6.3 - Business and the International Economy

Question 1

what is globalisation

Answer 1

the term used to describe increases in world-wide trade and movement of people and and money between countries.

Question 2

4 reasons for increase in globalisation

Answer 2

• increasing number of free trade agreements. Consumers can purchase goods and services from other countries with few or no import controls such as tariffs.​
• the internet has allowed the development of e-commerce where goods can be bought and sold online ​
• Improved and cheaper travel links makes it easier to transport products globally ​
• Emerging markets have developing manufacturing industries so can export many products

Question 3

4 opportunities of globalisation for businesses

Answer 3

• can start selling products to customers in other countries​
• can open up branches in other countries to sell products/services ​
• can open their factories in other countries- benefitting from cheaper labour and rental costs​
• can import raw materials from other countries which may be cheaper

Question 4

2 threats of globalisation for a business

Answer 4

• Increased competition from international businesses ​
• Employees may leave the business and work for other international businesses if their pay is higher

Question 5

what is an import tariff?

Answer 5

a tax placed on imported goods when the arrive into the Country, making them more expensive.

Question 6

what is an import quota?

Answer 6

a restriction on the quantity of a product that can be imported

Question 7

3 reasons why the government introduces tariffs and quotas

Answer 7

• as a form of protectionism. They protect domestic businesses from overseas competition that otherwise might close them down. ​
• If they impose a tariff, overseas products will be more expensive for domestic customers meaning customers may buy from domestic firms instead.​

​- If they impose a quota, the amount of products imported is limited. Therefore, domestic firms have less competition from overseas firms

Question 8

what are multinational businesses

Answer 8

Multinational businesses are those with factories or service operations in more than one country

Question 9

5 benefits of a business becoming multinational

Answer 9

• Producing goods in other countries can mean lower wage costs ​
• Producing goods nearer to your target market will cut transportation costs ​
• Can avoid barriers to trade such as tariffs and taxes. E.g. open factory in the place where you buy your raw materials from to avoid import tarrifs ​

To increase sales by opening up in anther country e.g. Starbucks​

To gain grants form particular countries to set up in that Country e.g. Qatar

Question 10

4 impacts of multinationals on stakeholders (employees, shareholders, government and suppliers)

Answer 10

• employees have opportunities to move and work abroad in the overseas branch/factory​
• the business will usually see an increase in profit and so shareholders will se an increase in dividends ​
• the government will receive more tax revenue if a firm opens up or relocates to their country ​
• suppliers of raw materials may lose sales if the factory relocates to another country

Question 11

4 benefits to a country and/or economy where a MNC is located

Answer 11

• Jobs are created, which reduces the level of unemployment. ​
• Taxes are paid by the multinationals, which increases the funds to the government. ​
• Increased exports – some of the extra output may be sold abroad, which will increase the exports of the country. ​
• Increased consumer choice – there is more product choice for consumers and more competition.

Question 12

3 drawbacks to a country and/or economy where a MNC is located

Answer 12

• Reduced sales for local businesses – local firms may be forced out of business.
• Repatriation of profits – profits are often sent back to a multinational’s ‘home’ country and not kept in the country where they are earned. ​
• Multinationals often use up scarce and non-renewable primary resources in the host country.