Flashcards in Internationalism Deck (8)
What has caused greater internationalisation?
- Trade Agreements - Trade allows businesses to focus on producing what they are good at domestically, and import from abroad what can be produced more efficiently abroad. Consumers should be able to benefit from value for money. - Free Trade - Trade without barriers & restrictions WTO tries to remove all tariffs/quotas.
Customs union = occurs when there is free trade between member countries, but an agreed tariff on non-members e.g. the EU.
- Technology - Easier & cheaper for bisneses to operate around the world.g. price of an International phone call has fallen. Pass data around the world more quickly and efficiently. Brings people closer e.g. with media.
- Transportation costs - Now much cheaper to move items by air or sea, making global trade more attractive - Containerisation was key!
What opportunities does greater internationalisation create?
- Selling products abroad - Is attractive because of a large target population, providing a bigger potential customer base. Provides opportunities for fast-growth. Spreading sales more globally offers opportunity to reduce risk : ANSOFF - market development
Methods of entering International markets
- Exporting - produces domestically but sells (exports), some of its products abroad, represents low level of commitment to overseas sales. is low risk
- Licensing - sells the right to an overseas business to produce and/or sell their products. provides the business with a local presence, networks and market links. Risk Is mainly taken by the firm that buys the license as it takes the responsibility for generating sales abroad.
- Alliances/Ventures - occurs when a domestic business works in partnership with an overseas business, share the investment, share risk but also involves sharing of profits.
- Direct investment - involves the greatest level of commitment from the domestic business, involves investing overseas, requires high funds, and is a high risk decisions - when a business has its own operations abroad = a multinational
What Is a multinational company (MNC)?
- Organisations that have production bases in more than one country
why may multinationals be welcomed by overseas governments ?
- skills and expertise
- increase demand for local goods and services
- increase tax revenue
what have some MNC's been criticised for?
- exploring local resources and not sharing business rewards with local economy
- keeping senior jobs for their staff and employing local people for low skilled-jobs
- keeping majority of profits for their own head office and not investing locally
- avoiding paying high levels of tax
what does it mean for the business itself being a multinational?
- gives it direct access to local markets
- means its production is closer to local customers
- spreads risk of being dependant upon one production base in one country