1.9 GLOBALIZATION

Globalization
DEF: The integration of the world’s

economies in terms of economics, sociology and politics.
For Businesses this means an attempt by firms

to efficiently produce and sell the same products or services simultaneously in different countries.
I.e. McDonalds and Pizza hut gone global by opening franchises around the world
Honda and Toyota have gone global by setting up manufacturing plants in other countries.

What is the most recognized brand in the world??
 Coke sells some 400 brands of soft drinks, sports drinks, coffees,

teas, bottled waters and fruit juices in over 200 countries. Some brands are only available in specific regions or countries of the world, target marketed based on the unique characteristics of local demand.  Coca-Cola is the most valued brand name on the face of the earth ,

far surpassing its rival Pepsi. The world's number one soft-drink company, Coke owns four of the world's top five soft-drink brands:
Coca-Cola, Diet Coke, Fanta and Sprite. North American brands include Barq's, Minute Maid, POWERade and Dasani water. In international markets Coke sells Crush, Dr. Pepper and Schweppes.

Factors contributing to the growth in globalization Removal of global trade barriers led to

more trade in exports and imports.
Technological Progress – reduced the cost of information interchange
Deregulation of business activity – costs of transportation and distribution have fallen.
 China removed trade restrictions on foreign

businesses
Cultural awareness and recognition

growth – consumers have similar tastes
Language- English is the official business language in many parts of the world

Effects of Globalization on business activity Increases level of competition
Meeting consumer expectations and needs is

more demanding.
Enjoy economies of scales if have a global presence Multinationals have greater choice of location
Apple IPOD are created in California and

assembled in China

Mergers, acquisitions and joint ventures allow

businesses to grow at a faster past
Increased customer base

Multinational Corporations (MNC)
DEF: Business organization that operates

in 2 or more countries.
Head Office based in one country.
Another name: transnational corporation

Why become a multinational company? Widen customer base - companies going into

China, how many customers can they gain??
Achieve Economies of Scale
Avoid Protectionist policies – by having factories in countries they can avoid tariffs, quotas set by country
Cheaper production costs – labor
Spread Risks
Globalization of markets – world is a smaller place Potential Problems of overseas expansion Lack of knowledge an experience
Storage, transportation and distribution

cost may increase
External factors
Political and economic conditions of a country Infrastructure

Effect on Host Country
Create Jobs
Increases national income of country
Standard of living may increase

Technology Transfer
New skills and technology introduced to

country
Create Competition in host country
Being social