Chapter 5 – Agreements,
Organizations and Policies
5.1 Positioning in Global Economy
What is Positioning?
 The strategy used to communicate to the consumer
 How to get ‘heard’ or how to ‘reach’ your target
audience
 Focus on what is unique, different or superior about
a product/service
 Focus on the main ‘benefit’ that a consumer gets
from your product/service
– E.g. cell phone allows you to make calls, but the
real ‘benefit’ is keeping in touch with friends,
enjoying life, entertainment, affiliation
Global Positioning:
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Franchise – authorizing someone else to sell
goods/services e.g. Subway, Boston Pizza and
McDonalds restaurants are franchised
Subsidiary
– Owned and operated by a firm in a different country
under a different name – “wholly owned subsidiary”
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E.g. Marmon Group bought Robertson Inc. pg. 147
E.g. Vale (Brazilian mining firm – largest iron ore
producer) bought Inco (Sudbury’s Big Nickel)
Joint Venture - two companies join forces to compete in
a foreign market
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Strategic Alliance – two or more firms cooperate, sometimes
buying each other’s shares, stronger ‘partnership’ than a joint
venture
International vs. Global:
International:
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Central location – i.e. one country is ‘home’
Top management usually from ‘home’ country
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E.g. Loblaws (part of the Weston Group, based in Canada with some international
operations in U.S. and U.K)
Global:
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Management makes decisions to maximize worldwide profits
Management from many different countries
Goal is to create a ‘stateless’ corporation that operates relatively free across
international borders
Makes operations and financial (i.e. tax rates etc.) decisions based on cost
i.e. moves manufacturing or corporate headquarters to countries with lowest
costs
e.g. Wal-Mart – international operations, management and
manufacturing/sourcing
International vs. Global:
Benefits
 Cost savings
 Diverse leadership
 Worldwide access to ideas, wants and needs
 Jobs in developing countries
Challenges:
 Costs of global branding – complex, more logistics i.e. travel
 Hard to have uniform quality and messaging around the world
 Time required for decision making – time zones, distances
 Complex political and taxation issues – many countries / laws
 Political, economic, commercial and foreign currency risk
 Local opposition to multinational corporations
5.2 Corporate Globalization
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Globalization – growth and spread of international
economies and business
Growing Power and Influence:
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Ford Motor Co. larger than economy of Norway
Phillip Morris (food, cigarettes) sales larger than GDP of
New Zealand
Corporations increasingly influence the politics, policies etc.
of countries where they operate;
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E.g. tax rates/laws, environmental standards, social policy
Other effects of globalization?
5.2 Corporate Globalization
Triad – U.S. , European Union and Japan
(pg. 152 – 153)
Neo-Liberal Trade Policies:
 Freer movement of goods, services, labour, capital
 Liberalizing – reducing barriers, easier, less restricted
 Economic imperialism – economic domination of nations
 World’s largest 500 companies account for 50% of world trade
5.3 Trade Agreements
Trading Blocs (or regions) – 90% of world trade
 NAFTA (North American Free Trade Agreement
 European Union (EU)
 Asia-Pacific Economic Cooperation (APEC)
 NAFTA – Jan. 1, 1994
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Canada, Mexico and U.S.
Increase trade, reduce prices / costs of production – economic
efficiency
Trade in goods and services, investment, intellectual property
There is fair competition and dispute resolution – doesn’t always
work – e.g. Softwood Lumber – NAFTA said the U.S. was wrong
but they still charged a tariff on softwood lumber
FTAA – Free Trade Area of Americas
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Goal was to start in 2005, but delayed presently
North, Central and South America free trade zone
34 countries
Problems include;
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the increasing gap between rich and poor (North vs. South)
Political tensions – Venezuela and U.S.
Opposition to Neo-Liberal trade philosophy
Nationalism – protectionism in the U.S. – concern over losing jobs
9/11 – security issues and more border security
Economic problems in member countries – inflation, unstable
currency
Complexity of harmonizing labour, manufacturing and
environmental standards
NAFTA
NAFTA