Chapter 2 - Globalisation and Homegrown Products

globalisation

process consisting of technological, economic, political and cultural dimensions that interconnect individuals, firms and governments across national borders

advantage of globalisation

• improve SOL

• promote competition

• create oppurtunity for business to expand to overseas market

disadvantage of globalization

• promote single culture

• widen gap between rich and poor

• international companies may exploit countries with lack of environmental protection

factors driving global business development

1)financial growth oppurtunity and loss minimisation

• reduce overhead costs and other costs, reducing loss and increasing earnings

• loss in profit and downturns in market have less impact to a business which have spread its risk

2)consumer purchasing and spending patterns

• involve elements of human behavior as it looks at how consumers make decisions in acquiring g/s

• consumer more willing to try foreign products, may use tech no compare productd

3)WTO regulation and sanctions

• set standards, is transparent and facilitates trade by lowering trade barriers

• dispute settlement, countries bring dispute to WTO if they think their rights are being infringed

4)deregulation of financial market

• reduces barriers to the flow of money between nations

• easier to attract foreign investment and send capital overseas

• give Aus business access to markets outside Aus

impact of globalisation

1)employment levels in developing VS developed countries

• jobs created in developing countries due to cheap labour bcs of lack of gov support

• job loss in developed countries due to wages too high, skilled labour will migrate to developing country to seek jobs

2)global spread of skills and technology

• spreads knowledge of new inventions, innovations, business models and technology

• MNCS invest in building supply of skilled workers

• access to IT aids development

3)international cooperation

• encourages international cooperation-2 or more actors involved in a joint operation with shared resources

• diversity in culture and travel

• more globalized countries like US more active in international cooperation

4)domestic market

• domestic market face some challenges as more competition and wider consumer choice

• domestic producers must lower price, hence no e.o.s

5)tax minimisation through tax havens and transfer pricing

• tax haven-countries with secretive tax and financial systems, low tax for non residents and foreign owned countries, lack of transparency, low level of regulations

• transfer pricing-intercompany pricing arrangements between related business entities, commonly applies to intercompany transfers to avoid tax and manipulate profits

benefits of homegrown products

1)employment and social welfare

• australians can keep their friends and family employed

• lower UE rates, less crime, less social welfare, increase in tax collection for gov

2)GDP and prosperity

• greater profits from increased sales, hence increase in taxation collection

• benefit ppl living in home country as gov spend on essential infrastructure

3)greater profits

• greater sales, more profits stay in Aus, hence economic growth