Globalisation

Introduction:  Q: What is globalisation?  A: The creation of global markets, global businesses and global products

Key aspects of globalisation:  Global brands Name some global brands  Global products and global advertising Think of some products with global advertising  Instant global communications  Huge economies being part of the global market, e.g. China and India

Interdependence:  Local level E.g. Local produce in supermarkets  National level E.g. Meat and fish in supermarkets from within GB  International level E.g. Supplies from all over the world

Supply chains:  Large businesses rely on global supply chains  What is the supply chain for chocolate? Cocoa beans grown in West Africa Processed in West Africa Sold to manufacturers, e.g. Cadbury’s and Nestle

Ownership of business:  Multinational company Owns at least 50% share in at least one overseas business The overseas business is called a subsidiary Examples: ○ Honda, Toyota, Nissan (UK subsidiaries) ○ Tesco – subsidiaries in USA, Thailand, etc Creating a foreign subsidiary: ○ ‘Greenfield investment’ – setting up a new plant ○ Acquisition of an existing firm

Ownership of business (cont)...  Joint ventures: When companies based in 2 countries create and share ownership of a new company Many European companies entering Chinese and Indian markets have created joint ventures  Why? Local partner has good knowledge of local market Easier to make contact with key stakeholders

Capital & business operations:  Capital – needed to: Build premises Invest in research Invest in new technology  Capital today flows freely between countries  International investors on lookout for good business investments

Capital & business operations:  Foreign Direct Investment (FDI)  Investor in a foreign company holds at least 10% of the shares with the purpose of securing a lasting interest in that company  Example: ○ Liverpool Football Club  Problem: No loyalty to specific countries, just want lowest costs, e.g. British companies with call centres in India

Government regulation:  Advantages to government of multinationals: Jobs Investment Business taxes  Disadvantages: Foreign companies more difficult to regulate Companies can switch production to new locations very quickly Government ‘stay on side’ at expense of other stakeholders

Assignment 2:  You now have all the information that you need to complete task 1 for assignment 2  Remember, you need to pick 2 types of issue to research and include in your assignment that will affect the 2 businesses in the 2 countries  You can pick different issues for each organisation/country