Business and the international economy

Globalisation

Sell in overseas markets → reach more customers → sales volume and revenue may rise → economies of scale may reduce average costs → competitiveness may improve.

Multinational companies (MNCs)

Operate in multiple countries → access new customers and possibly lower-cost resources → expand production and sales → increase potential profits.

Importing

Buy goods or materials from abroad → gain access to more suppliers and potentially cheaper inputs → production costs may fall → profit margins may improve.

Exporting

Sell products abroad → increase the potential customer base → reduce dependence on domestic demand → revenue may become more diversified

Currency appreciation

A stronger domestic currency makes imports cheaper in domestic currency terms → imported materials may cost less → costs may fall → profit margins may improve.

Currency depreciation

A weaker domestic currency makes exports cheaper for overseas buyers → demand for exports may rise → sales and production may increase → profit may rise

Evaluation chains-Business & the international economy

Globalisation increases market opportunities, but overseas competition can reduce prices and profit margins.

A stronger pound can lower import costs, but it can also make UK exports more expensive for foreign customers.

Currency changes have a greater effect on businesses that import or export a large proportion of their goods, especially when they have not fixed exchange rates in advance.

An MNC may benefit from economies of scale, but managing employees, suppliers and regulations across countries can increase complexity and costs.