2.4 Globalisation Flashcards
What is Globalisation
The process by which businesses start operating on an international scale
What are multinationals
A multinational is a business which trades in more than one country, often shortened to MNC
What are the benefits for UK business of globalisation?
Wider markets, economies of scale, labour migration, specialisation, multiplier effect
How are wider markets beneficial?
Trading on a global level (rather than just the UK) means access to more customers, and opportunities to trade in bigger markets
How are economies of scale beneficial?
A business trading om a global level can gain economies of scale x and get lower average unit costs.
Meaning the goods can be cheaper for consumers, giving the business a competitive advantage
How is labour migration beneficial?
Labour migration into the UK now means the most talented employees can be chosen from a fresh pool of applicants
How is specialisation beneficial for a business?
Globalisation can mean that some economies start to specialise at what they are good at
How is the multiplier effect beneficial?
As MNCs move to the UK to manufacture
their goods, they create jobs for UK workers
• This means all the factory workers now have an income which they can spend in the local area; on restaurants, in shops, in garden centres. This is called the multiplier effect.
What are the drawbacks for UK businesses of globalisation?
Foreign competition, loss of UK staff, threat to service industries, diseconomies of scale
What is an export?
An export is a product that the UK sells to
overseas markets
What is international trade?
International trade is the exchange of goods and services between different countries
What is an import?
An import is a product made overseas and brought into the UK
What are exchange rates?
The exchange rate is the price of one currency in exchange for another.
If the pound increased against another currency this will make imported supplies cheaper.
What will happen if the pound is strong agaisnt other currencies?
It becomes more expensive for those countries to buy UK exported goods, this means they will buy less, this means that UK exporter’s profits will go down
