Notes

Saturday, 30 March 2013 10:06 AM

Appreciation- an upward movement of the Australian dollar or any currency against another currency Bicultural- able to appreciate and understand the business practices and customs in the host country and speak the language of both home and host country Cross rate- Australia dollar compared with other country excl. America Cultural Diversity- the multitude of individual differences that exist among people Deprecation- a downward movement of the Australian dollar or any other currency against another currency E-commerce- the buying and selling of information, goods and service via the internet Equities (shares)- ownership entitlements in a company Exports- goods and services sold to another country Foreign aid- financial and technical assistance by government and non- government (private) organisations from developed (high income) nations to developing (low income) nations. Foreign exchange rate- the ratio of one currency to another; it tells how much a unit of one currency is worth in terms of another Global consumer- a person who buys goods and services from other countries Globalisation- a trend that sees people, goods, money and ideas moving around the world faster and more cheaply than before Gross domestic product- the total value of all goods and service produced in an economy in a given year Imports- goods and services brought from other county Intellectual property- property that is created by an individuals intellect; a song, poem, novel and so on International trade- the buying and selling of goods and services between nations Labour standards- those conditions that affect a business's employees or those of its supplies, subcontractors or others in the supply chain Managed fund- money from a large number if smaller investors is pooled together and managed as one large investment portfolio by a professional investment manager Parent company- a company that owns or controls another company (subsidiary) Political risk- any political event which results in a drastic change to the country's business environment and which ultimately has a negative impact upon business operations and profits. Subsidiary- a company owned and controlled by another company Transnational(multinational) corporation (TNC)- a large business organisation that has a home base in one county, and operates partially owned or wholly owned business in other countries Global market In Australia we receive news and entertainment from around the world, the clothing and footwear brands being sold worldwide, the rapid telecommunications access to all parts of the globe and the large number of products Australia buys and sells on the world market. This has been strengthened by the process of globalisation. Now using technology, the global consumer can shop at an international marketplace. e-commerce is now the most common used method of purchasing products from overseas and provides a whole new shopping experience and increase range of products and choice. Domestic trade is the million goods and services bought and sold within Australia. International trade include the economic transactions that take place in different countries. The two trades are linked. Business within country will specialise in those goods and services and produce more efficiently. They then trade their surplus with other business within other countries. Businesses therefore rely on each other. Consumers also rely on being able to purchase a range of goods and services many which came from overseas. Many goods and services are sold and bought in other countries and our economy is linked to the world economy via export and import. Australia trade with other countries because of two main factors. 1. We cannot produce all the good and services we require 2. Our population and domestic market are small compared to many other countries
Global Links Page 1

2. Our population and domestic market are small compared to many other countries What do Australia export? Primary- coal, wool, mineral, ores, meat, cereal grains- 49.6% Secondary- motor vehicles, machinery, food stuff- 28.6% Tertiary- tourism, education, financial services- 21.8% Total- $234 billion Australia import goods and services because we can purchase them more cheaply from overseas or because we cannot produce them ourselves What do Australia import? Primary- food, beverages, crude petroleum- 17.2% Secondary- computers, machinery, transport equipment- 63.6% Tertiary- travel, transportation, insurance- 19.2% Total- $250 billion Before ww2 our customers were mainly with England, now with Japan, China and the US are our major customers. Our main suppliers used to be UK, now it includes Japan, China and US- the growing significance of the South east Asia region Approx. 1.7 million Australian jobs are connected with export production Exports and investment represent almost 25% of Australia's total income. Over the past 20 years, local investors has purchased equities/ shares on overseas market either by direct purchase of shares or through investment in managed funds. You purchase international share with the money you have put in and therefore you are a global investor. A TNC is a large business organisation that has a home base in one country and operates other owned business in other countries. LG, McDonalds, Ford are all known foreign and Australia transnational corporations. In a fully developed TNC, finance, assets technology, information, employees, patents, goods and services all flow freely from one country and one subsidiary to another. Reason for expansion Business enter foreign markets for number of reasons which is linked to increase sales and profits. The growth and expansion of TNCs is one of the main driving forces behind the present sequence of globalisation. - Minimise risk of competition- overseas sales can provide another source of revenue - Economies of scale- mass production can lower the cost of production - Cushioning economic cycles- If the Australian economy is in a recession, overseas markets may be booming - Tax minimisation- some countries impose little or no tax - Increasing sales and finding new markets- for example, China offers a market of about 1.4 billion people - Acquiring resources and technology- this provides a constant supply of raw material and latest ideas - Diversification- this spreads the risk in case of difficulties experienced in one country - Fewer government regulations- this may result in lower production costs Ethnics Issues of international trade As business become more global they recognise the importance of fulfilling their ethical responsibilities. There is more pressure for business to adopt ecologically sustainable operating practices. This is in response to concerns about climate change and destruction of natural environment. Over the last two decades the global business community has undertaken many initiatives to put the principle of sustainable development into practice. Human rights code of conduct- adopting a human rights of code of conduct is one method of attempting to perform business in a ethically responsible way. Once the code of conduct has been established, the organisation may insist that all suppliers conform to it. e.g. - No forced labour - Fair wages - Safe and healthy work environment - Freedom of association - No child labour
Global Links Page 2

- No child labour Some businesspeople doubt whether such individual company codes can stop labour abuses in other counties in part because other competitors may not abide by similar standards. Employment issues A business success is determined by the abilities and performance levels of its employees. The quality, quantity and composition of the available labour fore are important considerations for any business as it undergoes global expansion. Staffing In a global business, find right people are hard especially higher positions e.g. senior management. These people usually need to be bicultural, able to appreciate and understand the business practices and customs in the host county and who can speak the language of both home and host country and the business should have a cultural diversity among the employees. Diversity in terms of gender, race, ethnicity and religion is a important factor. Minimum Standards of Labour Each country has specific labour laws which outline the minimum wage and non wage conditions for employees. Labour standards refer to those conditions that affect a business employees or those of it suppliers, subcontractors or others in the supply chain. Global business In many developing countries, environmental protection laws are often non existent or very weak. Some TNCs use these countries to dispose harmful chemicals e.g. electronic waste, poorly designed machinery and inappropriate food stuffs. Countries are often pressured into taking such materials, they may receive financial or other incentives and extra revenue may be used to repay their foreign debts. Since there are few laws prohibiting disposal of hazardous products, it is not technically illegal but highly unethical. But due to the imbalance of market power, TNCs have little fear of action form individual citizen of developing countries. Risks associated with selling global markets Currency risks Countries have their own currency which they use for domestic purposes. This means global transactions need the foreign exchange rate. Exchange rates fluctuate overtime due to variations in demand and supply. A currency depreciates lowers the value of a currency in terms of foreign currencies. A depreciation in Australian dollar makes our exports cheaper on international markets but prices for imports will rise. Appreciation has the opposite affect. Exchange rates fluctuations will affect the profitability and production costs. Fluctuations create risks for global business. Political Risks A political risk is defined as any political event which results in drastic change to the county business environment and has negative impact on business operation and profit. Risk tend to be greater in countries experiencing social or economical unrest e.g. terrorism, war. In such cases, businesses may need to find means to directly influence politically powerful people in order to operate in the country. Legal Risks Global business is affected by many thousands of laws and regulations because each country has its own unique set of laws and legal systems. This can change between countries. The risks for a global business in the areas of: - Contract law- especially the methods of enforcing laws - Legal disputes- resolving these can be very complicated due to differences in legal systems and culture - Intellectual property rights- weak protection can cost international businesses a great deal of money Social and cultural risks People in different countries are working in societies and cultures that differ from their own. It is important to understand an appreciate the customs and traditions of countries they deal with. Failing to do so might be embarrassing or losing business opportunities. Role of aid Foreign aid consists if financial and technical assistance by government and non government organisations from developed nations to developing nations. The assistance might include: - Loans- involving payment of interest rate to donor country - Grants- gifts which do not have to be repaid
Global Links Page 3

- Grants- gifts which do not have to be repaid - Technical assistance- trained personnel such as engineers, teachers and medical staff to help with development programs - Food and emergency aid- donation of food, clothing and shelter in response to natural or human disasters - Education and training programs- part of project or education in developed country - Technological aid- machinery and equipment - Community based project- construction of school, health centre etc. Sources of aid 1. Non government aid- provided by over 110 Australian Humanitarian, non gov organisations 2. Gov aid- managed by Australia Agency for International Development, provide assistance for over 60 million people living in poverty around the world. Government aims to - Assist economical development of recipient countries - Promote political stability in the region - Help develop investment and trade opportunities for Australian business Role of foreign aidSuccessful aid programs will reduce poverty and improve standard of living resulting in stronger more stable communities. Building roads and bridges, providing healthcare and educational facilities, delivering clean drinking water

Global Links Page 4