Business Considerations from Globalisation
Business: AQA A Level (2023 Specification), topic 4.6.1
International Businesses and Globalisation
Aside from global production networks, Transnational Corporations help globalisation to spread and also take advantage of the economic liberalisation that has come with globalisation.
Glocalisation (a word made by combining globalisation & localization)
- TNCs use glocalisation to help spread globalisation. This means that they adapt their products to the needs of local consumers.
- For example, lots of global food TNCs offer a different menu in India where beef is not eaten.
- Since 2012, McDonald’s has served the McVeggie and McSpicy Paneer in India.
Glocalisation reflecting laws
- Sometimes, glocalisation reflects the different laws in different countries.
- For example, BMW makes right-hand drive cars for the UK because we drive on the left whereas, in Germany, cars are left-hand drive.
Development of new markets
- TNCs use the development of new markets to benefit from glocalisation.
- As countries develop and their populations have higher disposable incomes to spend on ‘luxury’ items, TNCs are able to access new markets and sell their products in these countries.
Economic liberalisation
- TNCs take advantage of economic liberalisation. They take advantage of the removal of barriers to trade to earn more profit and increase their market share.
- TNCs use outsourcing and offshoring to make sure that they are able to maximise their profits by minimising the costs of producing their goods.
World Trade Case Studies
World trade can be examined by looking at trade for a manufactured good (e.g. cars) and trade for a food commodity (e.g. bananas).
Cars
- During 2016, global car exports amounted to over US$720 billion.
- World production of cars is dominated by huge TNCs, based in the USA, Germany, Japan and South Korea.
- The main importers and exporters of cars are all developed countries (Europe, USA) or emerging economies (India, China, middle eastern countries).
- The leading importer is the USA.
- The leading exporter is Germany.
- The bulk of world trade in cars is between rich countries where people have high disposable incomes.
- China and India are major producers of cars, but do not export significant amounts.
Bananas
- Bananas are mainly grown within the tropics and production is centred on Latin America (80% of exports), West Africa and parts of Asia.
- Other producers include Asian countries (e.g. the Philippines) and west African countries (e.g. Cote d’Ivoire).
- Production is dominated by large American TNCs (e.g. Chiquita and Del Monte)
- Some production is sold directly to supermarkets.
- Organic and Fairtrade produce is sold at a higher price.
- The largest importers are the EU countries and the USA.
Test yourself on Business Considerations from Globalisation
TNCs use glocalisation to help spread globalisation. What does glocalisation mean?
What is an example of a TNC adapting their goods to local consumers?
Which country is the leading importer of cars worldwide?
Which countries are major producers of cars, but do not export very many?