Impact of Globalisation on Businesses

A structured, illustrated, essay of 2,000 words (+/- 10%)

1. Why have global businesses appeared?
2. What type of businesses might have plans to become global?
3. How do global companies affect a) international trade, b) creating employment, c) increasing consumer choice, d) ethical objectives, e) tax revenues, f) cultural diversity, g) financial markets.
4. How do governments respond to an expanding global economy? Outline the main government areas of intervention: – a) fiscal policy, b) monetary policy, c) privatisation and nationalisation, d) trading blocs, e) exchange rates.
5. For your company, evaluate how it has confronted the various demands of globalisation.   

Sources:

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Globalisation is worldwide business. It is really important because businesses can get customers from all over the world.

In this assignment I will show you, why global business important and what types of business might be going to be global.

Also I will introduce how global companies affect such as international trade, knowledge transfer, creating employment, increasing consumer choice, ethical objectives, tax revenues, cultural diversity, financial markets.

And I will explain how governments respond to an expanding global economy. I will outline the main government areas of intervention such as fiscal policy, monetary policy, privation and nationalisation, trading blocs, exchange rates.

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1. Why have global businesses appeared?

Global business appeared because of 5 points.

Competition

Economics: Rivalry in which every seller tries to get what others sellers are seeking at the same time: sales, profit, and market share by offering the best practicable combination of price, quality, and service. Where the market information flows freely, competition plays a regulatory function in balancing demand and supply.

Consumer expectation

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“Customer expectation” refers to the total perceived benefits a customer expects from a company’s product or service. If the actual experience customers have with a product exceeds the expectation, they are typically satisfied. If the actual performance falls below the expectation, they are typically disappointed.

Economies of scale

Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because of the inverse relationship between the quantity produced and per-unit fixed cost because of the inverse relationship between the quantity produced and per-unit fixed costs; i.e. the greater the quantity of a good produced, the lower the per-unit fixed cost because their costs are spread out over a larger number of goods. Economies of scale may also reduce variable costs per unit because of operational efficiencies and synergies. Economies of scale can be classified into two main types: internal-arising from extraneous factors such as industry size.

Choice of location

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There are a lot of place of choice to locate the business in this world. You can choose the place by your needs (Low level tax, cheap labour, Warm place, cold place) For example it can be possible to Company A which produce swimwear open the main company in low tax country and build the factory in low wags country (like a china) then sell to tropical country.

Mergers

Merger it’s a transaction where two firms agree to integrate their operations on a relatively co-equal basis became they have resources and capabilities that together may have resources and capabilities that together may create a stronger competitive advantage. The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. Example: Company A + Company B = Company C

Global business has appeared in this 5 points (Competition, Consumer expectation, Economies of scale, Choice of location, Mergers). Globalisation appeared also because of company does have a lots of demand and so they cannot produce enough un less hey get support from other country. Also they need more cheap materials source from not only own country. For example, China is the one of the countries labour and cheap material. So a lots of business make factory in there.

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Globalisation is the process of integration of economies, industries, cultures and policy-making around the world. It describes a process by which national and regional economies or cultures have become integrated through the global network of trade, communication and transportation.

In the past globalisation was mainly focused on the economic side of the world, such as trade, foreign investments and capital flows. Now it started to include a broader range of areas and activities such as culture, media, technology, socio-culture, political and even biological factors, e.g. climate change.

2. What type of businesses might have plans to become global?

In this question I will talk about company “LADA”. It is not really famous company in the world but almost everyone knows about this brand in Russian. Lada it’s a sight of Russia.

Lada working on the company called “LADA Progress” when this company works on “Avtograd” which is really famous in Russia because they selling: Lada, Opel, Chevrolet, Kia and Lifan. When “LADA progress” join “Avtograd” its means what they trying to start working on global business level.

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“Lada” start opening new shops and getting more and more customers. They can order you: Selling Lada cars, selling parts for car and accessories, Full certificate workers will do MOT test, Test drive, Trade in.

Long time ago Lada was a croup company and was doing really bad machines and was chip, which is kind of okay, because everyone can get it. But now they trying to do much better and make customers take they words back.

In my opinion Lada should keep on this line and keep progressing in this stage, getting more customers, getting higher reputation and grow up in it. As I say before about bad reputation. Secondly I would say what they should move to other countries and see how is it going. If it will be all right, it means what they will keep growing up in reputation. When they rich moment whn they will be famous company with good quality of product, while they growing up they should watch on other companies and see how they going, so they can get more experience from them. Also they can get other company workers which can be better than Russians, for example take designer from BMW company so they get better view of the car and may be take engineer from Mercedes so they get better engine in the car and etc.

3. How do global companies affect a) international trade, b) knowledge transfer, c) creating or removing employment, d) increasing consumer choice, e) ethical objectives, f) tax revenues, g) cultural diversity or unity, h) financial markets.

1. International trade

Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewelry, wine, stocks, currencies and water. Services are also traded: tourism, banking, consulting and transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports

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2. Creating employment-

Lets talk about company McDonalds. First time when they come to Russia (USSR) was January 30^th of 1990, and in the first day they get 30,000 customers. They open they first restaurant in Moscow, which was also first in hall USSR. It was huge even for McDonalds to come to USSR; they were planning to come for over 20 years. “They say they were holding talks with Soviet officials about opening this venture for over 20 years – since 1976” That’s was told in news.

Every new day they start getting more and more customers. Russian people start liking this taste of American burgers, because it was cheap and god quality. The point is what, McDonalds moved to USSR they spend 50 million dollars to open factory and restaurant, but they get hell of a lot customers from doing it. They definitely overpay they expenses.

So, McDonalds made risky move to spend 50 million dollars to open they product in USSR, but it was successful risk. They overpay they expenses and open other culture what means American burgers.

3. Increasing consumer choice-

When McDonalds moved to USSR it was shock for USSR people because they never tried it before, and they like it so much. That’s why when they (McDonalds) mover to USSR in opening day was 30,000 people.

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4. Ethical objectives-
5. Tax revenues-

Let’s talk about Starbucks. It was a huge problem to this company, because of tax revenue. They were moving around the word to don’t pay to government hell of a lot money for being in company and using they property.

6. Cultural diversity- When McDonalds moved to Russia (USSR) it was huge step for McDonalds, because Russian people start liking Fast Food. Before McDonalds in Russian wasn’t that time of fast-food, so people was shocked from it because it is American food so it was taking time to get used to it, but in first day of opening there was 30k people in McDonalds. For McDonalds it was very good move, but the problem what it is Fast Food restaurant but they good huge quit to it so it was kind of fast food because McDonalds was making only hamburgers and cheeps, also selling Coca-Cola. McDonalds making 1 order for like 30 seconds. So it was the real fast-food.
7. Financial market- When McDonalds moved to Russia, they open share list for Russia government so Russian people can work in here, which will get move customers because at that time Russian people don’t really speak English so It will be hard for them to communicate which is other but if we look from other side, it was only 1 order, which is burger (hamburger) with cheeps and Coca-Cola, which was really sheep. I believe in America they were selling that order only for 0.15$ so it was really sheep. When in all other fast-food restaurant was cost only of 1 hamburger 0.15$ and if they want to get burger + cheeps + Coca-Cola It will cost around 0.4$. So in Russia I guess will be also very-very cheap to get that order. But after some time McDonalds changed because of the 1 reason. So they start making other restaurants and making other product so opening share list in Russia will be really important.

4. How do governments respond to an expanding global economy? Outline the main government areas of intervention: – a) fiscal policy, b) monetary policy, c) privatisation and nationalisation, d) trading blocs, e) exchange rates.

1. Fiscal policy- Fiscal policy is the use of government spending and taxation to influence the economy. Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty. The role and objectives of fiscal policy gained prominence during the recent global economic crisis, when governments stepped in to support financial systems, jump-start growth, and mitigate the impact of the crisis on vulnerable groups.

2. Monetary policy – It is the process by which the monetary authority of a country, like the central bank or currency bank, controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency. Further goals of a monetary policy are usually to contribute to economic growth and stability, to lower unemployment, and to maintain predictable exchange rates with other currencies.

3. Privation and nationalisation- Most of the UK’s major strategic heavy industries and public utilities were nationalised between 1946 and the early 1950s, only to be returned to the private sector between 1979 and 1990. (Question)

4. Trading blocs- A regional trading bloc is a group of countries within a geographical region that protect themselves from imports from non-members. Trading blocs are a form of economic integration, and increasingly shape the pattern of world trade. There are several types of trading block. (Question)

5. Exchange rates- A currency crisis is brought on by a decline in the value of a country’s currency. This decline in value negatively affects an economy by creating instabilities in exchange rates, meaning that one unit of the currency no longer buys as much as it used to in another. To simplify the matter, we can say that crises develop as an interaction between investor expectations and what those expectations cause to happen. (Examples, Answer question)

5. For your company, evaluate how it has confronted the various demands of globalisation.

When company was open they start working on first generator Model 200A. and when they finished It HP start selling it for $54.40 when all other company was selling this kind of product for more than $200. And the first big company which find about HP was really interesting and bought 8 generators Model 200A and each was sold for $71.50. That’s was the biggest step for that company, because of that they start being famous.

In 1966 they produce first in the world (that’s what Wired newspaper said) mini-computer HP2116A. In 1968 HP produce first in the world desktop scientific computer HP9100A cathode display, and together with the printer and magnetic card reader device cost $ 4,900. That’s how HP9100A look like That’s how PH2116A looks like

After this computer this company start getting hell of a lot profit and customers. Also at that moment they start known all round the world.

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6. Bibliography

https://www.reference.com/business-finance/definition-customer-expectation-963b46f5f05ac34b

http://www.businessdictionary.com/definition/competition.html

http://www.investopedia.com/terms/e/economiesofscale.asp

http://www.slideshare.net/AbhishekYadav68/mergers-acquisitions-and-joint-ventures

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http://williamssocial10.weebly.com/economic-globalization.html

http://www.investopedia.com/articles/03/112503.asp

https://www.researchgate.net/publication/270283041_THE_IMPACT_OF_TRUST_ON_KNOWLEDGE_TRANSFER_IN_INTERNATIONAL_BUSINESS_SYSTEMS

https://ec.europa.eu/research/innovation-union/pdf/ikt_expert_report.pdf

http://2012books.lardbucket.org/books/challenges-and-opportunities-in-international-business/s07-04-global-business-ethics.html

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http://economictimes.indiatimes.com/definition/tax-revenue

http://www.businessdictionary.com/definition/taxation.html

http://www.businessdictionary.com/definition/cultural-diversity.html

http://www.investopedia.com/terms/f/financial-market.asp

http://www.investopedia.com/ask/answers/040615/what-actions-or-policies-can-government-agency-take-counteract-and-end-stagflation-economy.asp

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http://economicsonline.co.uk/Business_economics/Nationalisation.html

http://www.economicsonline.co.uk/Global_economics/Trading_blocs.html

https://en.wikipedia.org/wiki/HP_Enterprise_Business