6. Business & Globalisation

What is globalisation?

The economic integration of different countries through increasing freedoms in the cross-border movement of people, goods/services, technology & finance

What are imports and exports in international trade?

• Imports: Goods and services bought by people and businesses in one country from another country.

• Exports: Goods and services sold by domestic businesses to people or businesses in other countries.

What is the impact of exports and imports on businesses?

• Exports: Generate extra sales revenue for businesses selling their goods abroad.

• Imports: Result in money leaving the country, generating extra revenue for foreign businesses.

How has globalisation impacted businesses in terms of location and production?

• Globalisation has presented opportunities for businesses to relocate to low-cost locations overseas

• Businesses may choose to set up production facilities in other countries

• This process differs from choosing a country as a potential market for customers

• Production includes both manufacturing and services associated with the business, such as call centers

What factors should businesses consider when assessing production location, and why are they important?

• Costs of production: Keeping production costs low helps businesses increase profit margins or sell at a lower price to gain a competitive advantage.

• Skills and availability of labour force: The quality and availability of workers impact the quality of goods and services produced.

• Infrastructure: Roads and other necessary infrastructure affect the efficiency of the production process.

• Location in a trading bloc: Being in a trade bloc offers benefits like reduced protectionist measures, making it easier to access other markets.

• Return on investments: Assessing ROI helps businesses avoid the risk of the initial investment not being paid off.

• Natural Resources: Access to raw materials reduces transportation costs and potential production delays.

• Political Stability: Stable political conditions make investments less risky for businesses.

• Ease of doing business: A location with limited bureaucracy allows businesses to set up more quickly and at a lower cost.

• Government incentives: Businesses may be offered incentives like grants, loans, and tax breaks to encourage investment.

What are multinational corporations (MNC)?

A business that is registered in one country but has manufacturing operations/outlets in different countries

What factors contribute to the growth of Multinational Corporations (MNCs) and how do they choose their locations?

• Globalisation: The expansion of global trade and communication makes it easier for businesses to operate in multiple countries.

• Deregulation: The removal or reduction of government restrictions in some markets enables MNCs to expand and operate more freely.

• Cost advantages: MNCs often choose locations where production costs are lower, helping them maximize profits.

• Access to markets: MNCs select locations that provide better access to customer markets, increasing their sales potential.

What are the advantages of MNCs?

• Access to cheap labour or raw materials

• Local residents may benefit from job opportunities and growth in the local economy

• MNCs often invest to improve infrastructure

• MNCs may have to pay taxes and business rates to local councils/authorities - these funds may be reinvested back into the local community

• MNCs can establish charitable initiatives that have a positive effect on the local community

What are the disadvantages of MNCs?

• May cause damage to local habitats/environments during production process

• May leave unattractive production facilities behind once they’ve extracted all of the resources and left the country