Chapter 5: International Agreements, Organizations, and Policies
5.1 POSITIONING IN THE GLOBAL ECONOMY
Pg 144-149
Communication satellites orbit the Earth transmitting and receiving signals far beyond national
political boundaries. These satellites relay images of information to the world below, which has
transformed communications in recent times.
These satellites are the technical basis of video-conferencing and the Internet, which allows
people around the globe to receive messages in an instant. Even international space stations
have been launched into orbit with the cooperation of Japan, the U.S. and Canada, to benefit
global space technology and experimentation.
The GPS system is a global positioning satellite funded and controlled by the U.S. Department
of Defense. There are 24 satellites that send specially coded satellite signals, letting the
receiver compute position, velocity and time. The GPS system also is used for positioning in
geographic terms (while traveling on vacations or driving).
In order to position itself in world markets, a business must figure out what makes its products
or services unique and superior to others. Well-run companies know how their reputation is
doing at all times.
Canada is trying to get the word out that we are open for business and have the technical
knowledge to do business with our major trading partners. In order to create this image, we
must become visible among trading partners. We can do this by creating a plan to
communicate what Canada has to offer to these partners and others.
Strategies toward Global Positioning
When companies position themselves internationally or globally, they’re more than likely to use
the following strategies.
Companies who are starting out a business beyond their nation borders, they are more likely to
enter the international arena by either exporting their products to other countries, or importing
products from other countries. This form of exporting and importing is done through a licensing
agreement, where a company pays a fee to another company from a different country to
produce or sell that company’s products.
Franchising a business operation is another way to establish global presence. Through formal
agreements, the franchisee pays a fee percentage in order to be able to ride on the success of
the franchisor, gaining benefits from its brand name and image. This requires the same
equipment, physical layout, marketing, training, and customer service model. The goals are to
have the franchisee replicate proven, successful, “formula” and foreign consumer to enjoy the
same experience.
A company may enter a foreign country by starting up a wholly owned subsidiary that operates
in the host country. A subsidiary may bear, and operate under, a different name or be owned
by a company’s larger subsidiary in similar area of business. Canada has historically been
largely dependent on investments that foreign subsidiaries have brought into this country from
a variety of nations.
The next popular international market entry strategy is to purchase in foreign markets the parts
or materials required for manufacturing a product in the home market. This method is mostly
used in the automotive industry.
A joint venture is the next way to an international strategy. This means to establish a company
from another country to produce new product. The recently introduces Nummie, produced a
jointly by General motors and Toyota, is an example of a joint venture.
Another type of international partnership is referred to as a strategic alliance, in which two or
more firms cooperate to co-develop, co-produce, or co-market their products. Sometimes such
partners also cross-invest; that is, they buy each others shares, usually to ensure supply or to
share risk and profit.
The Japanese term for this is keiretsu; in South Korea, it is known as chaebol. In Western
nations it has been referred to as “Japan Inc.”
International and Global Companies
We live in an age characterized by interdependence among nations and economies. Today’s
trend toward the globalization of business influences everyone. Individuals everywhere must
be able to work with people of different cultures and be aware of international events.
Companies expand internationally to increase sales and profit, and for a variety of other
reasons.
Some international companies think of their foreign operations as appendages, which usually
produce and sell products designed and engineered in the domestic market and sometimes
adapted for local needs, culture, and tastes.
A global company is one in which top management makes decisions to maximize worldwide
revenues, income, and profits. Global companies encourage employees to move from country
to country, and they promote foreign nationals to top management positions.
As cross-boarder free trade and investment become more accessible, growing numbers of
companies are developing into global companies to compete in the global marketplace.
Benefits and Challenges in Global Companies
Advantages:
 Savings in raw materials and labor by moving production facilities to locations where
wages are lower
 Worldwide access to the most innovative ideas and designs
 Ability to market a product to meet worldwide needs and wants
 Job creation in developing nations
Challenges:
 Cost of creating and maintaining a global presence
 Political, economic, commercial, and foreign currency exchange risks