Emerging and Developed Economies Quiz

Growing Economies

• Developed economies, e.g., USA, Canada, Japan, have high income levels (average income per capita of $12,476 or more), high literacy rates, high life expectancy (expect to live over 60 years), good infrastructure (schools, colleges, roads, hospitals, internet), and a heavily industrialized tertiary sector. Unemployment levels are generally low. Some developed countries have experienced high unemployment since 2017.
• Developing economies, which are more than 200 countries globally, have lower income levels (low or lower-middle income levels, e.g., income per capita as low as $1035 in 2019). Literacy rates are low, with only a small proportion of the population being literate. Low life expectancy, (e.g. 53 years in Central African Republic in 2017), poor infrastructure (lack of roads, schools, hospitals) and dependence on the primary sector (mainly agriculture or mining) are common. Unemployment rates are high.
• Emerging economies are nations investing in more productive capacity with rapid economic growth. They are moving away from reliance on traditional agriculture and raw material exports. Examples include the BRICS (Brazil, Russia, India, China and South Africa) and MINT (Mexico, Indonesia, Nigeria and Turkey) countries. Rising income per capita allows increased spending on imports and domestic products, making their markets attractive for foreign firms.

Emerging Economies

• BRICS and MINT countries have experienced strong growth over recent years.
• In 2018 and 2019, China and India were projected to be among the top 5 global economies.
• China has held the second-largest economy in the world for some time.
• China often ranks as a significant exporter and a major destination for foreign investment.

Indicators of Growth

• Gross Domestic Product (GDP) per capita measures economic output.
• Human Development Index (HDI) combines life expectancy, education, and income.
• Life expectancy reflects a nation's healthcare and societal well-being.

Mean years of schooling and Gross National Income (GNI)

• Mean years of schooling assess the average amount of education a 25-year-old has received.
• Gross National Income (GNI) represents the relative wealth of the population using Purchasing Power Parity (PPP).

Note: Developments in World Affairs

• Firms need to watch world developments to identify potential opportunities and mitigate risks.
• Russia's economic growth has been affected by sanctions imposed by the US and EU in recent years following military activities.
• Relations between North and South Korea improved in 2018 but have not produced the anticipated economic openings for North Korea.

International Trade & Business Growth

• International trade increases competitiveness and consumer choice offering access to goods and services not available domestically or at cheaper overseas prices. Increased choices allow countries to sell surplus goods.
• Visible trade is the import and export of physical goods, while invisible trade involves the import and export of services.
• Exports are the simplest way for firms to access foreign markets; imports allow businesses to reduce costs and access resources globally.

Implications of Economic Growth

• As economies grow, consumers have more jobs and disposable income, driving greater demand for products and increasing business opportunities for firms.
• Increased international trade allows firms to find access to lower costs of manufacturing and accessing larger markets.
• Unemployment levels offer businesses insights into the general state of the economy and help firms with their overall assessment of the broader market.

Factors Contributing to Increased Globalisation

• Global dependence/integration of the world's economies increases, due to increased international trade, increased movement of labour and capital flows between countries.
• The sharing of technology and intellectual property across borders has increased.

Trade Liberalisation & the WTO

• Trade liberalisation promotes open economies and the flow of trade amongst countries.
• The WTO helps regulate and facilitate trading relationships amongst countries to remove trade barriers, settle trade disputes, and promote free trade.

Political Change

• Political changes, such as the fall of communist rule in the Soviet Union and the economic reform in China, have been factors in increasing globalisation
• The reunification of Germany and the opening of China to international trade are examples of impactful political changes in the late 20th century.

Reduced Costs of Transport & Communication

• Improvements in international transport networks have decreased costs and increased the number of flights and destinations.
• Cheaper budget airlines have made air travel more accessible.
• The internet and online communication have facilitated global business operations and worldwide online shopping.
• Containerization has made transport and handling more efficient.

Increased Significance of MNCs

• MNCs are large firms operating across multiple countries typically having retail stores or factories in more than one country.
• MNCs contribute significantly to global GDP and exports, and they provide employment for large numbers of people.
• The internet has altered globalisation allowing small firms and businesses to participate and benefit.

FDI & Link to Business Growth

• Foreign direct investment (FDI) is important for business growth.
• Firms choose FDI instead of expanding due to reasons, such as maintaining control of foreign operations, protect intellectual property such as patents, copyrights, management know-how, to have closer access to customers, reduce transportation costs, and overcome trade barriers.
• FDI often comes from developed nations to emerging and developing nations.

Different Forms of FDI

• Strategic alliances are arrangements between two firms for a mutually beneficial project, without losing independence.
• Joint ventures involve pooling resources from multiple firms to create a separate, new business entity. Firms buying existing foreign businesses is another form of cross-border merger and acquisitions
• 'Greenfield' acquisitions involve building a new facility on a piece of land not used previously.
• Horizontal FDI integrates firms in the same industry but at the same stage of production in different countries.
• Vertical FDI occurs when a firm integrates firms in the same industry but at different stages of the production process in different countries

Factors Contributing to Increased Globalisation (cont'd)

• Structural change in the way economies are organised has a positive impact with firms becoming more export-oriented.
• There is greater accessibility to global markets for firms through Internet & social media. Access to this broader range of markets allows firms to operate regardless of geographical location.

Advantages of Globalisation to Firms

• Access to huge international markets makes it easier for firms to increase sales and profit levels.
• The expansion of firms can lower operational costs through economies of scale and cheaper resources. Cheaper labour is available globally.
• Globalisation makes access to a variety of resources easier as firms can use resources from various countries where they might offer the cheapest or most readily available options.
• Access to lower corporation tax environments can also benefit firms.

Disadvantages of Globalisation of Firms

• MNCs experience higher levels of competition globally
• Globalisation creates a higher dependency when the success of one country affects another eg financial crisis.
• Firms may negatively impact the local environment or workers through unethical practices.

Protectionism

• Protectionism comprises government measures designed to shield domestic firms from foreign competition, especially imports.
• Trade barriers are used to limit or prevent import.
• Reasons for Protectionism:
• Prevent dumping (foreign producers selling goods below cost in a domestic market).
• Protect local employment (domestic firms unable to survive without protectionism).
• Protect infant industries (infant industries need time to establish).
• Gain tariff revenue for the government.
• Retaliation (countries imposing trade barriers on each other).
• National security (dependence on trade with another country could be seen as a matter of security).

Tariffs

• Tariffs are taxes on imports which make imported products more expensive, making it possible for domestic products to compete on price.
• Governments can use tariffs as a source of revenue.
• Tariffs can be ineffective if imports are price inelastic.

Quotas

• Quotas limit the quantity of imported goods.
• Embargoes are total bans on imports.
• Quotas make imported goods more expensive as there are fewer imported goods available in the domestic markets

Government Legislation/Administrative Barriers

• Some governments impose strict safety regulations on imports, particularly in relation to food products.
• This can limit or reduce the volume of imports.
• Restrictions have been enforced in some countries in preventing the access to certain ports

Domestic Subsidies

• Subsidies, grants, interest-free loans, and tax breaks for exporters or domestic firms, help decrease production costs, making it easier for firms to compete in the domestic market and / or gain an advantage in the global market

Impact of Protectionism

• In the short term, protectionism benefits domestic firms as competition from overseas reduces. Firms grow as there are fewer businesses competing in the market for the same products.
• Increased profitability leads to investment in technologies, to become more innovative & more efficient businesses leading to wider growth in the markets.
• However, long-term protectionism can prevent competition and hinder the growth of poorly performing industries.

Trading Blocs

• A trading bloc is a group of neighbouring countries that have regional trade agreements (RTAs) and enjoy free trade with one another. (eg. EU, NAFTA, ASEAN)
• In order for a trading bloc to be successful, there needs to be little to no barriers/barriers that are minimal.

Free Trade Areas (FTAs)

• FTAs have few or no internal barriers like tariffs or quotas, amongst member countries
• Tariffs/quotas between member countries must be minimal or ideally zero
• Trade barriers between member countries and non-members typically exist
• Certificates of origin are sometimes used to ensure the traded products originated from a region. This is aimed at ensuring that MNC's do not take advantage of the FTA agreement.
• The volume of trade amongst the member countries is usually much higher in comparison to trade with non-members

Customs Unions

• Customs unions have common external trade barriers, typically tariffs, amongst member countries

Common Single Markets

• Common single markets eliminate tariffs.
• Non-tariff barriers amongst members countries remain

Single Markets

• Countries that belong to a single market allow the free movement of capital, goods and services, and labor.
• The conditions that allow these movements are often common across the bloc, creating ease of business for member countries.

Economic Unions

• Economic unions allow for the free movement of products, services, capital, and labor across member borders.
• With the goal of economic benefit for member countries, common currencies are also common with this type of agreement.

The European Union (EU)

• The EU is the most significant trading bloc in the world.
• The EU has expanded from six founding members to 28 in 2018.
• The EU includes a single market that guarantees freedom of movement for people, goods, services, and capital throughout the member states.
• Laws and regulations that work across many areas such as foreign policies and security are implemented.

ASEAN Free Trade Agreement (AFTA)

• ASEAN was established in 1967 to create growth within social, cultural, technical, scientific, and administrative fields, as well as to promote regional peace and stability.
• It has worked to enable regional economic integration and become a single market (AEC) by 2015.
• Cooperation across several areas such as macroeconomic, financial, and labor policies, as well as regional sourcing is also factored in to the agreement.

NAFTA

• NAFTA's purpose is to eliminate tariffs between the member countries. (Canada, Mexico, & United States)
• It includes agreements covering trade, investment, labor, and financial transactions, as well as intellectual property, and environmental issues.

Factors to Consider in Trading Blocs

• Firms need to consider where to create or produce their products as certain areas may provide lower operational costs.
• Decisions on when to sell products can be guided by the knowledge of the product life cycle when considering the markets that the product is offered in to gain market penetration and growth.

Trading Blocs: Opportunities to Firms

• Accessing larger markets, cheaper resources, and allowing localisation of products/specialisation are benefits to locating manufacturing and operations within a trading bloc, allowing better access to a wider global market.
• When a country is part of a trading bloc it may give a country the power to negotiate for better products/ deals with countries outside the bloc.

Trading Blocs: Drawbacks to Firms

• Trade diversion may occur, if a trading bloc has subsidies, the price of an item may be artificially lower than that of the country that has the most competitive advantage in regards to the item.
• Inefficient firms may be protected from competing firms.
• Unequal distribution of benefits may cause political tensions with members.

Conditions that Prompt Trade

• Firms may expand into international markets to access new resources and markets, as well as to lower the operational costs of their products and services in the new target market
• Other conditions for increasing trade include:
• There is demand from international markets
• New markets offer new and increased revenue

Push Factors

• Market saturation is reached in a particular market when the market’s consumer base has grown to their full potential.
• Competitive businesses may force firms to lower prices and reduce profit margins, posing a risk to customers switching to other businesses at lower prices.
• When competition is too intense, firms may consider moving to alternative markets.

Pull Factors

• Higher/new markets and resources available at potentially lower prices. These resources include labour, materials and other operational cost factors
• Access to cheaper labor, raw materials, and technologies
• The reduction of transport costs

Offshoring

• Firms move their operational process to another country with the goal of lowering the cost of the original process (eg. manufacturing)
• Lower costs are achieved by locating the operational process in a country with lower labor costs.
• Moving manufacturing to a low-cost country can lead to:
• Lower wages
• Unemployment in the domestic country
• Language/cultural differences
• Political/economic/technological risks

Outsourcing

• Firms may contract out portions or functions of their business to a third party.
• This is typically done on a cost reduction basis, to access expertise not currently available in the firm's country of operation, or to free internal resources in the firm to concentrate on core operational functions.
• Outsourcing of business tasks can lead to:
• Negative impact on quality of the finished product
• Increased vulnerability when dependent on outsourcers
• Increased management costs

Labour Productivity

• Labour productivity is the measurement of the output of goods and services related to the number of labor hours expended.
• Quality of labor often has a greater impact on labor productivity than the labor cost.
• Skilled workers with higher qualifications typically have higher productivity.

Extending Product Life Cycle

• Extending a product's life cycle involves repositioning the existing product for use in a new market, when the original market has reached its peak of product sales
• Firms may decide to enter a new market when the existing market has reached saturation or introductory phase.
• New feature additions to products in certain markets will extend the products use in new markets where they may also be a novelty.

Assessment of a Country as a Market

• Firms need to understand a country's competitive advantages before entering a foreign market.
• Levels of disposable income suggest consumer capacity to afford products.
• Ease of doing business provides insight into how accessible the market is.
• A country's infrastructure (eg: transportation and communication networks) affects business speed and operational logistics
• A country's political stability affects business dealings
• Currency exchange rates increase market uncertainty

Levels of Disposable Income

• Disposable income is the amount left after deductions, such as taxes, have been taken away from the original income. This income is evaluated by individuals and is the basis for spending preferences.
• Firms must consider consumers' ability to purchase their product
• The proportion of high and low income earners determines spending patterns

Ease of Doing Business

• It examines the ease of conducting business in a given country.
• It considers different factors, like the conditions of setting up premises, permitting processes and distribution considerations. These factors may help determine the level or efficiency of sales and operational costs.

Infrastructure

• Infrastructure is significant as access for goods, workers and raw materials is essential to smooth business dealings/transactions.
• Poor infrastructure affects the sales speed and efficiency of operations.
• Consistent access to electricity and internet coverage are important factors that determine business dealings.

Political Stability

• Political stability is critical for firms. A politically unstable country can increase uncertainty for firms and may lead to problems such as financial loss due to government instability, kidnapping and/or corruption.
• Risks, such as instability during elections, coups, terrorism, and human rights issues can be considered when assessing political stability of a host country

Exchange Rate

• Fluctuating exchange rates make revenue forecasting challenging for international businesses.
• The impact of fluctuating exchange rates may also differ greatly amongst businesses based on factors such as the elasticity of demand for their specific products.
• Ways firms can manage the risk of fluctuating currency exchange rates is through methods such as taking out insurance or hedging against the fluctuating rate.

Application of Porter's Five Forces Model to Assess Markets

• Porter’s Five Forces Model is used to evaluate competitive intensity and attractiveness of an overseas market.
• The model helps determining the extent or worthiness of the overseas market as a target market to enter.

Locating Production

• Several factors influence production location decisions:
• Production costs (labor, energy, raw materials)
• Availability of skilled labor
• Infrastructure (transport, communication)
• Ease of business
• Political stability
• Natural resources
• Locating in a trading bloc
• Likely return on investment/ ROI
• Government incentives

Costs of Production

• Companies prioritize lower production costs, gaining competitive advantages in the market.
• Main factors associated with production costs for firms are labor, raw materials, energy & land.
• For labor-heavy firms, labor costs are a significant proportion of the entire production cost

Skills & Availability of Labour Force

• Labour costs are usually a deciding factor when companies decide if it is worth locating a factory abroad.
• The availability of workers with the appropriate skills to produce the product is sometimes more essential than labor costs.
• Firms must consider whether the workers are skilled enough, and also the costs of training, to maintain the quality of the product.

Reshoring

• Moving manufacturing back to a firms original country of operation is known as reshoring. This trend is driven by issues such as;
• Poor quality standards
• Increase in operating costs in the original operating country

Global Mergers & Acquisitions

• Licensing & franchising, mergers and acquisitions are also common cross border forms of business expansion.

Global Joint Ventures

• Joint ventures offer firms a way to enter rapidly and efficiently into a new market or trading bloc quickly
• Companies may combine together to share risks and costs

Spreading Risks & EOS

• Firms may locate in multiple markets to reduce the impact of economic downturn, such as a global financial crisis.
• Locating in many different countries reduces dependence, also provides large economies of scale for firms

Entering New Markets/Trading Blocs

• Establishing joint-ventures is one of the ways that firms can enter new markets rapidly. New markets are more readily accessible through mergers and acquisitions

Acquiring National & International Brand Names/Patents

• Acquiring intellectual property that's already proven elsewhere is often easier than producing entirely new intellectual property if firms are expanding globally

Accessing Supply Chains

• Obtaining resources, is often a motivation to form cross-border partnerships. This can be part of backward vertical integration to secure supply.

Accessing Distribution Networks/Supply Chains

• Firms may establish or buy out relevant distribution networks to ensure availability of products to target markets immediately
• These partnerships can reduce the profit margins of retailers and ensure quicker availability of products

Maintaining/Increasing Global Competitiveness

• Cross-border partnerships, typically mergers and acquisitions can create new business opportunities and improve the competitiveness of firms in the growing global market.

Reducing Competition

• Mergers and acquisitions, especially when it involves horizontal integration, may reduce competition, resulting in firms with greater market domination in relation to a specific segment of the overall market.
• It is important that these firms, which may have gained an unfair advantage, are scrutinised by government regulators to ensure practices are legitimate, not impacting consumers negatively

Making use of local Knowledge

• Firms need to have a better understanding of local cultures, tastes and behaviors in order to successfully market and deliver products to targeted demographics
• Understanding these factors will allow firms to better adapt their marketing strategies and business dealings.

Government/Legal Requirements

• Governments may insist on partnerships with local businesses to control external influences, ensure market competitiveness, and to promote the transfer of new work processes, skills and technology to the local company.

Sharing Costs & Risks

• Sharing costs and risks can lead to an easier transition into new markets.
• Joint ventures are often utilized amongst companies to help share the associated risks and costs associated when entering foreign markets.

Global Expansion & Uncertainty

• MNCs typically have more options for establishing a presence in multiple or more international locations, including sourcing, locations closer to consumers and customers, and broader scopes of innovation.

Global Uncertainty

• Globalisation typically increases interdependence between nations that results in more uncertainty in global economic dealings and business dealings.
• The 2008 global financial crisis is an example of how one nation's instability can have implications for the international market,
• Brexit is another example of how a nation’s instability can have repercussions for the rest of the world.

Impact of Exchange Rate Movements

• Fluctuating currency exchange rates can affect firms through currency devaluation (making a currency weaker), and revaluation (making a currency stronger), and subsequently affecting their profit margins, and operational costs.
• The impact on firms strongly depends on the demand elasticity of firms

The Significance of Changes in Exchange Rate on Firms

• The impact on fluctuations of currency rates will depend on the elasticity of the firm's imports and export prices; more elastic means more substantial impact for firms.
• Companies face difficulty in forecasting when currency movements are unpredictable, and this makes it difficult to predict profit accurately
• When firms engage in the anticipation of exchange rate fluctuations, it is often done through methods like fixed contracts that set prices for specific periods of time.

Skills Shortages

• A skill shortage in a given country/region occurs when demand for skills is high, but supply is low;
• Factors that influence this could include increased demands/changes in skills required, and "brain drain"

Impact of Skills Shortages

• Higher wages occur when supply of labor is low. Many countries are actively seeking ways to increase the available skilled workforce to fulfill the needs of industry.
• Concerns regarding the quality of products and decrease in worker productivity can occur in the absence of skilled labor to meet the demand/needs of specific markets/industries.
• Firms could lose out on customers when the ability to produce efficiently is impacted

Marketing

• Global marketing involves planning, producing, distributing, and promoting products worldwide
• Global marketing strategy requires firms to have offices in different locations, and make use of global digital platforms to reach and sell products in diverse global markets

Global Localisation (Glocalisation)

• Glocalisation involves adapting global or international products to specific local contexts, by tailoring offerings to better suit the target markets.
• Glocalisation products are often adjusted to better meet tastes, values, and other cultural norms required by the new target market to best accommodate and cater to the locals

Marketing Approaches: Ethnocentric/Domestic Approach

• An ethnocentric approach considers the home country/domestic market as superior and applies those same market strategies to all other international markets.
• A strong benefit is that standardization across countries gives firms wide economies of scale, resulting in extremely reduced marketing costs
• A major drawback is that the lack of market orientation can negatively impact firm sales as consumers are not catered to their specific preferences

Marketing Approaches: Polycentric/International Approach

• The opposite of an ethnocentric approach is a polycentric approach.
• This approach is more tailored, catering to specific tastes and preferences in each individual country.
• A drawback is that high product and development costs can occur when firms try to establish a broader presence/business in specific markets with distinct tastes and preferences

Marketing Approaches: Geocentric/Mixed Approach

• A hybrid approach is a geocentric approach.
• It involves taking the best elements of both the ethnocentric and polycentric approaches, in an attempt to create the best and most accessible marketing plan for different markets

Adapting this 4Ps to Global Markets: Price

• Pricing is a crucial part of marketing in international markets.
• Cost, customer sensitivity & competition preferences are factors to consider when setting price in global markets

Adapting this 4Ps to Global Markets: Product

• Global firms must adjust their product's attributes to accommodate legal, economic, political, technological, and climatic needs of each market.
• Products may be adapted to local tastes, needs, or preferences
• Global marketing requires firms to have available & specific processes for product adaptation for success in new markets

Adapting this 4Ps to Global Markets: Promotion

• Promotion methods need to be adapted to be culturally relevant and effective.
• Promotion techniques need to consider language differences, beliefs, perceptions, laws and cultural norms when used in foreign markets

Adapting this 4Ps to Global Markets: Place

• Successful firms need to make their products accessible globally to various target consumers, using the appropriate channels that people typically utilize in that specific market.

Application of Ansoff's Matrix to Global Marketing

• Market penetration is a means for an existing company to increase presence/sales and profit in the country they currently operate in
• Market development is when existing products are marketed in a new market while remaining in the original product line.
• Product development is the promotion of new or modified products in existing markets.
• Diversification involves introducing new products in entirely new markets.

Application of Porter's Strategic Matrix to Global Marketing

• Firms can use Porter's Strategic Matrix to analyze competitive advantage in global markets, identifying cost leadership or a niche market approach

Niche Market

• A niche market approach focuses on a narrow segment of a larger market where customers have specific needs and wants

Global Niche Markets

• Global niche markets are smaller and specialized parts of a wider mass market, serving countries' specific needs that are not fulfilled by widely available or general products.

Cultural Diversity

• Each country has various cultural, racial, and ethnic groups with unique perspectives and evaluation of products and services
• Cultural factors to consider include language, hobbies or interests, economic development, religious norms, customary behaviors, and social norms.

Cultural Differences

• Language, customs, taboos, values, punctuality, and business norms need to be considered.
• The nuances of particular cultures should be accounted for when developing and advertising products because differences can translate to varying interpretations of communication and potential misunderstanding

Different Tastes & Preferences

• Consumers’ tastes and preferences vary across different locations due to their differing cultural, religious, and other values.
• Firms need to tailor products for each location to maintain profitability and accommodate the consumers in that particular market.

Language & Unintended Meanings

• The meaning of words and sentences can differ significantly across countries, potentially leading to misunderstanding in international communication.
• Cultural nuances and communication differences need to be considered when developing and delivering marketing campaigns.

Inappropriate Branding & Promotion

• Firms should tailor their branding and promotion strategies to cultural contexts of potential consumers, to prevent misinterpretations

Impact of MNCs on the Local Labour Force

• MNCs contribute to the creation of jobs/training new skillsets that workers can transfer to other work
• MNC strategies can increase wage rates as result of additional/increased demand for workers
• MNC’s are critiqued for exploitation of workers, often due to low wages and poor working conditions

Impacts of MNCs on the Local Firms

• MNCs may increase business from the sales of materials, new plant construction from MNCs, and potentially outsourcing
• Competition from MNCs is a motivator to firms to increase their competitiveness, improving/raising quality or efficiency
• Local firms may not survive due to intense competition from MNCs, or potential increases in labor costs

Impact of MNCs on the Local Community

• MNCs offer an increased choice of products and services to consumers at lower prices
• MNCs, while bringing in products and better infrastructure, sometimes are criticized for putting environmental resources under threat, also contributing to cultural issues

Impact of MNCs on Economic Growth & FDI Flows

• MNCs engage in foreign direct investment (FDI)

Impact of MNCs on Balance of Payment (BOP)

• MNCs having inward investment tends to benefit the BOP of the host country as it involves an inflow of capital into the country
• MNCs increase exports for the host country that in turn may increase import substitution if domestic productions are established in a similar niche
• Reduced exports will often occur due to the required importation of materials & machinery from other countries

Impact of MNCs on Technology & Skills Transfer

• MNCs contribute to technological growth, and some MNC's profit from R & D is used in the development of their products and/or services.
• Reverse engineering is another means from which MNCs spread technology

Impact of MNCs on Consumers

• MNCs increase consumer choice and often offer these products or services at lower costs due to economical gains.
• The added competition from MNCs tends to lower prices for consumers, and often improve the standards of living. This often leads to greater competitiveness among domestic firms.

Impact of MNCs on Business Culture

• MNCs tend to heavily influence the local business culture by establishing new practices, standards, and operating procedures/business ethos
• MNC’s may influence local firms to have similar practices, work procedures and general workplace ethos

Impact of MNCs on Tax Revenue

• MNCs contribute to tax revenue of the countries they implement their operations in.
• However, some firms may engage in transferring prices to regions with lower tax rates to reduce the total amount of tax paid to the host country.

Transfer Pricing

• Companies commonly use transfer pricing as a method to reduce their overall tax burden by charging different prices to different locations or subsidiaries.

International Business Ethics

• Companies need to establish ethical business practices and standards in order to maintain profitability and a positive international image

Stakeholder Conflicts

• Businesses face a variety of complexities in global markets, including conflicting needs (eg. consumers regarding product prices, employees and wage levels, and environmental concerns with communities that are associated with the operational and manufacturing procedures)
• Companies that act in line with ethical standards are often better positioned to attract and manage stakeholders more effectively

Environmental Considerations

• Businesses have environmental impacts due to the materials they use, and the waste that they produce
• Businesses can be mindful of their environmental impact by monitoring greenhouse gases and working towards more sustainable disposal and manufacturing processes

Supply Chain Considerations

• Companies need to be aware that unethical or harmful practices may take place through their supply chain. These practices can put the company at risk of reputation damage and potential boycotts.

Marketing Considerations

• Companies that plan their strategies carefully and are sensitive to different aspects of local market factors are better equipped to succeed when marketing their products.

Controlling MNCs

• Regulation or control of MNCs may involve imposing tariffs, quotas, or regulations on local content or access to resources, thus establishing restrictions on businesses or activities deemed critical.
• Support for domestic businesses through subsidies or tax relief can sometimes be beneficial to the balance of competition and protect local firms

Legal Control

• Regulations are often implemented to control multinational corporate (MNC) activities. These regulations include a range of policies such as;
• Competition policies
• Trade policies
• Incentives & penalties, also help to monitor the MNC company’s activities, including their impact on the economy and environment and also to safeguard that companies adhere to ethical standards

Consumer Pressure

• Consumer engagement is growing in international business operations.
• Consumers are more informed, and capable of applying ethical and economic pressure to businesses' decisions

Pressure Groups

• Pressure groups work collaboratively to influence corporate behavior/activity
• Methods for doing so involve tactics such a demonstrations, protests, media criticism, boycotts, petitions etc.

Social Media

• Social media platforms are often utilized by pressure groups to disseminate information quickly, and gather supporters to exert pressure on firms & corporations.

Self-Regulation/Self-Policing

• Firms may choose to self regulate their operational practices.
• This may be in reaction to legal standards/restrictions/fines. This may also be done in anticipation of potential consumer/ stakeholder pressure.

Test your knowledge on the characteristics of developed and emerging economies. This quiz covers topics such as spending patterns, ease of doing business, and challenges facing emerging markets. Perfect for students in economics or anyone interested in global markets.