Global Businesses and Multinational Corporations
• Special Events
What is a Global Company?
 It is a business that operates all over the world
and;
 Treats the world as one country.
 Locates in low wage countries.
 Purchases raw materials from cheapest country.
 Borrows from cheapest country.
 Moves managers around.
Examples
 Coca-Cola
 Toyota
 McDonalds
 Nike………………
Reasons for the development of Global Co.’s
Increase Sales: Higher profits.
(home market saturated)
Mass Production: Enables Economies of Scale (more
produced = lower cost per unit).
Developments in ICT: Communication is faster & easier.
Deregulation: World Trade Organisation making trade
easier.
Global Marketing
• Selling the same product in the same way all over
the world using the global marketing mix (4 P’s).
• Concentrates on similarities across world
markets.
• Uses a Standardized Marketing Mix wherever
possible.
• However the standardised marketing mix may
have to be adjusted to meet local tastes, cultures
& legislation.
Global Product
 Try to use same brand name world wide
 However this may not always be possible.
 Eg. Jif to Cif, Marathon to Snicker.
 Barbie doll modified for Japan!!!
 McDonalds don’t sell beef in India!!
Global Price
 The price may vary around the world due to:
 Higher standard of living = higher price.
 Higher transport costs = higher price.
 Taxes & tariffs = higher price.
 More competition = lower price.
Global Promotion
• Olympic Games
• World Cup
• Not always possible to use identical promotion
due to legislation, language & culture:
• Proctor & Gamble had to withdraw bathroom tv
add in Japan.
• In Germany “come to life with coke” = “come out
of the grave with coke”!!!!!!
Global Place
 Channels of distribution is longer.
 Manufacturer-exporter-importer-agents and
distributors ……….
 More time consuming and expensive.
 Many global businesses rely on local agents and
distributors to deliver.
 Coca–Cola allows local businesses to produce &
sell its product under licence.
 Less expensive but involves loss of control over
quality.
Why is Global Marketing important?
• Economies of Scale: The more products that are
made/advertised the cheaper per unit to
make/promote.
• Home market may be saturated: There is no
more potential to increase sales at home.
• Standard Marketing Mix may not always work.
• Cultural differences must be recognised.
• Adapted Marketing Mix takes these differences
into consideration.
Role of ICT in International Trade
1. Increase sales:
• e-commerce is using the internet to sell products
all around the world either through websites or
e-bay.
2. Advertising:
 Using MSN or Yahoo to advertise golbally.
3. Faster & cheaper communications
• E-mail is faster than “ snail mail”.
• Businesses can e-mail documents worldwide for
a flat monthly fee.
• EDI: Electronic Data Interchange, sending
standardised documents to other firms that you
deal with regularly.
4. Decision-making
• WWW is a vast library of information.
• Managers can access information it needs about
trading partners.
• More informed decisions can be made
5. Reduced Costs • Reduce warehouse costs by making & selling in
• Video-conferencing allows virtual face-to- same country.
face meetings without travel. • Overcome trade barriers, Japanese car
• Live pictures & sound are sent via the internet or manufacturers set up in Ireland so they can sell
satellite. to EU without import duties being imposed.
• This reduces cost as no flights or
• Infrastructure: Good roads, broadband Reasons for the development of MNC’s
• Incentives: Grants and low tax • Infrastructure: Improved roads,
• Workforce: Skilled and unskilled telecommunications & skilled work force.
• Support services: Finance, government agencies, • Incentives: Low corporation taxes
shops, housing, hospitals, schools • Economic & political stability: National wage
• Availability of raw materials: agreements, good industrial relations….??????
• Proximity to markets: Close to where goods
• will be sold. Factors that influence the location of a new factory.
• accommodation is needed. • Infrastructure: Good roads, broadband
• e-banking reduces fees…. • Incentives: Grants and low tax
• Workforce: Skilled and unskilled
Multinational Corporations (MNCs) • Support services: Finance, government
• Large business with headquarters in one country agencies, shops, housing, hospitals, schools
and branches in many others. • Availability of raw materials:
• May move operations from one country to • Proximity to markets: Close to where goods
another in response to market conditions. will be sold.
• Eg. INTEL, IBM, Coca Cola, Nestle, Unilever……….
• Unilever The United Nations
Why do we have the UN?
Impact of MNC’s
• Advantages of MNC’c
• Disadvantages of MNC’s
Advantages of MNC’s
• Jobs are created directly & indirectly.
• Taxes revenue from corporation tax and Vat
increase.
• Import substitution: MNC’s source raw
materials
• Exports increase improving the balance of trade.
• Efficiency & quality are improved in order to
compete on the world stage, benefits
consumers.
Disadvantages of MNC’s
• Powerful MNC’s try to influence indusrial
relations & tax policy by threatening to
withdraw.
• Closures of MNC’s causes massive
unemployment.
• Grants are lost if MNC’s move.
• Profits are transferred out of the host country

Why do some businesses become MNC’s?

• Less dependent on the home market, inc
sales/pr.
• Avail of low labour costs in some countries such
as Poland, Hong Kong..
World War 2
 Among the causes of the WW2 were:
 A. political takeover in 1933 of Germany by Adolf
Hitler and his Nazi party and its aggressive
foreign policy
 B. Italian Fascism in the 1920s
 C. Japanese militarism preceding an invasion of
China in the 1930s
 The main combatants were the Axis Powers
(Germany, Italy and Japan) and the Allies
(France, Great Britain, the US, the Soviet Union
and China)
 Approximately 40M-50M deaths were incurred
 The name United Nations coined by US President
Franklin D. Roosevelt , was first used in the UN World Headquarters - New York
“Declaration by United Nations” of 1 January
1942, during the Second World War, when
representatives of 26 nations pledged their
governments to continue fighting together
against the Axis Powers.

History of the United Nations

International Court of Justice - The Hague, Netherlands

The General Assembly

What does the United Nations Do?
 The UN was created to maintain international
peace and security.
 It also works to maintain friendly relationships
between countries.
 Tackle global issues like global warming, trade
policies, and human rights and humanitarian
issues
 Lastly, it works to promote economic
development of member nations.
 Every member nation has a seat at the General
Assembly.
 Brings up international issues that they want the
Security Council to deal with
 Holds elections for Security Council members
and other leaders
 The General Assembly is the world’s parliament,
where all 193 member states are represented
 Each sovereign state gets one vote so it is not
exactly representative of the world’s population
 The General Assembly is not as powerful as
Security Council, which can pass binding
resolutions, and is dominated by the five
permanent members
 But the General Assembly can express world
opinion, make recommendations to the the
Security Council and elect the Council’s non-
permanent members
 The world leader is given time limit of 15 minutes
to speak in front of the green marble podium and
orate in front of the world.
 The General Assembly - Inside UN Headquarters
UN Security Council ECONOMIC AND SOCIAL COUNCIL
 Made up of 15 countries:  May make or initiate studies and reports with
• The “Permanent Five” countries respect to international economic, social,
• 10 non-permanent countries (elected cultural, educational, health, and related
every two years) matters and may make recommendations with
 The strong-arm of the UN respect to any such matters to the General
 Maintains international peace Assembly to the Members of the UN and the
 How does it do this: specialized agencies concerned
• Recommends peaceful negotiations  It may make recommendations for the purpose
(peace talks) of promoting respect for, and observance of,
• Can use Economic Sanctions human rights and fundamental freedoms for all.
• Can use Military Sanctions
Types of Sanctions
Permanent Members  Diplomatic Sanctions – removal of all political
 China ties (like embassies)
 France  Economic Sanctions – ban on all trade with a
 Russian Federation country (except food)
 United Kingdom  Military Sanctions – using military to force
 United States compliance.
 The permanent members have the power to Military Sanctions
veto a substantive decision of the Council by  UN Peacekeepers – a group of armed soldiers
voting against in sent to a hostile area to promote peace. They
ARE NOT COMBAT TROOPS.
Non-permanent Members  These soldiers maintain peace.
 Belgium Poland  They don’t go on combat missions.
 Cote d’Iviore South Africa  They are not an ‘army’
 Dominican Republic  UN Military Force – an army made up of soldiers
 Equatorial Guinea from more than one UN country that can serve
 Germany as combat troops.
 Indonesia • They are not very effective and are not
 Kuwait used very often.
 Peru
UN Peacekeepers
• They always wear blue berets or blue
helmets to identify themselves.

The UN Security Council - Inside World Headquarters

Sanctions
 Sanctions are used to punish a country for
violating international law. They can be used to
force a country to follow a law.
 In order for sanctions to be used by the UN Strengths of the UN
Security Council, ALL FIVE permanent members  Provides a forum for almost all of the world’s
must have a unanimous vote. nations to discuss international issues
 Humanitarian efforts
 • AIDS
• Landmine removal
• Food and supply organization
 Peacekeeping forces
 Will get involved with messes that no one else
will

Weaknesses of the UN
 Sanctions are only effective if ALL countries
follow them (Iraq example)
 Military force is rarely used and is usually
ineffective
 ALL permanent members of the security council
have to vote unanimously (one country can stop
a sanction)
 Inadequate funding by member nations
• 14 Countries Pay 85% of the
subscriptions (membership fee)
 Big gap between developing and industrialized
nations

UN Analysis Questions
 Some of the weaknesses of the UN are caused by
flaws in the structure of the organization. Would
it be better to start from scratch, or spend time
and money solving the problems from within.
 What do you think the world would be like
without the United Nations?
 Which part of the Untied Nations would you put
the most money towards? Why?
 What are some alternatives to economic and
military sanctions if they don’t work?