies to promote global niches are often based around the brand name and reinforcing the exclusivity of the brand, and need to be more targeted than mass market promotion. Consideration for language differences that might exist- sometimes the product needs to be rebranded if the name has completely different meaning. One problem is that this need to be sensitive to national and cultural differences is that promotional costs will be higher, and this may impact on price and ultimately competitiveness Place- serving niche markets makes distribution channels more selective and specific so often careful how they distribute product. Particularly important where exclusive brands are involved- networks of exclusive dealers are a common method of selling products to global customers. Advantage in terms of image.

Naming and Shaming

Publicizing behaviour that is considered to be unethical as widely as possible and thereby threatening a business's reputation.

Taxation Policy

Raising or lowering taxes on business or individuals- used to raise the revenue of a country. Different countries set different levels, which if low can act as an incentive for FDI.

Cultural Diversity

Range of different societies or people of different origins, religions and traditions all living and interacting together. -Valuing diverse culture is all about understanding and respecting the beliefs of others and their way of life, as we would expect someone to respect ours. Supporting individuals to keep cultural traditions alive

Trade Liberalisation- Factor Increasing Globalisation

Reduction of international trade barriers- tariffs and quotas decreased considerably over the decades. -Increasing numbers of countries have opened up their economies around the world- allow trade to flow without any barriers -Due to the influence of the WTO- removal of tariffs (free and fair trade competition- benefiting suppliers and customers) for example, support for free trade agreements- markets more accessible to each other- backs big businesses, most powerful trade blocs have great influence over smaller countries. -Free trade agreements help to encourage trade between nations, as a result, the volume of international trade increases and businesses can sell G& S's in new foreign markets without penalties -This increase in international trade helps to maintain the process of globalisation -However, despite the numerous trade agreements that have already been established, there is still a long way to go before the entire world embraces complete free trade

Isolationism/Protectionism

Refers to a nation whose trade policies are designed to put the interests of the domestic businesses first by imposing trade barriers to hamper imports.

Sanctions

Restrictions intended to enforce international law- Ban on trade with EU countries and Russia due to Syria and the UK.

What is the pull factor of risk spreading?

Risk mitigation- in the context of scenario planning. The risk can range across financial, strategic, operational and hazard-related risks -Ansoff Matrix suggests that moving into new markets (overseas) involves greater risk (market development) However, trading internationally can spread the activities and revenues of a business over a wider range of markets, making the business less dependent on domestic demand -Where they can be recognised and quantified, risks can usually be insured against- where they cannot, they pose a threat to the firm's strategy and need to be addressed -By expanding into other countries and markets a firm may be able to limit the various tasks that it faces -Not just dependence on one market- which ay otherwise leave the firm vulnerable in the short term if market faces economic challenge such as recession for example. -Expanding abroad helps a firm to minimise the impact of such risks upon its overall profitability

Economic Risk

Risk that future cash flows will change due to unexpected exchange rate changes.

Administrative Barriers

Rules and regulations (such as trading standards and strict specifications) that make it difficult for importers to penetrate an overseas market.

What are the differences between shareholder objectives and ethical objectives?

Shareholder Objectives: -High Profits -High Dividends -Growth -A say in the business -A positive corporate image Ethical Corporate Objectives -Low emissions -Safe waste disposal -Paying fair wage rates to employees in other countries -Sourcing sustainable raw materials

Off-Shoring

Shifting jobs to other countries. --ENTIRE BUSINESS FUNCTION or PROJECT-relocate Moving manufacturing or service industries to a location with lower costs eg UK- call centres in India- well educated, good english, employed on low wage and long hours. This reduces costs and the business can hire workers with particular skills

Outsourcing

Shifting jobs to other organisations/ providers- purchases specialist services for period of time. to specialist external provider -Many large firms outsources info technology or payroll functions, accounting etc In turn reduces costs, specialises in areas of the business (the business can focus on core competencies rather than support functions) and improve speed, flexibility or quality, comply with laws and regulations

Give three factors a business might take into account when choosing a country as a Production Location?

Skills & Availability of Workforce Ease of Doing Business Political Stability

Subsidiaries

Smaller brands which the parent company has control over- they have a separate legal identity to the parent company.

Political Change- Factor Increasing Globalisation

Some radical changes in the political regimes of certain nations have helped to increase globalisation. More markets available with less protectionism- barriers. However not all countries benefit- cheap goods into market= foreign competition. -Politics happens on a global scale with regular meetings with heads of state, summits, power devolved to governments in trading blocs such as EU and WTO -This has lead to less protectionist policies such as tariffs and quotas and more open trade between nations- now turning to one market Eg Communist rule ended in the Soviet Union- dissolution was complete- restructuring of the economy- these countries old soviet blocs given independence such as Latvia and began opening up economies and developing trading ties with the rest of the world. Eastern European countries are joining the EU- more democracy instead Chairman Mao death loosened communist grip and economic reforms began with changes to agriculture - efficiency improved by handing over plots of land to farmers. Trade was gradually opened up and became a member of the WTO-now a booming economy - well established manufacturing- heavy expenditure on infrastructure, rising prosperity of middle class

Cultural Audit

Study and examination of an organisation's cultural characteristics (such as its assumptions, norms, philosophy and values) to determine whether they hinder or supports its vision and mission.

How might subsidies be used as a form of protectionism?

Subsidies will provide extra finance for businesses to reduce costs of production and therefore make themselves more competitive against rival firms in the global market.

What are the impact of tariffs on domestic producers?

Tariffs, if imposed highly on imports into a given country, would lead to higher costs for external businesses transporting goods into a country and thus, make it less likely for these businesses to enter. In such a way, domestic producers are likely to have an increase in demand as there is less choice for the population. Thus, they will have an increase in sales revenue and are less likely to have to drop prices- sustain their sales without losing market share and competitiveness

Tariffs/ Customs Duties

Taxes that are imposed on imports to make them more expensive. Increase price and decrease demand. Can be used by governments to raise revenue and restrict imports -Likely to raise the final price to the consumer- therefore a fall in demand for the goods- tend to pass cost on so profit margins don't suffer -So, consumers will switch consumption to domestic goods -However, if demand for import is price inelastic- won't affect demand

Levels & Growth of Disposable Income- Factor affecting the choice of business as a MARKET

The amount of money a person has left over after they have paid their taxes, national insurance and other deductions- used for consumption or saving -It is a key reflection of the standard of living in a country- Businesses looking to expand internationally may identify countries with fast growing income per capita as a key factor. -If average level of income is falling, people with low incomes struggling to pay for minimum standard of living + people with high incomes also reduce expenditure as they realise the value (more likely to invest). Thus consuming less, total expenditure decreases and reduced savings as people don't have enough to put away- particularly reduced spending on luxury, unnecessary items -As economy grows, so does disposable income- HOWEVER- Income inequality is a major issue in both developed and emerging economies. -Low disposable income countries will be unattractive markets for companies selling expensive luxuries -Direction and size of income suggests what the future holds -Customers need to have a sufficient level of income in market to purchase the businesses' G&S but also disposable income at least steady or preferably rising -If steady or rising over several years, then consumers are able to buy now and in the future- attractive to expand into -Rising= associated with growth of the middle class with money on G&S -Growing levels represent an opportunity for the business-as people earn more, they spend more and spend differently as - when rise, new niche markets emerge due to satisfying customer wants rather than needs- into niches early can lead to major success in new country -Countries with growing levels=opportunities for firms to expand abroad -Crucial judgement for business looking into is timing- too early=may not be a large enough market, too late= rivals may have already established brand loyalties

Repatriation

The act of returning the profits made in one country back to the country of origin.

Competitive Advantage

The advantage one company has over another, or several others, in the provision of a particular product or service. According to Porter a business may achieve this through competitive advantage or low cost advantage. 'lower prices or by providing greater benefits and service that justifies higher prices'

Price

The amount of money exchanged for a good or service- the end user is expected to pay for a good

Disposable Income

The amount of money that a person has left over after they have paid their taxes, national insurance and other deductions.

Mean Years of Schooling

The average number of years of education achieved by those aged 25 years and over- does not consider the quality or nature of education- US and Germany= highest

Balance of Payments

The difference between the flow of money into and out of a country- countries want to have a surplus of more exports compared to imports. -It is good for a company if there is more exports and FDI assists this- because the money from exports is going back into that country's economy -Bad for there to be more imports and if there is profit repatriation

Culture

The dominant and enduring set of behaviors, ideas, attitudes, values, and traditions shared by a group of people and transmitted from one generation to the next- what we learn as we grow and develop in our social groups. -Culture determines how we view ourselves and others, how we behave and how we perceive the world around us -We tend to believe that our way of viewing the world is the only way, or at least the best

Emerging Economies

The economies of developing countries where there is rapid growth, but also significant risks. A country in the process of rapid growth and industrialisation. The world's emerging economies produce most of the manufactured goods that are globally consumed.

Global Competitiveness

The extent to which a business or geographical area such as a country, can compete successfully against rivals.

Globalisation

The growing integration of the world's economies, particularly through international trade. ->The process of businesses starting to operate internationally and develop international influence -Some firms expect to sell their products anywhere in the world -Firms and people behaving as if there is just one market/economy in the whole world -A business can sell existing products to new markets abroad with no further development costs -Globalisation is a process in which economies have become increasingly integrated and inter-dependent -Globalisation is dynamic rather than an end state -Globalisation is not inevitable - it can reverse, indeed the growth of world trade in goods and services slowed in recent years following the global financial crisis

Competitive Advantage 2

The idea that a business should specialise in any area (products, services, management, research etc) where it can perform better than it's competitors. Access to cheaper resources, strong brand name and good customer service -Holds true for international trade, business should specialise in what it does well and adds value- thus this competitive advantage can help it make profit abroad ->A business may have particular resources it can use wherever it goes - eg intellectual property ->It may have acquired access to\ local markets, local resources and materials ->It may be able to better organise and replace separate cross-border trading enterprises (importing and exporting) with one firm that does it all- organises, manages and control trading activities

Literacy Rate

The percentage of adults (over 15) that can read and write. -Investing businesses look to hire a workforce - most productive employees at the lowest possible cost -An exporting firm would want to consider customers to which it will sell- understand them and how to market goods/services to them

Exchange Rate

The price of one currency in terms of another.

Risk

The probability of a (bad) event happening multiplied by its (negative) impact.

Global Marketing Strategy

The process of adjusting a company's marketing strategies to reflect conditions, consumer tastes and demand in other countries. -Standardised global marketing= entails a uniformity -Emphasis on the similarities of customers aspirations and tastes -May be same promotional message or sales incentives varying due to differences in local markets -May view the world as a global marketplace- creating products which suit a worldwide audience -Microsoft is an ideal global product- all it needs is language adaptation, cost change and fine tuned marketing for area- creates a global brand Marketing strategy is a set of plans that aim to achieve a specific marketing objective- outside country of origin, operate a common strategy in order to sell their products beyond their national borders -Involves planning, producing, placing and promoting a business' products in a worldwide market- can involve different offices in different countries - also by the use of internet

Trade Liberalisation

The removal/reduction of restrictions/barriers on the free exchange of goods between nations. The move towards greater free trade through the removal of protectionist barriers to trade.

Institutional Framework

The system of formal laws, regulations and procedures, and informal conventions customs and norms that shaper activity and behaviour.

Ethnocentrism

The tendency of people to view their own cultures, ethics and norms as superior. The evaluation of other cultures according to preconceptions originating in the standards and customs of one's own culture- eg people tend to accept the values of the culture around them as absolute values, when each culture has its own set, often quite divergent from some. -The concepts of proper and improper, foolish and wise, and even right and wrong can become blurred- businesses- what is right by whose standards IN ORDER TO MARKET EFFECTIVELY IN OTHER COUNTRIES, BUSINESSES MUST OVERCOME THIS- avoid alienation

Comparative Advantage

The theory that a country should specialise in products and services that it can produce more efficiently than other countries- according to what it can do best. Instead of two countries making the same 2 products, if each one focused all production on one and the two countries traded, total output of both products goes up and consumers in both countries are better off- net gain to both countries. -Does have limitations- eg it assumes that the world does not change but the modern, globalised world changes rapidly, and often unpredictably

What is the link between trade liberalization and trading blocs?

The two key features of a trade bloc is that (1) it involves a cutback or abolition of obstacles to trade, and (2) the trade liberalisation that is attained through the trade bloc is discriminatory in purview of the fact that it is applicable only to the member states of the trade bloc and non-member countries are shown prejudice in their dealings with members of the trade bloc. While regional trading blocs promote liberalisation of trade between the member states of a trading bloc, they impose restrictions to other states. -Countries not in the trade bloc would be able to trade globally and find resources for the cheapest cost in certain parts of the world- can compete of price as pay less -No potential flooding in domestic market- therefore less free movement of competition into the country- may keep existing customers effectively- in trade bloc good

Direct Action

The use of demonstrations, protests, strikes or even sabotage to achieve a political or social goal.

Cost Competitiveness

Through acquiring ever-increasing economies of scale, a company creates the cheapest product on the market.

What are marketing mix considerations which need to be taken into account?

Ties into International Marketing Debate- adapted or standardised? Price- local factors such as income, taxes, rents and other costs- it is unlikely that a business will charge the same price in all markets- Apple IPhone costs less in US than Russia- also reflect different local factors such as wage rates and taxes. What price is charged by competitors? Varies dependent on disposable income, any trade barrier costs, exchange rate fluctuations -Product- to what extent should the product be modified or adapted is another key consideration- different approaches before -G, E, P. Different needs and cultural sensibilities. -Promotion- when promoting, language differences are essential. Most effective methods to promote? Culturally relevant and avoid offence. Brand known worldwide- used internationally. Adapted due to political climate? -Place- need to take into account how local consumers typically buy their products- how do consumers buy their products? Standardised= distribution in UK will likely involve goods moved through a chain from manufacturer to wholesalers and onto retailers for consumers. Adapted= overseas- more parties involved as goods moved around foreign market where business practices will be different to national markets

What is the aim of dumping by businesses?

To sell all goods and maximise profits- making it cheap to the country dumped in so can get quick high sales

What are the examples of protected infant industries?

Toyota was protected by Japan from American car imports after WW2. Now it is larger than Ford and GM.

Trade Diversion

Trade diversion occurs when tariff agreements cause imports to shift from low-cost countries to higher cost countries. Trade diversion is considered undesirable because it concentrates production in countries with a higher opportunity cost and lower comparative advantage.

What country has the highest FDI in Europe?

UK- offers foreign businesses wide range of guidance and support services -There is a company responsible for helping UK businesses establish links abroad- and helps attract FDI- specialist advisory services considering UK as a possible location

According to World Bank, what are the largest economies in the world?

US JAPAN GERMANY UK

Tax Evasion

Using illegal means to avoid paying taxes that are owed by the business.

Tax Avoidance

Using legal methods to reduce the amount of tax liabilities the business pays.

Corruption

Using public power for personal benefit. Bribery is the most common practice of corrupt practice- was constitutes a bribe is not often easy to figure out. -If work for a British firm, could face prosecution for offering or accepting a bribe. -International Business have a code of conduct that set out policies to guide employees' decision making.

EXAM TIP- CONTROLLING MNC'S

When evaluating MNC's, consider the extent and impact of control from different areas- eg the political and legal control or consumer pressure coming from the country of origin of an MNC- which may be a developed Western country- or from the other countries in which the MNC is operating? -Are these controls consistent or are there conflicting objectives? -Further, you could consider the effect that the controls can have on both the country of origin/country in which the MNC has headquarters and other countries in which it operates.- Again consider to what extent these effects may differ and whether there is any conflict

Stakeholder Conflicts

When the objectives of one stakeholder in a business conflict with that of another - eg customers desire for ethical products and shareholders desire for profits

Dumping

Where an overseas firm/foreign producer sells large quantities of goods below cost price in a domestic market; this is considered unfair competition. -If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be dumping its product -Destroyer or Predatory Pricing from a foreign firm -The long term consequences for the home market will be that undercutting domestic prices will force the domestic industry out of business and allow the foreign firm to establish a monopoly (one business running the whole industry- In the UK a firm is said to have monopoly power if it has more than 25% of the market share) -The World Trade Organisation allows a government to act against dumping where there is genuine 'material injury' to the competing domestic industry- under the WTO law, a complaint of market dumping must be brought by at least 25% of particular industry

Skills Shortages

Where potential employees do not have the skills demanded by employers. -To the gov, looks at perspective of national comparative advantage- concerned that the relative education and skills of other countries is making them more competitive - threaten UK international competitiveness -Employers are more concerned that they can't fill certain vacancies or cannot at the right skill level

What is the role is WTO?

World Trade Organisation- In brief, the World Trade Organization (WTO) is the only international organization dealing with the global rules of trade. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. WANTS FREE TRADE WORLDWIDE- Sets up trade for countries that may not otherwise

What are the key benefits of open trade?

• Countries can benefit from comparative advantage • Businesses can better achieve economies of scale • Encourages competition and economic efficiency • Enables businesses to grow beyond their domestic borders

What are the factors influencing cultural diversity across the world?

• Economic development - in particular disposable incomes, health and education standards • Language • History & traditions • Religious & social norms • Weather & climate • Attitudes to "outsiders" • Legal systems

What are the key benefits of international trade?

• Export revenues and jobs help to reduce poverty • Low prices for consumer as markets are more competitive • Technology is spread, raising productivity • Knowledge and skills cross borders • Economies of scale - causing lower unit costs and prices • Better use of scarce resources -Production facilities abroad may be less expensive- cheaper wage payments- moving manufacturing to low cost country is attractive option

Why do ethics play such a crucial role in decision making?

• Used by individuals to make choices about how to behave • They define acceptable conduct in business • Should underpin decision making • An ethical decision is one that is both legal and meets the shared ethical standards of the relevant business community • Note: different countries and cultures have different attitudes to what constitutes acceptable ethical behaviour!