Global Considerations

Globalisation

the Effect of high tech communications, lower transport costs and unrestricted trade and financial flows turning the whole worlds into a single market, producing more integrated global economic systems.

  • Globalisation allows businesses to increase their market, but also compete with many more businesses as a cost.

Exchange Rates

  • An exchange rate is the price of one country’s currency expressed in terms of another country’s currency.

  • En exchange rate is affected by Economic Conditions

    • Interest Rates

    • Inflation

    • Balance of trade

    • political stability

    • government involvement

  • Exchange Rates are important for businesses who buy and sell goods internationally.

3.8 Textbook Notes

Overseas Competitors and Markets

  • Highly unlikely to face competitors overseas

  • Must build a competitive advantage over their overseas rivals

  • It is important to consider the financial rates of competitors overseas - national, local marketing.

  • Not only big companies, but local market’s businesses can also sell their produce internationally.

  • Except - problems include considering transportation, currency exchange, taxes, marketing and packaging and distributions on such a wide scale.

  • Good idea to speak with someone with overseas-business experience.

  • The Australian Trade Commission supports growing overseas Australian businesses.

Offshoring Labour

  • Opportunity to use labour overseas is something where owner of the business needs o consider the laws of that country/region

  • for eg. legal ages to work differ, minimum wage differs, working conditions, way of running that branch and safety precautions differ.

  • Offshoring refers to the practice of moving some of a business’s processes or services

    to the same or another business located in an overseas country.

  • Businesses usually do this to take advantage of lower costs, including labour and transportation, as well as more favourable economic conditions in other countries.

  • Eg. Telstra uses offshore labour in the Philippines and India in its call centres and for other support roles. Qantas uses offshore maintenance facilities to perform maintenance checks on many of its aeroplanes.

Exchange Rates

  • Exchange rate: Price of a country’s currency in terms of another.

  • Affects the amount of one currency needed to buy another.

  • Australia's rate often quoted as AUD/USD (e.g., 0.770.77 means 1 AUD = 77 US cents).

  • Influenced by:

    • Interest rates

    • Inflation

    • Trade balance

    • Political stability

    • Economy

    • Governance

  • Impacts financial transactions, product demand, and import costs.

  • Traders profit from buying/selling price differences.

  • Important for businesses involved in exporting/importing.

  • Depreciation (currency value fall):

    • Exports cheaper, imports more expensive.

    • Benefits exporters, increases costs for importers.

Patenting, Copyrights and Trademarks

It is important to protect intellectual property at a global or international level, especially with overseas competitors; use patenting, copyrights and trademarks.

  • Patenting:

    • Exclusive right for new, inventive, and useful devices, substances, methods, or processes.

    • Legally enforceable; gives exclusive rights for commercial use during the patent's life.

    • Australian patent protects rights only in Australia; there is no 'international patent'.

    • Must obtain patents in each country for protection.

    • Can file an international application under the Patent Cooperation Treaty (PCT) via the World Intellectual Property Organization (WIPO); IP Australia supports this.

  • Copyright:

    • Free, automatic protection for original works (writing, music, art, films, sound recordings, broadcasts, computer programs).

    • Generally obtained without registration or formalities.

    • Copyright notice reminds competitors, though not always required.

    • 179/190 countries ratified the Berne Convention for minimum protection standards, but some countries require establishing copyright.

  • Trademarks:

    • Right over letters, words, phrases, sounds, smells, shapes, logos, pictures, or packaging aspects representing products.

    • Australian trademark protects only within Australia.

    • Can apply for trademark protection in each country separately.

    • Can make a single international application via IP Australia, nominating Madrid Protocol countries.

Online Sales

Most businesses sell products directly to consumers online. When planning, a business owner will need to consider the options of selling through a physical store, an online store, or both.

  • Online sales present many opportunities for businesses:

    • Reduced long-term costs:

    • No need to pay for premises.

    • Lower expenses on utilities like electricity and water.

    • Wider market reach:

    • Customers can purchase from around the world.

  • However, business owners need to consider the following:

    • Setting up and maintaining a professional website or mobile app can be expensive.

    • Requires expertise.

    • Website crashes can occur