The global economy is the world's economies and refers to the economic activity of the world.
Global influences on Australia:
Changing international business environment
Reduction of protection
Increased overseas expansion.
Changes in markets:
Changes in financial/capital markets - finance is mobile and flows easily between countries.
Changes in labor markets - has not been freed up as much as other markets because of increased immigration policies.
Changes in consumer markets - consumer markets are no longer seen as the consumers of individual economies, but as a whole world market. Businesses now have to aim at the whole global consumers.
Drivers of globalization
Transnational Corporations - they are the biggest players in the global economy because they export large volumes of products to different countries around the world and take advantage of economies of scale.
Global consumers - today's consumers have access to the internet and pay TV so they are more likely to purchase products from foreign sources.
Impact of technology - due to improvements of communication/technology and transport the globe has shrunk in size because it is a lot quicker to send date/information.
Role of government - over the past 20 years, most governments have made an effect to gradually phase out protection. This has also been through the establishment of many large trading agreements.
Methods of international expansion
Can gain valuable experience overseas
*Foreign Direct Investment (FDI)
-Greenfield strategy - commencing a new business overseas.
-Acquisition - merger/takeover
-Joint venture - where 2 or more businesses work together.
1. Direct control over foreign facilities
2. Reduction in transport costs
3. Better ability to monitor position
Increased financial risks
Exposed economic uncertainties
*Relocation of production - this occurs when production is shut down...