Globalization Worksheet

1. Define globalization
Globalization, in terms of business, is "the growing integration and interdependence of the world's economies." Otherwise, it can be defined as "the integration of the world's economies in terms of economics, sociology, and politics."

2. What are the indicators of Globalization? List 3.

• Higher levels of foreign direct investment.
• Greater cultural awareness and exchange, such as the export of cultural foods.
• Higher spending on international travel and tourism.

3. Check out the website listed at the bottom of box 1.9b for 2009. Are there any changes to the top 10 as listed for 2008?
2008:

1. Belgium
2. Austria
3. Sweden
4. Switzerland
5. Denmark
6. Netherlands
7. UK
8. Czech Republic
9. France
10. Finland

2010:

1. Belgium
2. Austria
3. Netherlands
4. Switzerland
5. Sweden
6. Denmark
7. Canada
8. Portugal
9. Finland
10. Hungary

4. What are the factors contributing to the growth in globalization? Make sure you understand terms such as liberalization and deregulation.

• The liberalization of international trade (the removal of global trade barriers)
• Technological progress
• The deregulation of business activity (decrease in costs of transportation & distribution)
• Growth in cultural awareness and recognition
  
• Language (e.g. English as a business language)

5. Read and list the opportunities and threats of globalization for business.

• Increases the level of competition
• Meeting customer expectations and needs
• Benefits of economies of scale
• Greater choice of location (production facilities)
  
• Mergers, acquisitions and joint ventures
• Increased customer base

6. Define "Multinational Cooperation"
"A business organization that operates in two or more countries"

7. Why become a multinational?

• Widen their customer base
• Benefit from economies of scale (production levels must increase)
• Avoid protectionist policies
• Cheaper production costs (inexpensive labor)
• Spread risks
  
• Globalization of markets

8. What are the problems of expansion overseas?

• Lack of knowledge and/or experience
• Storage, transportation and distribution costs
• External factors
  
• Political and economic conditions in foreign countries
• Infrastructure may be less developed

9. Give 5 effects of a Multinational company on a host country?

1. Creates jobs (benefit)
2. Boost gross domestic product (benefit)
   
3. Technology transfer (benefit)
4. Competition (benefit/limitation)
5. Unemployment (limitation)

10. Explain what is meant by a technology transfer?
It's the process of sharing skills, knowledge, technologies, methods of manufacturing, samples of manufacturing, and facilities among governments and other institutions to ensure that scientific and technological developments are accessible to a wider range of users who can then develop and exploit the technology into new products, processes, applications, materials or services.

11. Which businesses are most at risk when an MNC sets up in a host country? Why is this?
Domestic businesses, particularly ones on a small scale, are at high risk when an MNC sets up in their country and they may find it difficult to compete with them. This can lead to profit loss within the business, or even the shutting down of the business completely.

1. Define a multinational company?
A business organization that operates in two or more countries.

2. Define a holding company?
A business that owns a controlling interest in other diverse companies.

3. What are the similarities and differences between the two?
A holding company does not produce goods - it merely buys shares in another company. However, a multinational company does produce goods. They are similar, however, in the sense that they both operate in countries other then their home countries.

4. Research a Multinational Company on the internet
GOOGLE.

• a) What is their history?
  
• It was created January of 1996 by Larry Page and Sergey Brin as a research project, student at Stanford University. The domain of "goggle.com" that we use today was officially established on the 15th of September 1997. The company itself was incorporated and became "Google Inc." on the 4th of September 1998. They are currently stationed in Mountain View, California since 2003, and the complex is currently called "Googleplex".
  
• b) What is their core business?
• Advertisement
  
• c) Have they diversified their business? How have they done this?
• Google has definitely diversified since it started, and now offers a much wider range of products and/or services. 99% of its revenue is from their advertisement programs (they put prices on search tags). They also diversified their search engine, so that you can now not only search for websites but also images, news, price comparisons, groups, maps, and more. They also launched Google Video, similar to YouTube, in 2006. They have created desktop applications like Google Desktop, Picasa (a photo editing software), Sketchup (used for sketching buildings, etc.) and Google Earth (satellite imaging). Gmail was also created - an e-mail database similar to Hotmail. They also helped develop an operating system called Anderoid, and released "Google Chrome" (an internet browser) on the 1st of September 2008.
  
• d) What advantages does this give them over the other businesses?
• Google has many competitors, particularly when it comes to their search engine. One of the most recognized competitors is probably Yahoo. Yahoo also a search engine, e-mail capabilities, news and image searches, video, and so on. However, there are some things that Google has that Yahoo does not (for example Google Earth or Picasa), and all of Google's programs are interlinked. For example, if you are using Google Earth their logo is everywhere, and so on. Therefore, someone who wants to use a program like Google Earth, which is not offered by any other business, is going to become more loyal to Google as a whole.
  
• e) What stock exchange are they listed on?
• NASDAQ Stock Exchange (American Stock Exchange)
  
• f) How many do they have on their board of directors?
• There are currently 9 people on their board of directors.
  

5. Research a Holding Company on the internet
AMERICAN EXPRESS

• a) What influences do they have over their subsidiaries? Is it a management thing or are they assest strippers? (Define this term)
• The control that American Express has over their subsidiaries is basically a "management thing". They help the other countries to grow - they issue charge cards, loans, certificates of deposit. It is not an asset stripper (a company that takes over another company when it is suffering from financial difficulties and then sells each of its assets separately at a profit, thinking that the remaining assets will then be worth more).
  
• b) How have MNC's and Holding companies achieved the growth they have, what are they renowned for in their respective markets?
• This company started with a business surrounding travel and tourism, however is now well known for it's growth when it began credit cards and/or loan cards in major banks.
  

6. Has the MNC you researched encountered any problems in operating in overseas markets?
One example of a problem faced by Google when it began operating in overseas markets is the one that came along with Google Earth. This program caused issues when nations quickly realized that some of the satellite images allowed viewers to see details like cars and people. Censorship has also been an issue in some countries, where particular sites are blocked - USA, UK, Germany, France and China in particular.

7. What are the ramifications for the MNC of any problems you identified in Q6?
Google attempted to solve the privacy issue by ensuring users that the satellite images are not necessarily updated on a regular basis. They also have given in to most censorship requests by whichever country making the request, which is sometimes thought to be beneficial and sometimes sparks controversy.

8. Define the term "conglomerate"?
The combination of two or more companies engaged in entirely different businesses together into one overarching company.

9. Which of the multinationals listed in Q4 could be also described as conglomerates?
All of them!

10. Give two advantages and two disadvantages of conglomerates.
Advantages:
1 - Reduction of invest.
2 - Can show earnings growth, by acquiring companies whose shares are more discounted than its own.

Disadvantages:
1 - Extra layer of management therefore increased costs.
2 - Lack of focus, and inability to manage unrelated businesses equally well are the reasons to criticize conglomerates.

Skoda Auto

a. Two internal stakeholder groups suggested in the case study are the employees and the management.

b. A conflict between stakeholders is evident in this case study between the employees and the management of the company. The management wanted to become part of Volkswagen, most likely in order to increase their own benefits and profits. However, as the business' profits increase the workers would be looking for higher pay and better benefits - things that they didn't receive.

c. This conflict can be minimized

Stakeholders

1) On your blog, briefly describe each of the internal and external stakeholders of a company, including all SIG's.

Employees

• the staff of the business (they produce the goods/services, communicate with customers, etc.)
• they want good wages, working conditions, security, training and so on that can only be provided when the business is doing well, and they will therefore work harder to achieve such things
  

Shareholders

• owners of private/public limited companies (purchasers of shares)
• they have the voting rights and a "say" in how the business is managed

Managers and Directors

• the people who plan/organize/control the daily running of the business
• they will be aiming for profit maximization (for their own benefit) and will be looking at the long term health of the business
  

Suppliers

• provides a business with raw materials, component parts, finished goods, or other resources needed for production. They can also provide services (e.g. maintenance, technical support).
• it is up to them to when to deliver their products/services, and for what cost
  

Customers

• the people that buy the product/service
• they decide the financial survival of the business - if no one buys the product/service, the business will not survive
  

Trade/Labor Unions

• unions that are for the better good of their members in form of fair wages, good working conditions, etc.
• businesses have to put up with the demands of such unions to avoid problems (e.g. a strike)
  

Pressure groups

• individuals with a common interest who seek to place demands on organizations to act in a particular way or to influence a change in their behavior.
• pressure from the pressure groups and the potential customers that support them can influence the business' behavior and/or customer base
  

Industry trade groups

• organizations that specialize in public relations with the aim of promotion a particular industry, through education and advertising.
• they have the potential to promote and support the industry that the business is part of
  

Local community

• the community surrounding the business
• they can either support the business and find it as an opportunity for labor, etc. however they may also have a negative outlook on the business and complain about it
  

Competitors

• rival businesses
• competitors will be interested in the business mainly to avoid anti-competitive practices and as a stimulus to innovation and product development
  

Government

• self explanatory
• the government will want to make sure the business is helping the public - they can either help stimulate business activity or they can also constrain the business
  

2) What determines whether an SIG will succeed in their objectives?

There are four main things that determine whether an SIG will be successful; funding, public opinion, number of members, and commitment of members. The more financial resources an SIG has, the stronger they will be. Similarly, an SIG is stronger when it there is greater public support and/or sympathy. The more members there are in an SIG, the bigger an impact and the more influential it will be. However, without the commitment of these members, it will not be successful.

3) What factors determine whether a business should take notice of an SIG?

If the SIG hopes to attract the business' attention, it will first have to be effective; if they are not strong and do not have a huge influence, the business won't do anything about it. Also, if the business has a large amount of market power they don't really have to react to the SIGs. Similarly, it depends on the business's financial resources; if they don't have enough spare money to comply with the demands of the SIG, they wont. If the directors, senior managers, and shareholders do not agree with the views of the SIG, then compliance is of low possibility. Finally, the aims and objectives of the business may clash or be delayed by such compliances, and they will therefore not take notice of the SIG.

Sources Used:
Hoang, Paul. Business and Management. Victoria: IBID, 2007. Print.

1. Define

• a) Ethics: the moral principles that guide decision-making and strategy
• b) Morals: what is considered right/wrong from society's point of view
• c) CSR: (Corporate Social Responsibility) the responsibility to act morally towards stakeholders like the employees and local communities
• d) Social Audit: independent assessment of how a firm's actions affect society

2. Give 3 examples of unethical business behavior.

• Environmental neglect (pollution, depletion of non-renewable resources, etc.)
• Exploitation of the workforce (mistreating staff, etc.)
• Exploitation of consumers (knowingly selling harmful products)

3. What are the advantages for businesses who behave ethically?

• Improved corporate image - enhances the image + reputation
  
• Increased customer loyalty - loyal customers due to acting morally
  
• Cost cutting - specific examples + lower litigation costs
  
• Improved staff motivation - ethical + moral behavior = driving force
  
• Improved staff morale - high quality staff who are motivated

Disadvantages?

• Compliance costs - potentially high costs of acting ethically
• Lower profits - if compliance cost cannot be passed on as a higher selling price
• Stakeholder conflict - not everyone might want these changes

4. How does CSR help a business compete?

When a business is socially responsible, it typically gives them a better public reputation. The public, i.e. the customers and consumers, will learn about this particular business' good reputation of being socially responsible, and will therefore be more eager to become a loyal customer of that business. This can mean a lot when it comes to competition within any given market.

5. Why is a social audit undertaken by a business?

Usually, a social audit is undertaken in order to show their stakeholders (anyone from the shareholders to the local community) that the business is doing the right thing, i.e. being socially responsible. This includes proving that they are doing things like:

• using renewable and sustainable resources
• using reputable and socially responsible suppliers
• creating systems that cater for the well-being of employees
• establishing an ethical code of conduct
• creating methods to monitor management and employee commitment to CSR policies

Sources Used:
Hoang, Paul. Business and Management. Victoria: IBID, 2007. Print.

Case Study on Franchising

To what extent is a franchise opportunity a true reflection of what it is like to set up and run a business?

Setting up a business and setting up a franchise can be very similar; however there are a few differences that need to be taken into account when making a decision. When a franchisee buys the rights to set up their own franchise, they are buying rights to use the franchisor’s trademark and model. They therefore don’t have to come up with their own ideas for the business; the logo, product, trade name, equipment etc. are already provided. Apart from that, however, running a franchise is very similar to running an individual business. The franchisor controls the marketing and quality of the product (they don’t want their business to get a bad name); however it is up to the franchisee to conduct and organize their franchise in such a way that earns them a good profit. Therefore, it is a fairly good reflection of what it is to run a business, not so much set one up (idea-wise).

Use the Forbes site and the Business of Baseball site to do some research on the financial positions of the different baseball franchises in the United States and Canada. Using the data, suggest which teams are the most vulnerable to seeing their franchise sold to a rival bidder such as Portland Oregon.

A team like the ‘Tampa Bay Devil Rays’ is most likely to be sold to a rival bidder. They rank number 30 in the top 30 teams of the league, and are therefore not doing very well in their games. They are, however, doing well financially – they have an operating income of 27.2 million dollars annually (this is the third highest amount of the whole league). Therefore, a bidder would be more likely to buy them; it will earn them more income, and the fact that the team isn’t doing all that well sport-wise can also work to their advantage (sponsorship, reputation build-up, etc.).

Imagine a situation where the English soccer Premier League became the franchisor as in the case of MLB Inc. How might the Premier League seek to use this position to expand the growth of the ‘brand’? What implications would this scenario have for clubs in the League and outside it (i.e. those in the Championship?)

If the Premier League was to become a franchisor, it could easily expand by introducing teams from different nations, for example the United States or even Canada. Obviously, a more international presence would help its reputation just as it would help any other business that went into franchising. They would also be able to earn much more profit if they were to introduce new teams/nations, as each team would (more then likely) have to pay some sort of royalty payment to the "brand".