Global business concepts and practices

Global Business

Q1.Identifying global business opportunities

While the lowering of trade barriers through formal agreements such as NAFTA have been vitally important in expanding the possibilities of consumers to access a diverse range of products, technology has been an equally important factor in doing so. Through the ubiquity of the Internet, consumers can buy products from all around the world. They can view them and select them without ever having accessed a brick-and-mortar shop. Technology is not simply a way of making products more efficiently (although it does accomplish that objective). It is also an effective marketing ploy. Consumers can read about products and how they are consumed, and they often want to imitate those lifestyles.

For example, SUVs and Apple products are extremely popular amongst China's burgeoning middle class. "Sport utility vehicle sales surged to 2 million units in 2012, a 25.5% increase over the 1.59 million sales volume in 2011, despite a slim auto market growth" (Chinese SUV sales hot, market divided, 2013, China Daily). The question might arise -- why would Chinese consumers living in cities need off-road vehicles? The answer is that SUVs have come to symbolize status and luxury, based on what Chinese consumers have read about Western lifestyles. American car manufacturer GM, despite its economic difficulties in the U.S., has capitalized upon Chinese demand for these vehicles and gained substantial inroads amongst consumers who embrace what they see as a unique product that embodies a lifestyle to which they aspire.

Apple's premium image has also been a selling point for Chinese consumers. "The social pressure of having an Apple product is strong, especially as the wealthy elites set the trend. If a middle class Chinese consumer cannot afford an expensive car or watch, sporting an iPhone may be just as good" (Chang 2011). Having 'the right' technology -- i.e. Western technology -- conveys important social cache in the developing world, and technology in general is vital in generating interest in a specific name brand or product before the company makes the investment in expanding abroad. While imports certainly existed before the Internet age, technology has speeded up the rate of adoption.

Q2. Differences in political economy and culture

Conventional wisdom once suggested that democracy and economic liberalization went hand-in-hand. This was once used as a justification for supporting right-wing conservative autocrats -- the assumption was that since they were capitalistic, democracy would be more likely to take root than in communist dictatorships. However, many nations in the world today belie the association between democracy and capitalism. China is often repressive in terms of the way it governs its citizen's ability to express themselves freely, but its capitalist economy is flourishing. Similarly, post-Soviet Russia is not a model of democracy, despite the fact it has transitioned to capitalism.

In theory, capitalism and democracy are guided by the same liberal principles: "Capitalism is an economic system characterized by freedom of thought and voluntary action creatively applied to production; it is based on private property rights, economic justice, the profit motive, competition, a division of labor, and requisite social cooperation. Democracy is based on the principles of consent and political equality, and may be defined as a political system in which governments are established by majority votes cast in regular, uncoerced elections" (Younkins 1998). However, there is considerable variation in terms of how these political theories are expressed in reality. Even in Western democracies, corporations and specific classes of individuals can gain disproportionate amounts of power, stifling the ability of other segments of society to rise through the meritocracy; disproportionate wealth can also give certain individuals greater political influence (such as the ability to contribute to political campaigns, to lobby politicians, to pay for advertising to fight legislative initiatives that affect their interests).