Assessing Internationalisation Flashcards
What has caused greater internationalisation?
Trade agreements
Technology
- information and communications
Transportation costs
What is free trade?
Free trade occurs when there is trade between countries without barriers such as tariffs and quotas
What is a tariff?
A tariff is a tax placed on foreign goods and services
What is a quota?
A quota is a limit on the number of imported goods and services
What is a customs union?
A customs union occurs when there is free trade between member countries but an agreed tariff on non-members
What are the opportunities of greater internationalisation?
Buy from abroad
Sell abroad
- larger target population
- opportunity to reduce risk, by spreading sales globally
Produce abroad
What methods of entering international markets are there?
Exporting
- produce domestically, but sell some product abroad
Licensing
- Sells the rights to an overseas business to produce and/or sell its products
Alliances/ventures
- Domestic business works in a partnership with an overseas business
Direct Investment
- Greatest level of commitment, investing overseas, to establish outlets or production facilities.
What is a multinational company?
An MNC has operations based in overseas markets
Why are MNC’s welcomed by overseas governments?
They can:
- bring skills and expertise
- bring employment
- bring investment
- increase demand for local goods and services
- increase tax revenue
Why are some MNC’s criticised?
- exploiting local resources and not sharing the rewards of the business with the local economy
- keeping senior jobs for their staff and employing local employees for low-level jobs
- finding ways to avoid paying high levels of tax
- being involved in corruption to win contracts
