CHAP 26: GLOBAL BUSINESS
1.What are TNC’s?
TNC’S are firms that produce and market
goods in more than one country.
Examples: Shell, McDonalds, Mitsubishi
Business decisions are made on a country
by country basis. They have a global
perspective which means they see the
world as one giant marketplace. They do
not have a particular allegiance to any one
country.
2. How do TNC’S & global
companies operate?
1. OPERATIONS
They have factories in different countries in
order to maximise profits and minimise
costs. This means locating in a country
where wages and taxes are lowest.
They often use “PRODUCTION SHARING”.
This means that part of a product is made in
one country, shipped to another for further
assembly and then finished in another
country.
2.Marketing
Usually the production and advertising of goods
are standardised and homogenous. It can be
adapted to meet the needs of specific
markets and countries.
3. Financing
Finance is raised by obtaining long term loans.
They can also engage in transfer pricing, this
the buying and selling of goods between their
own subsidiaries. This can help Global
Companies to manipulate the tax system by
having businesses in different locations and
paying tax levies in the country with the
keenest rates.
4. Human Resource Management
Employees especially management are
often moved around between different
subsidiaries in different countries.
TQM techniques are used to match the
desired quality standards.
STEPS TO BECOME A GLOBAL BUSINESS
1. National Business:
• Home is the only market
2. International
Business:
• Home country is the main
market but some goods
exported
3. TNC’s:
4. Global
Firms:
• produce & sell in numerous
countries, decisions made on a
country by country basis
• the world is the market,
decisions on finance,
marketing, HRM are made on
a global basis.
3. Why have TNC’s/Global
firms developed?
1.
2.
3.
4.
5.
6.
7.
Improvements in transport & IT
communications, Internet/e-commerce
Domestic market saturated
Opening up of global markets
Emergence of trading blocks
The deregulation of trade restrictions
The benefits of economies of scale
Bankers/investors are more willing to invest
on the global stage (prior to economic
downturn 2008/ 2009)
4. What is Global Marketing
Global Marketing means marketing a product
globally with broadly the same marketing mix,
as though they were a single marketplace. EG –
COCA COLA
A standardised global marketing mix means using
the same mix in different countries.
An adapted global marketing mix means adjusting
the mix to take account of cultural, geographic,
economic differences
EG In France the McDonalds sells wine and in India
the McDonalds sells fish, and chicken burgers
instead of hamburgers.
5. What are the elements of
the global marketing mix?
Global Product: It should have a distinct
advantage/USP over existing competitors.
The product must comply with national regulations,
meet with local cultures and lifestyles, easy to
transport, functional in all climates.
Global Price: the price set on particular globalised
products should
• Cover the costs of manufacture, labour etc.
• Aim to make a profit
• Take environmental costs into account
• Take different taxes/tariffs into account
• Take marketing objectives into account
Global Promotion
As well as using advertising, sales
promotion etc the selling of goods
on a global scale can include the use
of
• trade fairs,
• trade missions and
• the internet – websites,
advertisements on the web etc
• Foreign licensing agreements
Global Place/Distribution
A firm wishing to distribute its product on
a global scale can chose from the
following channels of distribution.
• Direct selling to customers
• Use of agents to sell your product in a
target market
• Set up a foreign subsidiary
• The setting up of joint ventures or
strategic alliance
6. Why do TNC’s locate in Ireland?
1.
2.
3.
4.
5.
Access to EU markets
Avail of low tax incentives
Highly skilled workforce
Generous government grant aid available
English language appeals to attract
foreign companies especially American
firms
6. The link with universities and the ability
to recruit high tech sector graduates
7. Our green image
Positive/Negative effects of
TNC’s & Globalisation for Ireland
7.
Positives
• Smaller to medium sized businesses can help
to supply larger TNC’s located here.
• The government can raise tax revenue
through the new business start ups that are
brought about
• Increases in employment levels
• They create competition amongst existing
Irish Businesses.
Negatives
• They become powerful and can dictate
to national governments
• They become “footloose” as they
become powerful and they give very
little consideration for the effects of
a factory closure
EG – DELL Limerick in 2009 moving to
Lodz – Poland
• They create competition amongst
existing Irish Businesses.
8. Should the activities of
TNC’s be controlled?
There is an argument for tighter control on their
activities. This type regulation is seen as difficult to
implement and has arguments for and against.
For regulation
Against regulation
KEY TERMS
EXAM QUESTIONS
2008 Q2 (A)
20 marks
(i) Explain the term “Transnational
Company”
(ii) Discuss the reasons for the development
of TNC’s in Ireland?
Exam questions
2007 Q3 (B)
25 marks
Explain the term “global marketing” and its
role in international business.
2005 Q3 (C)
15 marks
Discuss the concept of Global Marketing for
Irish Business
Exam questions
2004 Q3
(A) Define global marketing?
20 marks
Discuss the role of global marketing in
international business?
2000 Q3
20 marks
(a) Explain, using examples, the importance of
global marketing for a global business?
Exam questions
1998 Q3
30 marks
Discuss the positive and negative
effects of TNC’s and Global firms for
Ireland?