Globalisation

Question 1

What is globalisation?

Answer 1

Globalisation is the process through which world economies have become steadily more interconnected since the 1970s.

Question 2

How has this changed how businesses operate?

Answer 2

• The volume of trade between countries has increased
• People have moved overseas to live and work and money has flowed between different countries
• Multinational companies (MNCs) have grown in importance and have supplied products to markets across the world

Question 3

What has aided the speed of globalisation especially recently?

Answer 3

• rising incomes
• falling transportation costs
• electronic communications

Question 4

What has caused the increase in international trade?

Answer 4

• Rise in incomes in countries, increasing demand for different goods
• Different countries produce different goods (able to produce somethings better than others)
• Emerging economies - China, India, Brazil
• Reduced transport costs
• Containerisation
• Offshoring - setting up branches in different countries
• More trade agreements between nations - WTO has reduced trade barriers, particularly removing tariffs - a tax on foreign goods imported into a country

Question 5

What are the benefits of globalisation (for the business)?

Answer 5

• rapid growth
• inward investment
• cheaper resources
• new and fierce competition

Question 6

What are the drawbacks of globalisation (for the business)?

Answer 6

-threat of takeover

Question 7

With this increased competition, how do businesses compete internationally?

Answer 7

• Improving the design of products - charge a higher price, competitive advantage, can also be in planning and production
• Quality
• Price
• Non price factors

Question 8

What are non price factors?

Answer 8

This would cover discounts, promotions, advertising, loyalty cards etc anything that doesn’t affect the selling price of the product.

Question 9

What is meant by exchange rate?

Answer 9

The exchange rate is the price of one currency expressed in terms of another.

Question 10

How do exchange rates affect export and import prices?

Answer 10

It depends on whether they rise (appreciate) or go down (depreciate).

Appreciates - imports > exports
Depreciates exports > imports

Question 11

How does the exchange rate affect businesses?

Answer 11

• Increase/decrease sales

- Increase/decrease profits