You are on page 1of 11


he Effects of Globalisation on Business The effects vary a lot from one part of the world to another, and from one area of business to another. Communications infrastructure is important to modern businesses, but not all countries have got one. There is also the non-traded sector ie goods and services which are not traded internationally. Domestic services, for example, have to be provided where the house is; you cant export a clean house. Competition - Foreign businesses buy into domestic markets. - Deregulation opens up markets to competition. - Deregulation encourages innovation in new products and markets which challenges traditional market leaders Meeting consumer expectations and tastes - Generally, consumers all over the world are better informed, have higher incomes and therefore higher and more exacting expectations. This forces businesses to meet higher standards. Economies of scale Selling into a global market allows for enormous economies of scale, although not all industries benefit from these. Choice of location Businesses are now much freer to choose where they operate from, and can move to a cheaper and more efficient location. In the last decade the UK has been seen by many businesses as an attractive business location, especially in financial services, and many businesses have located in the UK which has boosted the UK economy but also provided increased competition for UK businesses. This increased movement of businesses and jobs has, to some extent, forced governments to compete with each other in providing an attractive and low-cost location. Ireland, for example, offers tax holidays to businesses relocating there. Manufacturing businesses are increasingly relocating to low-wage countries such as Indonesia. Inputs vary in price across the world, and businesses now have more freedom of movement in moving to get hold of those cheaper inputs eg labour in developing countries, or financial advice in the City of London. One limitation on this is that managers won t always move to some countries if living conditions are unpleasant or even dangerous. Multi-national and multi-cultural management This is a major challenge to businesses and their managers. A multi-national business environment is more complex with more variables, and so is more difficult to manage. A multi-cultural employment policy leads to employees of many different nationalities, languages, religions and cultures in different offices across the globe. These employees react in quite different ways to incentives, to motivation and it is very difficult to find managers who are sensitive to all these different factors. It is very easy to inadvertently give offence and demotivate workers. For example, the Japanese were initially very disappointed with their Thai employees who didnt respond well to Japanese methods of building up

corporate loyalty and motivation. Once they turned production targets into a game, the Thais worked extremely well. Globalisation of markets National borders are becoming less and less important. Markets stretch across borders and MNCs are well-placed to take advantage of this. The same issues of language and culture and so on arise. Consumers are more alike, but by no means the same. Many businesses have made expensive mistakes by not taking local variation sufficiently into account. Marketing, in particular, is a minefield because of its dependence on language. The marketing books are full of stories, often very amusing, of how businesses got it wrong. For example, the GM Nova failed in Spain because NoVa means doesnt go in Spanish. See, for example,


Successful international franchising and licensing development takes considerable planning, involving business, franchising, legal and accounting specialists. Preparations involve multiple stages, from target country selection, business optimization, feasibility reviews, channel development planning, systemization to marketing. Overall, a well- planned and structured international franchising and licensing program has the potential to provide many successful domestic companies with an intelligent and efficient method to leverage returns from the intellectual property associated with their businesses.

A strategic alliance is a collaboration between two or more companies which can take on many forms such as:

technology transfer purchasing and distribution agreements marketing and promotional collaboration joint product development.

Each partner usually retains their independence while contributing towards a mutual shared goal.

A joint venture involves a potentially long term investment of funds, facilities and resources by two or more companies to a combined venture, which benefits all companies. All involved will have an equity stake in the new venture. A joint venture may be formed to:

run production facilities in another country establish a marketing and distribution presence use complementary technologies held by each participant.

Joint ventures can also be used to get around country trade barriers. In some cases a joint venture with a local company may be required to enter some overseas markets.


5) Exporters should seriously consider having the freight forwarder handle the formidable amount of documentation that exporting requires; freight forwarders are specialists in this process. The following documents are commonly used in exporting; which of them are actually used in each case depends on the requirements of both our government and the government of the importing country. 1. Commercial invoice 2. Bill of lading 3. Consular invoice 4. Certificate of origin 5. Inspection certification 6. Dock receipt and warehouse receipt 7. Destination control statement

8. Insurance certificate 9. Export license 10. Export packing list Section b 1)

Expand Markets and Increase Sales Expanded markets and increased sales mean more profits. Profits mean success for a business. They also mean that a business can make contributions to causes that they believe in. For example, MAC Cosmetics is a business that increased sales and broadened their markets in order to become more successful. This business started as a small idea and eventually expanded to a greater establishment by going international. This business in particular decided to create a fund dedicated to the cure and prevention of AIDS. MAC Cosmetics really did expand their markets. They ended up selling their product in 118 countries, controlled 45% of cosmetic sales and had $3.6 million in USD. Controlling Expenses Every business wants to have low expenses; so some companies will therefore enter the global arena to minimize their costs. Companies will examine the resources they need and where they can get them at the lowest price. By searching outside of their own borders, companies hope to find more economical solutions to the production and manufacturing problems they have. Business might choose to take advantage of lower labor costs, they might move manufacturing plants closer to natural resources, invest in new and more efficient technology, or profit from another countries innovations or tax structures. For example a company that is located in Toronto that gets most of their resources from Japan might want to look into moving the company closer to Japan or they might have to look into finding a new place to get their resources. This is known as outsourcing, meaning that a company will obtain something by contracting it from another source. Diversification In order to diversify a companys product line they may choose to enter a specific international market. This will apply to both a large scale international business along with a small company. Companies have a foothold in a number of countries so they dont have to depend on the economy of one country. Companies engaged in international business can protect their investments and their markets by dealing with countries in a variety of countries. A recession in one county wont have a huge effect if business is doing well in another country.

Competitiveness Many companies expand globally for defensive reasons-to protect themselves from competitors or potential competitors, or to gain advantage over them. In todays business environment, even a small business is competing with international businesses. A neighbourhood video store is facing competition from a larger international company such as Blockbuster Video. A local store may have a limited selection because of its small size but it may be able to offer more personal service, a more specialized stock or even lower prices. On the other hand, local businesses may find if difficult to compete with the selection and price that multinational companies can offer. If their businesses are too threatened, they may find wider markets or merge with a larger, possibly international company. 2)
Ethnocentric is a staffing policy that is used in companies that has primarily international strategic orientation. This policy is generally adopted by headquarters by sending employees from the home or parent countries to the host country. This approach is used best in some situations such as, a team is sent from the home country to help setting up a new plant as well as train subsidiary personnel to use new system. The benefit of having staffs from home country abroad is that employees may gain experiences worldwide in order to become higher level in management of their headquarters because international managers require broad perspective and international exposure. Polycentric is the policy involved hiring and promoting employees who are citizens of the host countries that the subsidiary is operated. This policy is best used when companies want to keep hiring cost low. Moreover, employees who are hired at subsidiary level would not have any problem adapting to the culture. Communication is smooth within the operation. Regiocentric staffing policy involves hiring and promoting employees based on specific regional context where subsidiary is located. This approach is used when regional employees are needed for important positions. However, both employees from host countries and a third country are employed. The disadvantage of using this type of policy is that sometimes employees from home or host countries are not unselected. Instead, employees from a third are selected to subsidiary in which they may face cultural differences. Geocentric staffing approach is used when companies adopt a transnational orientation. It is best used when companies need the best personnel to work at subsidiary. Employees are selected regardless where they come from. This staffing strategy is reliable for all subsidiaries because best employees are selected and sent from the companys worldwide network. [continues] 3)
n this section of the course we will study the Cultural Forces. It is critical to understand the effects of the cultural environment on International Business.

Even if you do not have the resources to "know", in detail, each culture, you need to know the effects. "Because international business includes people from different cultures, every business ... is subject to cultural challenges" The cultural environment has influences on some of the other environments: the cultural environment strongly influences the labour environment and the socio-economic environment and the politics of the populace o which effects the Political / Regulatory / Legal Environment..

The cultural environment is in turn influenced by some of the other environments: the economic evironment o o o o o o o is the standard of living comfortable, or stressed how people are able to do things do they walk to work, drive can they use a phone, access the internet effects weather growing food housing and living conditions the technological environment

the geographic environment

Difference between international marketing and domestic marketing

First, International marketing is facing a more complex market environment . Domestic marketing is conducted in this country and so faced corresponding structure of the market environment is relatively simple ,which consists of those factors that are more familiar to companies -- the domestic political, economic, legal, cultural and so on. However, International marketing is facing a more complex environment, it's a market with multi-level structure. This is because those companies who engage in international marketing , will inevitably be subjected to the world market environment. Which requires companies to face the world market environment, including the world's political, military, economic, technological and other aspects. Second, International marketing is facing more Uncertainties factors The contradiction between subjective understanding and objective reality, coupled with the volatility of the objective process, international marketing facd more uncertainties factors for the companies .Compared with domestic marketing, it's more difficult to make sure the total demand, purchasers and competitors and more difficult to investigate and predict wholesale segment, retail structure, buying habits in international marketing. Third, International marketing is facing more diverse selection of marketing programs Companies in the

domestic market, although also need to deal with different regions and different programs for different target markets, different strategies, and even the use of different promotions, but the overall program is the same however. the international market is a market composed of different countries .Enterprises in the international marketing, its marketing programs are of diversity, Enterprises in different country markets to sell their products, not unified marketing program, and must host country market, different scenarios were developed. Four, Marketing in international marketing is more difficult Besides the complex environment and the uncertain factors ,diverse selection programs, international marketing have more risks and meet more fierce competition. The risks are added by the changing international political situation and the fluctuate exchange rate .Competitor's brilliant competitive strategy in price, promotion and products made the international market more and more narrow.