Topic 1 - Global Business Development and Globalisation

Question 1

What is global business development?

Answer 1

Refers to the expansion of trade, investment, and business activities across international markets. Businesses pursue global expansion to increase profitability, enhance market share, and mitigate risks through diversification.

Question 2

What are the 4 key drivers of global business development?

Answer 2

1. Financial Growth Opportunities & Loss Minimisation
2. Consumer Purchasing & Spending Patterns
3. World Trade Organisation (WTO) Regulations & Sanctions
4. Deregulation of the Financial Market

Question 3

What is Financial Growth Opportunities & Loss Minimisation?

Answer 3

Refers to businesses seeking global expansion to increase revenue, minimize potential financial losses, and diversify operations to reduce dependence on a single market.

Question 4

What are ways businesses benefit from global expansion through financial growth opportunities & loss minimisation?

Answer 4

1. Access to New Markets
2. Cost Reduction
3. Market & Revenue Diversification
4. Strengthening Supply Chain Resilience
5. Hedging Against Currency Fluctuations
6. Trade Agreements & Strategic Partnerships

Question 5

What is access to new markets?

Answer 5

Expanding into new economies allows businesses to increase their customer base and revenue.

Question 6

What are examples of businesses gaining access to new markets?

Answer 6

– Tesla opened a Gigafactory in Shanghai in 2019, reducing manufacturing costs and increasing accessibility to the growing Chinese EV market.

• Starbucks adapted its menu to include Indian flavours and opened stores in major cities, capitalising on the country’s emerging middle class.

Question 7

What is cost reduction?

Answer 7

Businesses lower operational costs by offshoring and outsourcing production to countries with cheaper labour and raw materials.

Question 8

What is an example of businesses having cost reductions?

Answer 8

Rip Curl outsources wetsuit production to Thailand and China to maintain high quality while reducing expenses.

Question 9

What is market and revenue diversification?

Answer 9

Companies operating in multiple regions reduce reliance on a single economy and minimize risks of market saturation.

Question 10

What is an example of businesses having market and revenue diversification?

Answer 10

McDonald’s operates in over 100 countries, modifying its menu and marketing strategies to appeal to local tastes, ensuring stable revenue streams globally.

Question 11

What is hedging against currency fluctuations?

Answer 11

Businesses use financial instruments like currency hedging to protect against exchange rate volatility.

Question 12

What are trade agreements and strategic partnerships?

Answer 12

Businesses leverage free trade agreements (FTAs) to lower tariffs and costs.

Question 13

What is an example of businesses having trade agreements and strategic partnerships?

Answer 13

China-Australia Free Trade Agreement (ChAFTA), which has reduced tariffs on Australian exports like beef, wine, and dairy, boost trade and create new market opportunities for Australian businesses.

Question 14

What is Consumer Purchasing and Spending Patterns?

Answer 14

Refers to how individuals spend their money based on factors such as economic development, technological advancements, and social trends.

Question 15

What are case studies/examples relating to consumer purchasing and spending patterns?

Answer 15

• McDonald’s offers McSpaghetti in the Philippines and McPaneer in India to cater to local tastes.
• Netflix has customised content by producing local shows (e.g. Squid Game in Korea) to attract international audiences.

Question 16

What are key global trends influencing consumer purchasing and spending patterns?

Answer 16

1. Digital Transformation
2. Sustainability and Ethical Consumerism
3. Urbanisation and Middle Class Growth

Question 17

What is digital transformation?

Answer 17

The rise of e-commerce and digital payment systems has revolutionized shopping habits.

Example: Alibaba’s Singles’ Day – China’s biggest online shopping festival generates billions in revenue within 24 hours.

Question 18

What is sustainability and ethical consumerism?

Answer 18

Consumers demand eco-friendly and socially responsible products.

Example: Tesla’s rise in popularity – Tesla has capitalized on growing consumer demand for sustainable electric vehicles (EVs).

Question 19

What is urbanisation and middle class growth?

Answer 19

Emerging markets with increasing middle-class populations drive demand for consumer goods.

Example: Unilever tailors’ products for emerging markets - Unilever sells small-sized packaging in India to cater to lower-income consumers while maintaining affordability.

Question 20

What is the World Trade Organisation (WTO) Regulations & Sanctions?

Answer 20

The WTO governs international trade by reducing trade barriers, ensuring fair competition, and resolving disputes between member countries.

Question 21

What are impacts of WTO Rules on businesses?

Answer 21

1) Reducing Trade Barriers – WTO agreements help businesses by lowering tariffs and improving market access.

Example: WTO’s General Agreement on Tariffs and Trade (GATT) reduced trade restrictions worldwide.

2) Ensuring Fair Competition – The WTO regulates subsidies and anti-dumping practices to prevent market distortion.

Example: The EU filed a complaint against China over unfair subsidies in solar panel production.

Question 22

What are trade wars?

Answer 22

A trade war occurs when countries impose tariffs or other trade barriers on each other in response to economic disputes, leading to increased costs for businesses and consumers.

Example: The US-China trade war raised tariffs on electronics and agriculture, disrupting global supply chains.

Question 23

What are trade sanctions?

Answer 23

Trade sanctions refer to restrictions imposed by one or more countries on another nation to influence its policies or economy.

Example: 2022 sanctions on Russia impacted oil, gas, and food markets worldwide.

Question 24

What is Deregulation of the Financial Market?

Answer 24

Deregulation refers to the process of reducing or eliminating government controls over financial markets, making it easier for businesses and investors to operate across borders.

Question 25

What are effects of deregulation on global businesses?

Answer 25

Increased Foreign Investment – Deregulation enables foreign banks and investors to enter new markets. Example: India’s financial liberalization in the 1990s attracted foreign direct investment (FDI), boosting economic growth.

Question 26

What is globalisation?

Answer 26

Globalisation refers to the expansion of business operations across multiple countries, leading to economic integration through free trade, investment, and knowledge trade.

Question 27

What are the key impacts globalisation has on businesses?

Answer 27

G – Global spread of skills and technology E – Employment levels in developing and developed countries D – Domestic market I – International cooperation T – Tax minimisation

Question 28

What is the Global Spread of Skills and Technology?

Answer 28

The transfer of knowledge, skills, and technology across borders through multinational corporations (MNCs), partnerships, and foreign investments, leading to industrial and economic development.

Question 29

What are impacts of global spread of skills and technology?

Answer 29

- Facilitates technological advancements and skill development in developing nations. - MNCs introduce proprietary knowledge, improving productivity and efficiency. - Digital advancements and education initiatives enable the modernisation of industries.

Question 30

What is a case study involving the global spread of skills and technology?

Answer 30

China’s partnerships with foreign companies, such as Apple’s supply chain involving Foxconn, have enhanced its expertise in high-tech manufacturing. These collaborations have enabled China to become a global leader in electronics production and innovation.

Question 31

What are Employment Levels in Developing and Developed Countries?

Answer 31

Globalisation influences job availability and labour dynamics by creating employment opportunities in some regions while displacing jobs in others due to outsourcing and automation.

Question 32

What are positive impacts of employment levels?

Answer 32

- Foreign Direct Investment (FDI) and outsourcing create jobs in developing nations, improving living standards. - Growth in manufacturing and service industries increases economic activity. Nike’s supply chain expansion to Vietnam and Indonesia has created thousands of jobs due to lower labour costs, reducing production expenses and increasing profit margins.

Question 33

What are negative impacts of employment levels?

Answer 33

- Job losses in developed nations due to outsourcing and offshoring. - Increased job competition limits upward mobility in developing nations. - Weaker labour laws may lead to worker exploitation and poor conditions. In 2016 – 2017, major automakers, including Ford, Holden, and Toyota, shut down production in Australia due to high manufacturing costs and cheaper imports. This resulted in widespread job losses and economic shifts within the industry.

Question 34

What is the Domestic Market?

Answer 34

The impact of globalisation on domestic businesses, including increased competition, market dependence, and consumer benefits.

Question 35

What are impacts of the domestic market on domestic businesses?

Answer 35

1) Increased Competition: - Global brands entering local markets challenge domestic businesses. - E-commerce giants like Amazon force local retailers to innovate or closure. 2) Greater Product Variety at Lower Costs: - Consumers benefit from a wider range of goods at competitive prices. 3) Global Supply Chain Dependence: - Over-reliance on global trade was evident during COVID-19, causing supply chain disruptions and shortages of essential goods.

Question 36

What is International Cooperation?

Answer 36

Collaboration between nations through trade agreements, economic partnerships, and global organisations to regulate commerce and promote stability.

Question 37

What are positive impacts of international cooperation?

Answer 37

- Trade agreements and diplomatic partnerships foster economic growth. - Promotes stability. - International organisations regulate trade and financial stability

Question 38

What are challenges of international cooperation?

Answer 38

US-China Trade War (2018–Present): Retaliatory tariffs on goods from both nations highlight global economic interdependence complexities with protectionist policies threaten economic stability.

Question 39

What is Tax Minimisation?

Answer 39

Tax minimisation refers to strategies used by multinational corporations to reduce tax liabilities through tax havens and transfer pricing.

Question 40

What are tax havens?

Answer 40

A tax haven is a country or jurisdiction with low or no taxation, offering businesses and individuals a way to reduce their tax burdens legally. Tax havens often provide financial secrecy, attracting corporations looking to minimize their tax liabilities. Examples: Cayman Islands

Question 41

What is transfer pricing?

Answer 41

Transfer pricing is a practice where multinational corporations allocate profits between different branches or divisions in various countries to reduce their overall tax obligations. By setting internal transaction prices, companies can shift profits to jurisdictions with lower tax rates.

Question 42

What are concerns regarding tax minimisation?

Answer 42

- Governments lose revenue, limiting public funding for services like healthcare and education. - Ethical concerns over corporate tax avoidance. - Policymakers struggle to balance foreign investment with fair tax collection.

Question 43

What is a case study involving tax minimisation?

Answer 43

In 2003 – 2014, Apple established subsidiaries in Ireland to reduce corporate tax rates significantly. This tax structure faced legal scrutiny from the European Union for avoiding billions in taxes.