Globalisation Flashcards

GLOBALISATION

LEARNING OBJECTIVES

• Understand the concept of globalisation.
• Understand the threats and opportunities of globalisation for businesses.

STARTER ACTIVITY

• A business sells exercise equipment to companies in a variety of different countries.
• Its cycling machine has a price in the UK of £250.
• Calculate how much the equipment would sell for in the following countries:
  • United States
  • Germany
  • Turkey
  • Australia
  • Japan
  • Canada
• Exchange rates:
  • £1 = US Dollar 1.97
  • £1 = Euro 1.52
  • £1 = Turkish Lira 2.76
  • £1 = Australian Dollar 2.54
  • £1 = Japanese Yen 239
  • £1 = Canadian Dollar 2.33
• Rule: To change pounds into another currency, multiply by the rate. E.g. at £1 = €1.48, £50 changed into Euro would be 50 \times 1.48 = €74.

STARTER ANSWERS

• United States = $492.50
• Germany = €380
• Turkey = 690 Lira
• Australia = AUS$635
• Japan = 59750 Yen
• Canada = Can$582.50

ACTIVITY

• Write down a definition of Globalisation.
• Why do you think businesses want to become global? (5 minutes)
• Discuss as a class.

THE CONCEPT OF GLOBALISATION

• The growing integration of the world's economies.

THE CONCEPT OF GLOBALISATION - DETAILED

• Many of today’s markets are global – firms sell their products anywhere in the world.
• A firm could have a head office in London, borrow money from a Japanese bank, manufacture goods in China, deal with customers in a call center in India & sell products all over the world.
• Firms/people behaving like there is one market or one economy in the world – this is called globalisation – the integration of the world’s economies.
• Key Features:
  • Goods & services freely traded
  • People can live & work in any country
  • High level of interdependence between nations
  • Capital can freely flow between countries
  • Free exchange of technology & intellectual property

REASONS FOR GLOBALISATION

• The growing integration of the world's economies.

REASONS FOR GLOBALISATION - DETAILED

• Developments in technology:
  • High-speed internet, swift transfer of data.
  • People can work at home, not in the office – can be anywhere in the world.
  • Consumers can gather info & buy online from anywhere.
• International transport networks:
  • The cost of flying has fallen, and the number of flights & destinations has increased.
  • Travel to business meetings & transport goods is easier.
• Deregulation:
  • Privatisation – increased competition.
  • Removal of trade barriers.
  • Increasing numbers of opening economies.
  • Domestic industries are no longer protected.
  • Simplified monetary and legal systems – easier to trade.
• Increase in tourism:
  • Consumer tastes have changed due to experiences abroad, and people are willing to try goods/services produced abroad.
  • Fly with Middle Eastern airlines, drive Korean cars, etc.
• Domestic markets are saturated:
  • Firms want to sell abroad.
• Multinational companies benefit from international markets & producing goods anywhere in the world where costs can be minimised.

GOVERNMENT AND GLOBALIZATION

• The growing integration of the world's economies.

GOVERNMENT AND GLOBALIZATION - DETAILED

• Will only flourish if governments are committed to it.
• No trade if international borders are kept closed.
• International trade limited if trade barriers are put up.
• People can’t live and work overseas unless borders are left open.
• Firms cannot develop businesses overseas if planning permission is denied.
• Governments aid globalisation by relaxing laws & regulations that prevent, restrict, or complicate trade and business.

GLOBAL CAR INDUSTRY EXAMPLE

• A few large firms, such as Toyota, General Motors (GM), Ford, Volkswagen, Hyundai, and Nissan, dominate the global car industry.
• Each of these firms produced over 6 million cars in 2015. Three of them - Toyota, Volkswagen, and GM - produced over 9 million cars each.
• Many of these firms sell their cars in global markets and have factories and suppliers in many countries.
• For example, Ford has factories in Australia, Brazil, France, Portugal, Spain, Thailand, the USA, the UK, and many other countries.
• These companies have a global outlook. They will sell their products anywhere and operate production plants and other facilities wherever costs can be minimised.
• Fifty years ago, US producers, such as GM, Ford, and Chrysler, dominated the world car industry. However, from the 1980s, their market share fell as Japan made an entrance into the global market. The market shares of the US producers have declined dramatically as new and more efficient producers like Toyota have entered the market.
• In 2015, global sales reached 72.37 million. It is expected that total sales in 2016 will reach the 75 million mark.
• In particular, demand for cars is growing fast in emerging economies. Sales in China, for example, were around 25 million in 2015.

THINK, PAIR AND SHARE

• Students can work together and discuss the answers.

LEARNING OBJECTIVE CHECK

• Understand the concept of globalization.
• Have we met this?

PLENARY

• Tell me 3 things you have learnt today.
• 1 thing you are still unsure of.

PART 2 - LEARNING OBJECTIVE

• Understand the threats and opportunities of globalisation for businesses.

STARTER

• Write down 3 – 5 points as to what can STOP a company from becoming global.
• Then discuss as a class (5 minutes).

OPPORTUNITIES OF GLOBALIZATION FOR BUSINESSES

• Globalisation has a range of benefits – more free trade, higher employment, increased incomes & living standards.

BUSINESSES MAY EXPLOIT

• Access to larger markets:
  • Global markets are bigger than domestic ones – provides more opportunities to increase sales.
  • Access to global markets leads to business growth – higher sales revenue and profit.
• Lower costs:
  • Businesses grow by selling more to larger markets, they may be able to lower costs – exploit economies of scale.
  • Lower costs mean the business is more competitive, may help with larger market share, increased sales, and raise profit margins.
• Access to labour:
  • Free movement of labour – businesses have a larger labor pool.
  • Important because:
    • There may be a shortage of domestic labor.
    • Rising labor supply may keep wages low.
    • Businesses can recruit specialist, highly skilled staff from all over the world.
• Reduced taxation:
  • Choose where to locate their base, therefore reducing the amount of tax paid – Ireland is popular for this – corporation tax is only 12.5% - higher than 20% in other places.

THREATS OF GLOBALIZATION TO BUSINESSES

• Globalisation has a range of benefits – more free trade, higher employment, increased incomes & living standards.

DESPITE BENEFITS THERE ARE INCREASING RISKS

• Competition
  • Increased competition due to globalisation, some companies will have survival threatened.
  • Companies that exploit globalisation are well-resourced and influential – use their resources to invest in marketing. Whole industries have been wiped out.
  • This is the most worrying threat for most businesses.
• International takeovers
  • Free movement of capital leaves businesses open to takeovers from other countries.
  • Vulnerable to predator businesses – subject to hostile takeovers.
• Increased risk of external shock
  • Due to interdependence that results from globalisation. Events in one economy are likely to affect other economies.
  • e.g., UK leaving the EU, when the decision was made, stock markets fell sharply. When the UK actually leaves, some businesses will feel negative impacts – German car manufacturers as they may face trade barriers.

PLENARY

• Which is a reason for increasing globalisation?
  • B Decreased regulation, such as privatisation
• Which of the following is a feature of globalisation?
  • A The free flow of goods and services across international borders
• Which of the following is an opportunity for businesses that might result from globalisation?
  • A Lower costs resulting from economies of scale
• Which of the following might be a threat to businesses that could result from globalisation?
  • B Increased competition