Reasons business models have be changing

business models have be changing. To understand what is happening we will look at: the impact of globalization, product quality, the effect of NAFTA and Chinese negotiating techniques. These different elements are important, because they will provide specific insights about how businesses must continue to adapt with the transformations that are taking place.

Explain the concept of the globalization-online era and its impact on marketing research firms.

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The globalization online era is when there has been a transformation in the way that consumers are entertained and informed. What is happening is technology has improved so much, that many people are now conducting more of their everyday activities online. A good example of this can be seen with the fact that Americans spend 16% of their time on Facebook. As they are using this web site, to effectively reach out to friends / family and to be entertained. This is significant, because it is showing how the changes in technology are transforming the way that everyone is living their lives. (“Time Spent on Face Book,” 2011)

Globalization is when there is focus on reducing tariffs and trade barriers, to help make the economy more competitive. Over the course of time, this allows a country to be able to adjust to changes in the world marketplace by: specializing in certain areas where they are most productive. When this is combined with the improvements in online technology, it means that a shift is occurring within society itself. As people, are more open to ideas and they are changing how they learn about them. This is when there is transformation is the way that everyone is living their daily lives. Once this occurs, is the point that there will be a change in how the public will see different events and their underlying meanings associated with them.

For marketers, these two factors have forced them to change how they are reaching out to consumers. This is accomplished by focusing on specific areas that will help to create a lot of attention about: the products or services of the organization. Once this occurs, is when they can be able to standout in minds of consumers using the Internet and ideas of globalization.

A good example of this can be seen with the Chevy Volt. What happened was the company started using a number of innovative strategies to be able to highlight the benefits of the car over that of foreign competitors (i.e. Toyota and Honda). This was accomplished through websites such as You Tube. As, they were showing how: the charging options on the car could be adjusted from your I Phone and the way it was powered (by an electric motor for short distances). To highlight these features, the company produced a series of videos that illustrated the benefits of the car in comparison with other hybrids on the market. This helped General Motors to be able to create a buzz about the vehicle, which played a role in GM’s turn around since exiting bankruptcy. (Zimmerman, 2011)

What this is showing, is how the Internet is playing a part in promoting different products and services to consumers. This is accomplished through highlighting the benefits in different videos that are posted on websites such as You Tube. While at the same time, it involves creating content that is geared towards specific audiences in the form of a blog. This allows marketers to be able to promote their products and services that the company has to offer to specific segments. Once this takes place, is when its popularity will increase and they will reach out to a large demographic of customers. This is the point that video and the blog could receive massive amounts of attention in a short period of time (the viral effect). (Zimmerman, 2011)

You don’t inspect quality into a product; you have to build it in. Discuss the implications of this statement.

The implications of not inspecting quality, is that there could be major issues surrounding safety and if the product will meet company standards. In the short-term, this is an attempt by executives to save money. However, over longer periods of time this could create situations where there are design flaws that could inflict physical harm on consumers (who are using the product). Once this takes place, it means that the image of the organization will be damaged by these events. This is the point that there is the realistic possibility that the company could lose customers and market share based upon quality issues. (Hua, 2011) (Bagh, 2011)

At the same time, having to build into the product to ensure quality, is creating problems for the staff and engineers. What is happening with these kinds of situations; is that each unit requires matching the exact specification from another manufacturer with our company. This is problematic, because the inferior design means that engineers will have to troubleshoot flaws. Then, during the process of making any kind of modifications, employees must be aware of the steps they are following. (Hua, 2011) (Bagh, 2011)

These different elements are troubling, because they are illustrating how not inspecting the quality of the product could result in inferior designs. Once this takes place, it means that the company must waste time, money and labor in trying to deal with obvious product design issues. Over the course of time, this could cause the company to see a decrease in productivity in trying to rectify these issues. If this kind of a situation is allowed to continue, it could have an adverse impact on the profit margins of the firm and their brand image. As a result, the negative implications of this approach should be taken into account in comparison with the limited short-term benefits that will be received from this kind of strategy. (Hua, 2011) (Bagh, 2011)

However, it is also important to note that this kind of approach could yield long-term benefits for the organization. What would happen is the obvious design flaw issues in the product, could be rectified by creating a process that will have built in modifications. This will directly address any kind of product safety and quality issues. While at the same time, it is allowing the firm to lower their costs and increase profit margins. This is significant, because it illustrating how this strategy could offer the company major benefits (if they have pre-determined conditions in place during the process). (Hua, 2011) (Bagh, 2011)

As a result, executives must be aware of possible quality issues from the uninspected merchandise. This will have an impact on the outcome by ensuring that company can reduce the time and cost of making any kind of modifications. If this kind of focus can be taken, it will help the firm to see a reduction in their production costs and increase profit margins. However, if managers do not have any kind of effective strategy in place, they more than likely will lose time and money. This could have an impact on earnings and the image of organization. Therefore, executives must take these factors into account, as this will have long-term implications on the firm. (Hua, 2011) (Bagh, 2011)

During the debate on the North American Free Trade Agreement (before its ratification), several international economists noted that the average wages and fringe benefits in Mexican manufacturing industries were about one-fifth of those in U.S. manufacturing, while the U.S. output per worker was about five times that of the Mexican output per worker. Based on your understanding of the Classical Model of Trade, is there any causal relationship between these two facts? Substantiate your response.

The classical model of trade is when there is focus on real time factors that will have an effect on input to include: labor costs and productivity. When you apply this to the U.S. And Mexico (before the ratification of NAFTA) there is a direct relationship between the labor costs and productivity. What is happening, are those areas with lower costs of labor will be less productive (under the classical theory). This is because there is no incentive to increase salaries or benefits. As, there are different trade barriers are in place, which makes it difficult for a country to export its products to markets where there are large amounts of consumers. Over the course of time, this will have an impact on productivity, with most employees unwilling to do more because there is little economic opportunity. (Villareal, 2010) (Gerkin, 2008, pg. 17)

However, once NAFTA was ratified is when this all changed. Part of the reason for this, is because the reduction in trade barriers meant that American firms could establish operations in Mexico. During this process, they were paying Mexicans lower wages in comparison with American workers. While at the same time, they offered more benefits in comparison with traditional Mexican employers. Over the course of time, this had a positive impact on the standard of living in Mexico. (Villareal, 2010)

Evidence of this can be seen by looking at the poverty rate in Mexico between 1994 and 2008. As, it declined from: 24% (in 1994) to 16% (by 2008). While at the same time, wage increased from $3,814 in 1996 to $7,870 in 2009. The below table is illustrating the overall scope of these changes in income during this time. (Villareal, 2010)

Annual Income Levels in Mexico from 1996 to 2009


Annual Income









(Villareal, 2010)

These different figures are important, because they are showing how once NAFTA was ratified, is when it would slowly address inequalities inside Mexico. This is an indication that the abandoning of the classical model would have a positive impact on the country. (Villareal, 2010)

Therefore, this is highlighting how there is a causal relationship between the low wages and lack productivity in Mexico in comparison with the U.S. Once the views on trade began to change, is when there was a transformation in these disparities with: many foreign-based firms relocating to Mexico to increase their productivity and profit margins. This is the point that there was a change in the business model of many multinational organizations. (Villareal, 2010)

These elements are important, because they are showing how there was a causal relationship between: income and productivity under the Classical Model of Trade. Once these views began to change is when many of these ideas were abandoned. This is because, there were vast divisions in society and firms were having trouble in remaining competitive. When NAFTA was enacted, is when these disparities began to disappear. Over the course of time, this created a transformation in the Mexican economy and the standard of living. (Villareal, 2010) This is when there was a change in: the income levels and the standard of living

Your company is about to take a team into Beijing, China to negotiate a 3-year supply contract. What should you know about advantages and disadvantages of negotiating terms of a contract in China?

The Chinese negotiating process is less transparent and clear in comparison with other Western practices. This is because in the West, there is focus on having all negotiations work towards achieving an end to a means. In China, there are different phases of the process that all parties must go through when conducting any kind of business transaction. These include: the pre-negotiation, the actual discussion and the post negotiation process. During pre-negotiation, is when the different parties will meet to go over formalities, legal issues and financial aspects of the deal. However, there are no agreements that are made during this phase, as everyone is being introduced to one another and needs a chance to consider their options. (Boden 2008, pp. 202 — 205) (Brahm, 2007, pp. 107 — 115)

The decision making process is when all of the different parties will meet to discuss the transaction. During this phase of the project is when, there is the possibility that business executives will have to work with government officials. As they more than likely, will want to see the impact of the transaction on the economy and those who are involved. Once this occurs, is when detailed negotiations will take place with an initial agreement proposed during the process. (Boden 2008, pp. 202 — 205) (Brahm, 2007, pp. 107 — 115)

The post negotiation phase is when the final details of the project are agreed upon. This is when there will be the actual signing of the agreement with: all parties understanding and acknowledging the different provisions. This is important, because it is illustrating how the process of negotiating in China everyone must follow more formal (yet less concrete steps). During this process, all executives need to understand these provisions and how they are applied to all negotiations. (Boden 2008, pp. 202 — 205) (Brahm, 2007, pp. 107 — 115)

The advantages of using this system include: you will know the various parts of the agreement and there are adjustments that can be made. This helps to give both parties time to: think about how this impacting them and if this is something they want to become involved in over the long-term. Once this occurs, it means that the negotiations are more transparent and will produce the best results for all parties. This is when the agreement will be able to benefit everyone. (Boden 2008, pp. 202 — 205) (Brahm, 2007, pp. 107 — 115)

The disadvantages of using this system, is that the process can often be long and tedious. This is troubling for most executives, because they are used to all negotiations being driven towards achieving the final objectives of the firm. The problem with the Chinese approach is it makes it appear, as if no one is serious in dealing with the issue. Instead, everyone wants to have a series of meetings that will bring in new parties and change the terms of the proposal. Once this occurs, is when executives will become frustrated with process and will often have lower level employees handle these negotiations. This is the point that they are not as effective in dealing with these issues. (Boden 2008, pp. 202 — 205) (Brahm, 2007, pp. 107 — 115)

As a result, the benefits and drawbacks of the Chinese system are illustrating how executives must understand that they have to follow select procedures. While at the same time the process will be slow and cumbersome, due to the fact that everyone wants to make an informed decision (versus moving towards an agreement). If managers can take these variables into account, this will help them to be able to more effectively negotiate with Chinese officials about a host of different issues.


Time Spent on Face Book. (2011). Business Insider. Retrieved from:

Bagh, C. (2011). Apple’s 3 Product Design Strategies. IB Times. Retrieved from:

Brahm, L. (2007). The Art of the Deal in China. Tokyo: Tuttle

Boden, J. (2008). The Wall Behind China’s Open Door. Brussels: Academic and Scientific Publishers.

Gerkin, G. (2008). The Constitution of Liberty in the Open Economy. New York, NY: Routledge

Hua, Z. (2011). Product Design Strategies. Ideas. Retrieved from:

Villareal, A. (2010). NAFTA and the Mexican Economy. FAS. Retrieved from:

Zimmerman, K. (2011). Chevy Volt Roll Out Strategy. University of Wisconsin. Retrieved from:

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