NI

Business Exam 1

Globalisation: The movement towards the expansion of economic and social ties between countries through the spread of corporate institutions and the capitalist philosophy that leads to the shrinking
of the world in economic terms

Factors driving global business development:

Financial Growth 

  • These are factors that help a business grow financilly by reaching more customers and increasing profits:

    • Globalisation: Connects businesses to a global market and a bigger customer base.

    • E-Commerce: Online platforms help businesses reach customers worldwide.

    • Global Brand Recognition: Well-known brands attract customers across different countries, helping them expand.

Loss Minimisation 

  • This means reducing costs and avoiding risks while operating globally:

    • Economies of Scale: Producing in large quantities reduces the average cost per product.

    • Lower Labour Costs: Businesses can relocate production to countries where wages are cheaper.

    • Risk Spreading: Producing in multiple countries protects against natural disasters, conflicts, or political changes.

    • Taxation Benefits: Moving production to countries with favourable tax laws saves money.

Consumer purchasing and spending patterns:

  • Involves human behaviour of how a consumer makes a decision to acquire or purchase a product.

  • These patterns refer to how people decide what to buy, influenced by income, trends, and access to products. As more people gain internet access and smartphones, global awareness of brands increases. E-commerce makes it easy for consumers to buy from anywhere, driving global business growth. Rising disposable incomes, access to credit, and strong currencies boost spending power, creating opportunities for businesses to expand internationally. The pandemic also accelerated online shopping, increasing demand for fast, convenient, and global options.

  • There is a greater choice of products, secure and reliable payment systems, and an increased level of satisfaction with online shopping among all ages groups.

World Trade Organisation (WTO) regulations and sanctions:

  • The WTO supports fair global trade:

    • Sets rules and standards for international trade.

    • Protects developing countries from exploitation.

    • Encourages transparency, reduces trade barriers, and resolves disputes.

    • Promotes fair trade practices, helping global businesses operate efficiently.

    • The WTO encourages the removal of tariffs and non-tariff barriers, which enables businesses to access larger markets, improve supply chain efficiencies, and enhance competition

Deregulation of the financial market

  • This means fewer government restrictions on banking and investment, making it easier to trade internationally:

    • Allows foreign banks in Australia and removes limits on foreign investment.

    • Encourages competition, access to global markets, and easier movement of capital.

    • Helps Australian businesses expand globally and access larger customer bases.

The impact of globalisation on:

Globalisation is the spread of products, technology, information and jobs across national borders and cultures, which has led to international cooperation. 

Employment levels in developing countries and in developed countries:

  • employment levels in developed countries are generally lower than developing countries.

  • the higher the unemployment level, the greater are the opportunities businesses have of paying lower wages and having more applicants to choose from when they advertise jobs.

  • low unemployment in most developed countries means that wages are higher and there are less applicants to choose from when jobs are advertised. This drives globalisation towards developing countries because labour costs are lower.

Global spread of skills and technology:

Technology

  • communication technology is developing at a rapid rate, including in developing countries.

  • Ease of communication allows businesses in different countries to work together to achieve goals. For example, transport technology (in the form of shipping containers) improved as more goods were transported.

Skills

  • leads to greater sharing of ideas and education. If the required skill sets are not available in a country, the ability to globalise may be hindered.

International cooperation:

The impact of globalisation on international cooperation:

  • Multiculturalism and migration increase cross-cultural understanding and global awareness.

  • Leads to stronger political, social, and economic relationships between countries.

  • Encourages strategic partnerships and alliances (e.g. ASEAN, United Nations, World Health Organization).

  • Free Trade Agreements (FTAs) reduce trade barriers and boost cooperation.

  • Nations work together on shared goals, like the UN Sustainable Development Goals (SDGs).

  • Results in easier global trade, investment, and movement of goods, services, and people, helping global businesses grow.

Domestic market

  • If a domestic market is flooded with a product or industry type, this may push for businesses to send products overseas or to look for profits in other countries.

  • Domestic businesses might need to decrease the price of their products to compete negatively affecting their profits. This can lead to cost-cutting domestically, including redundancies.  

Tax minimisation – (tax havens and transfer pricing):

Tax haven

  • is a jurisdiction that has a low rate of tax or does not levy a tax. It offers some degree of secrecy.

  • Tax havens do not share or provide information to other financial institutions or governments.

Transfer pricing

  • is the setting of the price for goods and services sold between controlled legal entities within an enterprise.

  • For example, if a subsidiary company sells goods to a parent company, the cost of those goods paid by the parent to the subsidiary is the transfer price.

  • This allows for the manipulation of profits and the consequent amount of tax paid by the enterprise.

 

 

Benefits of home grown/developed products:

  • Greater profits: Selling Australian-made products overseas boosts business profits and keeps money in Australia.

  • Increased employment: More sales = more local jobs in design, production, sales, and distribution.

  • Higher government revenue: More business income leads to more tax collection, which funds public services (schools, hospitals, etc.).

  • Social benefits:

    • Supports innovation (R&D).

    • Stimulates local economic growth (multiplier effect).

    • Builds community pride and awareness of Australian quality, standards, and authenticity.

    • Encourages future development of other Australian-made products.

  • Increased awareness of home grown products within the local community in terms of knowledge and pride in Australian home grown products. Recognition of high Australian standards, quality and authenticity. Increased awareness and recognition of high quality Australian home grown products could lead to opportunities and/or innovative ideas to pursue other home grown products.

 

Role of ethics in global business decisions, including:

environmental responsibility:

  • Environmental Responsibility

    • Use renewable energy and reduce overall consumption.

    • Minimise waste with recycling programs and recyclable or reusable packaging.

    • Conserve energy (e.g. turn off lights/equipment after hours).

    • Promote paperless offices using digital/cloud systems.

    • Be transparent with consumers about eco-friendly practices to build trust and influence behaviour.

    Other Ethical Areas
    • Outsourcing: Choose partners that follow fair labour and ethical standards.

    • Offshore labour: Ensure workers are treated fairly and ethically, even if operating in countries with looser regulations.

Host country and home government incentives for international trade, including:

Grants:

  • Purpose: Financial assistance to reduce upfront costs and encourage businesses to export internationally.

  • Provided by: Government departments like Austrade.

  • Export Market Development Grant (EMDG):

    • Key Australian Government financial assistance program.

    • Encourages small and medium-sized Australian businesses to develop export markets.

    • Reimburses up to 50% of eligible export promotion expenses above $5,000 (if total expenses are at least $15,000).

    • Each eligible applicant can receive up to 8 grants in total.

    • Makes global expansion more financially viable for Australian businesses.

Taxation:

  • GST Exemption:

    • Exports are exempt from GST, reducing the cost burden on businesses.

  • Duty Drawback Scheme:

    • Allows exporters to claim refunds on customs duty paid on imported goods.

    • Applies when those goods are treated, processed, or incorporated into products that are then exported.

  • Tradex Scheme:

    • Designed for importers who intend to export goods.

    • Provides upfront exemption from both customs duty and GST.

    • Goods must be exported within 12 months of importation.

    • Offers a cash flow benefit to exporters.

  • R&D Tax Incentives:

    • Businesses can claim tax offsets for eligible research and development (R&D) expenditure.

    • Encourages innovation and development in export-focused industries.

    • Administered through the Australian Taxation Office (ATO).

Features of free trade agreements (FTA), including:

ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA)

  • Eliminates tariffs on (96% of Australia’s exports by 2020) therefore reduces the price of the export product which might, potentially increase sales, leading to an increase in profits and market share.

  • International arbitration is established: assists to resolve foreign investment disputes by referring disputes to international arbitration.

  • Provides a platform for ongoing economic engagement between the three parties through a range of agendas, economic cooperation projects and business outreach activities.

  • Promotes greater certainty for Australian and New Zealand service suppliers and investors, including certain legal protection for investment in ASEAN territories.

  • Provides new opportunities for Australian and New Zealand exporters to tap into international supply chains in the ASEAN region.

  • Reduces or eliminates certain forms of tariffs between the three parties.

 Role of AANZFTA:

AANZFTA aims for sustainable economic growth in the region by providing a more liberal, facilitative and transparent market and investment regimes among the twelve signatories to the Agreement.

Features of Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA)

  • prohibits all tarrifs and import and export restrictions on goods originatining withing the FTA area under ANZCERTA

  • Minimise market distortions in trade in goods, including through domestic industry accistance and export subsides and incentives

  • harmonise trans tasman food standards through Australia new zealand food authority (ANZFA) agreement, meaning lower compliance costs and fewer regulatory barriers

  • provides for mutual recognition of goods and occupations, removing barriers for trades and facilitating movement of skillled personnal jurisdictions

  • reduces investment costs, investors in both countries benefit from lower compliance costs and greater legal certainty when investing in their trans-tasman neighbour.

Roles of Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA)

  • strengthens the broader relationship between Australia and New Zealand

  • develops closer economic relations between the member states through a mutually beneficial expansion of free trade between New Zealand and Australia

  • eliminates barriers to trade between Australia and New Zealand in a gradual and progressive manner, under an agreed timetable and with a minimum of disruption.

  • develops trade between New Zealand and Australia under conditions of fair competition.

Benefits and challenges to Australian owned businesses as a result of FTAs

Benefits:

  • Increased profits from higher export sales and reduced restrictions.

  • Greater market access and expansion into overseas markets.The harmonisation of Trans-Tasman food standards through Australia New Zealand Food Authority (ANFA) agreement means lower compliance costs and fewer regulatory barriers (ANZCERTA)

  • FTAs can stimulate economic growth in Australia, reducing unemployment and increasing the country’s gross domestic product. Thus, overall there is higher consumer confidence and they are able to spend more money, which is beneficial to small businesses.

Challenges:

  • Increased foreign competition in local markets.

  • Reduced market share for some Australian businesses due to global entrants.

  • Higher labour costs in Australia may make local businesses less competitive.

  • Regulatory complexity: small to medium businesses may find it difficult to navigate any regulatory complexity associated with exports FTAs.

The role of e-commerce in a global environment:

  • Enables businesses to access international markets, boosting sales, profit, and global brand awareness.

  • Supports online transactions: Business-to-Business (B2B), Business-to-Consumer (B2C), and Consumer-to-Consumer (C2C).

  • Enhances communication with global customers, suppliers, and staff via mobile and digital platforms.

  • Uses technology tools such as electronic funds transfer (EFT), digital marketing, real-time inventory tracking, and secure payment systems.

  • Offers 24/7 availability and efficient digital distribution, reducing the need for physical retail presence.

Management

Marketing

Benefits to a business of having a global brand

  • Consistency – communicates a consistent message to all customers in all markets resulting in stronger brand awareness and positioning.

  • Low risk – can use marketing strategies that have worked in domestic markets.

  • Lower cost – businesses can achieve economies of scale by using the same advertising/packaging around the world. A centralised team can develop marketing strategies for all markets.

  • Easier to manage – standardised approach to global branding will be less complex to manage.

  • Better differentiation – a consistent global brand can stand out from the competition. The same logo, colours, product names and advertising can be seen all over the world.

Factors that determine the feasibility of expanding into a foreign market, including:

1. Level of Demand by Consumers
  • Reflects consumer willingness and ability to buy a product.

  • Feasibility depends on:

    • Number of potential customers and how often they buy.

    • Disposable income levels.

    • Size of potential market share must justify expansion investment.

2. Consumption Patterns
  • How and why people choose and use products.

  • Influenced by:

    • Changing consumer trends or interest in alternatives.

    • Rising wealth in developing countries expanding demand.

    • Seasonal or cultural events impacting purchasing behaviour.

3. Competitor Activity
  • Refers to number and strength of existing competitors.

  • Easier expansion if:

    • Few competitors or unsatisfied customers.

    • Gaps in market or unmet needs.

  • Harder expansion if:

    • Dominant brands, strong supplier/retailer ties.

    • High product loyalty or cultural attachment.

    • Products can be easily copied or substituted.


🌍 Standardisation vs Adaptation in Global Marketing Mix

Standardisation
  • Keeps marketing elements (name, slogan, features) consistent globally.

Adaptation
  • Adjusts elements to fit local cultures, laws, or preferences.

Elements to Consider:
  • Corporate Slogan:

    • Must be culturally appropriate and translated carefully to avoid offence or misinterpretation.

  • Product Name:

    • Should align with brand image and local language sensitivities.

  • Product Features:

    • Colours, packaging, climate needs, local laws (e.g. labelling, electrical standards) may require adaptation.

  • Positioning:

    • Decide whether to enter as a premium, economy, or niche brand based on local market research and strategy.

Rationale for and benefits of global strategic alliances 

Operations

Outsourcing
  • Hiring external specialists to handle tasks previously done in-house.

  • Benefits:

    • Cost savings and improved efficiency.

    • Access to specialist expertise.

    • Focus on core business functions.

    • Lower labour costs in other countries.

    • Better customer focus through external support.


Acquisition
  • When a business buys another to gain control and expand.

  • Benefits:

    • Instant access to new markets and customers.

    • Increased market share and financial power.

    • Reduced R&D and marketing costs.

    • Economies of scale and reduced competition.

    • Shared skills, technology, and capital.


Merger
  • Two companies combine to operate as one.

  • Benefits:

    • Access to foreign markets and broader resources.

    • Shared facilities and reduced asset duplication.

    • Larger teams with diverse talent and output.

    • Lower marketing and R&D costs.

    • Stronger brand presence and exclusive offerings.


Joint Venture
  • Two or more parties collaborate on a specific project while remaining separate businesses.

  • Benefits:

    • Local market expertise from partners.

    • Shared costs, risks, and resources.

    • Access to established customer bases.

    • Staff skill sharing can spark innovation.


Franchising
  • A business licenses its brand and operations in exchange for fees and revenue share.

  • Benefits:

    • Use of an already trusted brand and customer base.

    • Support in training, setup, and operations.

    • Shared advertising and large-scale marketing advantages.

    • Rapid expansion with lower direct risk.

Sources of Financial Risk in Export Markets

Currency Fluctuations
  • Changes in exchange rates can lead to losses when converting foreign earnings.

  • Exporters need strong knowledge of both local and foreign financial environments to manage this risk.

Non-Payment of Monies
  • Refers to not receiving payment for goods/services sold overseas.

  • Harder to recover funds offshore due to legal, time, and cost barriers.

  • Limited support from domestic institutions like the ACCC in international cases.

  • Greater need for accurate legal documents and supply chain transparency to track and recover payments.

Strategies to Minimise Financial Risk

1. Documentation
  • Letter of Credit: Bank guarantees full payment.

  • Documents Against Payment: Exporter sends documents through banks; goods released only when payment is made.

2. Insurance
  • Covers risks such as non-payment, political unrest, or damaged goods.

  • Types include:

    • Export credit insurance

    • Political risk insurance

    • Transit/shipping insurance

3. Hedging
  • Reduces losses from exchange rate movements.

  • Types:

    • Forward Contracts: Lock in a set exchange rate for future payments.

    • Options: Gives the right to use a pre-set rate or choose the better current rate at payment time.

Role of Innovation in Improving Products, Processes, and Services

Product Innovation
  • Involves changing features, materials, or functions of a product/service.

  • Purpose: Gain or maintain competitive advantage.

Benefits:

  • Attract new/existing customers

  • Build loyalty

  • Enhance public image

  • Increase referrals and sales

  • Extend product lifecycle

  • Increase profits

Process Innovation
  • Involves changing how a business operates, produces, distributes, or markets.

Benefits:

  • Reduced waste, time, and costs

  • Improved efficiency and sustained profits

  • More affordable manufacturing processes


📈 Benefits of Innovation for a Business

Financial Gain
  • Increased or new income via new markets or greater market share

  • Delays product decline stage

  • Boosts customer demand through added features/quality

Expansion of Global Market Presence
  • Innovation creates global competitiveness

  • Use of tech (e.g., e-commerce, cloud computing, social media) helps expand reach

  • Global exposure via platforms like apps, websites, Instagram, Twitter

Increased Market Share
  • New products attract new customers

  • Sustainability-focused innovations enhance image and loyalty

  • Improved tech and environmental responsibility appeal to modern consumers


🧩 Factors Impacting Innovation Success

1. Timing
  • More likely to succeed during economic prosperity

  • Higher consumer confidence = more willingness to try new things

  • Retailers are more likely to stock innovative products

2. Cost
  • Innovation requires significant financial and human resources

  • May take funding away from core business operations

  • Needs internal/external investment and skilled personnel

3. Marketing Strategy
  • Crucial to build awareness and desire

  • May include education campaigns, PR, advertising, packaging changes

  • Strong reputation for innovation helps with product acceptance

  • Poor marketing = risk of failure

4. Technology
  • Enables new capabilities and efficiencies

  • Stimulates innovation by offering platforms for business transformation

 People and Change in a Global Business Environment


1. Internal and External Factors That Drive Change

Internal Factors Driving Change

These are factors originating within the business that motivate or force the organization to adapt or change:

  • Management Initiatives: Management may push for change to reduce costs or improve efficiency. For example, if production costs rise, management might decide to outsource certain functions to countries with lower labour costs.

  • Employee Initiatives: Sometimes, employees themselves may push for change to improve workplace conditions or seek opportunities for skill development and career growth.

  • Technological Advances: The introduction of new technology can lead to changes in business processes to improve efficiency, reduce costs, or enhance product quality.

  • Staff Attitudes and Work Habits: Changes in employee mindset, motivation, or work habits can influence organizational change, especially in a global environment where diverse cultures and work ethics come into play.


External Factors Driving Change

These are forces outside the organization that compel it to adapt in a global business environment:

  • Political and Legal Factors:

    • Political decisions can drastically alter business operations by introducing new laws, regulations, or policies.

    • Shifts in legal requirements across different countries where the business operates can force adjustments to comply with local standards and regulations.

  • Economic Factors:

    • Interest rates, inflation, and unemployment rates influence consumer spending and business investment.

    • Economic indicators such as GDP growth, currency fluctuations, and trade policies can affect business strategy globally.

  • Social Factors:

    • Changes in social norms and consumer behavior can drive businesses to adapt products, marketing, and operations.

    • International events (e.g., pandemics, social movements) influence public perception and consumer expectations.

    • Advances in consumer technology compel businesses to improve their own technology use and digital interaction.

    • Prevailing social issues, such as sustainability or diversity, can affect a company’s public image and stakeholder relations.

  • Technological Factors:

    • Rapid technological innovation changes how businesses interact with customers and suppliers.

    • It impacts distribution channels, e-commerce capabilities, marketing methods, and overall communication strategies.

  • Environmental Factors:

    • Growing environmental awareness and regulations require businesses to consider sustainability in their operations.

    • Environmental impact can affect market access, as consumers and governments increasingly prefer eco-friendly products.


2. Reasons for Resistance to Change

Resistance to change is common and can arise from various sources within an organization:

Financial Costs

  • Employees may fear job losses due to automation, outsourcing, or restructuring.

  • High costs associated with new technologies or processes can cause reluctance.

  • Training required to adapt to change may be time-consuming, costly, and unwelcome.

  • Expansion costs might seem too risky or uncertain for some staff.

Managerial Inertia

  • Managers may resist change because it disrupts familiar routines.

  • Lack of understanding or fear of failure can slow decision-making.

  • Poor communication about the benefits and process of change increases resistance.

  • After leadership restructuring, employees might doubt management's competence or problem-solving ability.

Cultural Incompatibility in Mergers and Takeovers

  • Mergers bring together different organizational cultures, communication styles, and work ethics, causing friction.

  • Employees may struggle with different values, ethical practices, or educational backgrounds.

  • New leadership and team structures can disrupt existing work relationships and motivation.

  • Proper training and joint change management strategies are essential to bridge cultural gaps.

Staff Attitude

  • Lack of trust in the new organization or leadership.

  • Negative preconceptions about the merging company, leading to competitiveness or resentment.

  • Feeling undervalued or threatened by new hierarchies or comparisons with other staff.

  • Fear of the unknown and self-doubt about ability to adapt.

  • Mistrust towards management’s capability to deliver successful change.


3. Preparing People for Change

Effective preparation can reduce resistance and smooth the transition process. Two key models help with managing change:

Lewin’s Forcefield Analysis (FFA) Model

Lewin’s model helps analyze the forces for and against a proposed change to understand whether it is viable:

  • Purpose: To convince employees that the forces driving change outweigh those resisting it.

  • Steps:

    1. Clearly describe the change or plan.

    2. Identify all forces driving the change (e.g., long-term profit, customer demand, unsustainable costs).

    3. Identify all forces restraining change (e.g., company culture, costs, staff attitude).

    4. Assign scores to each force based on impact.

    5. Analyze whether driving forces are strong enough to overcome resistance.

  • Usage: Businesses can use this model to:

    • Brainstorm and document forces during meetings.

    • Communicate openly with employees about the reasoning and impact of change.

    • Develop action plans to strengthen driving forces and reduce resistance.

    • Show transparency, which helps build trust and readiness.


Kotter’s 8-Step Change Management Model

This model provides a clear, step-by-step approach for implementing change successfully:

  1. Create urgency: Show why change is necessary.

  2. Form a powerful coalition: Gather influential leaders and stakeholders from various departments to lead the change.

  3. Create a vision for change: Develop a clear, inspiring vision that explains what the change will achieve.

  4. Communicate the vision: Share it consistently with all employees.

  5. Remove obstacles: Identify and eliminate barriers to change (fear, lack of skills, etc.).

  6. Create short-term wins: Celebrate small successes to build momentum.

  7. Build on the change: Keep improving, update policies and procedures, and seek employee feedback.

  8. Anchor the changes: Integrate new behaviors and practices into the company culture.


4. Managing Diversity as a Strategy for Business Growth

A global strategic alliance or merger brings together diverse cultures, skills, and perspectives. Managing this diversity effectively can foster innovation and growth:

increase diversity with different people working together increase creativity and innovation, helps the business understand target market, or the market theyre hoping to expand into using inside help.

allow job sharing, and flexibile working hours - part time jobs, higher people with diabilities - these are ways to cater to people in diverse groups.

when operating in a global setting, businesses can draw on the knowledge and experiences of their diverse staff to help understand the countries and cultures they are planning to expand to.

The ASX diversity policy encourages listed entities to adopt and disclose a diversity policy, set measurable gender diversity objectives (particularly for boards and senior executives), and report progress annually. Companies in the S&P/ASX 300 are specifically recommended to aim for at least 30% of each gender on their boards. While compliance is not mandatory, companies must either follow the guidelines or explain why they don’t—known as the "if not, why not" approach.