2.4 Globalisation Flashcards
What is globalisation?
The process through which world economies have become steadily more interconnected; The free movement of goods, services, people, capital, information and technology, enabling businesses to sell their products anywhere in the world
What are the main aspects of globalisation?
- Imports and exports
- International competition
- Exchange rates
What is a multinational company
(MNC)?
A business which produces goods and services in more than one country. Also called transnational corporations
How has globalisation changed the ways in which businesses operate?
- Increased international trade
- Increased movement overseas to live and work and money has flowed between different countries
- MNCs have grown and have supplied products to markets across the world
Why has the rate of globalisation increased through the years?
- Rising incomes allows consumers in many countries to buy goods and services by multinational companies
- Cost of transportation has fallen, making it possible to move raw materials and finished goods around the world
- Electronic communication has allowed all businesses to sell products to global markets
What is international trade?
The selling of goods and services across national borders
What are exports?
Goods and services produced by a business in one country and sold in another
What are imports?
Goods and services bought from businesses located in another country
What is a tariff?
Tax on foreign goods imported into a country
What is a trade bloc?
When a group of countries form a group in which they agree to reduce tariffs between themselves
What are the benefits of globalisation?
- Increased chances of growth
- Increased inward investment
- Access to wider market
- International specialisation
- Increased levels of efficiency due to more competition
- Access to cheaper labour and raw materials
- Transfer of knowledge, technology, and skills
What are the disadvantages of globalisation?
- International competitors with cheaper costs
- Power of multinational brands
- Whole industry closures
- Movement away from manufacturing sector, and more towards tertiary sector
- Effects of events in other countries
- Threat of takeover from MNCs which can also cause loss of jobs
What is growth?
When a business sells increased quantities of its products
What is economies of scale?
When the cost of producing a single unit falls as output increases
What is inward investment?
When governments, businesses, and individuals invest capital into another country, e.g. Building new factories or buying companies
What is a takeover?
When one business buys control over another one
How can businesses compete internationally?
- Improve design and quality of products
- Lower prices
- Target a specific market
- Provide more convenient locations for consumers
What are exchange rates?
The price of one currency expressed in terms of another
What is the effect of higher exchange rates?
- Fewer pounds are needed to purchase goods and service from other countries
- Products imported from other countries become cheaper
- UK exports overseas become more expensive
- Export sales decline
What is the effect of lower exchange rates?
- Imports become more expensive as more pounds are required to buy a unit of foreign currency
- UK exports of products become cheaper as fewer units of foreign currency are required to buy them
- UK export sales increase
Explain the term SPICED
Stronger
Pound
Imports
Cheaper
Exports
Dearer
Explain the term WIDEC
Weaker
Pound
Imports
Dearer
Exports
Cheaper
