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Chapter 3

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Ryerson University
Global Management Studies
GMS 200
Sui Sui

GMS Chapter 3 Week 3/4 Chapter 3 – Week 3/4  The World : A Business View (Map) – Adjusted by countries GDP  The World : A forward-looking Business View – Adjusted by future business potential (Population)  Why business want to go global i) Profits ii) Customers iii) Suppliers iv) Capital v) Labour  KFC opened in Hong Kong in 1973 but all 11 restaurants closed in two years. i) Self developed logistics and distribution system ii) Implemented a supplier rating system to find supplier that perform best iii) Local food R&D team and a test kitchen iv) Focusing on ownership rather than franchising Theyt adapted their business model .  Refer Figure 3.2 – Common forms of international business – from market entry to direct investments.  Types of Market entry strategies i) Global Sourcing  The process of purchasing materials or services around the world for local use ii) Exporting & Importing iii) Licensing agreement  One firm pays fee for rights to make or sell another company’s products (ex. Coca-Cola bottlers) iv) Franchising  A fee is paid for rights to use another firms name and operating methods (ex.KFC)  Types of direct investment strategies i) Joint Ventures  Operates in foreign country through co-ownership by foreign and local partners ii) Global strategic alliances (HP and Microsoft) iii) Foreign subsidiaries  Local operation completely owned by a foreign firm  Complications in the global business environment i) Political Risk ( War , Bad Government etc.) ii) Local legal systems iii) World Trade Organization iv) Protectionism  The political call for tariffs and favourable treatment to help shelter domestic businesss from foreign competition GMS Chapter 3 Week 3/4  Regional Economic Alliances i) North American Free Trade Agreement (NAFTA)  United States , Canada & Mexico  Favourable trade and customs laws ii) European Union (EU)  European Counties  Euro  Removing trade barriers  Southern Africa Development Community (SADC)  Multinational Corporation (MNC) i) Is a business with extensive international operations in more than one foreign country  Lululemon : 201 stores in Canada , the US , New Zealand and Australia  Transnational corporation ( a type of MNC): (a) MNC operates worldwide on a borderless basis (i) General Electrics (GE) -> 70% foreign assets.  Culture i) The sha
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