Business Structure

Question 1

International trade links advantages

Answer 1

Advantages:
- Economic development in each country
- Growth in world trade
- Develop political and social links

Question 2

international trade links disadvantages

Answer 2

Disadvantages:
- Loss of output and jobs from domestic businesses -> because they cannot compete with imported goods
- Decline in domestic goods -> loss of trade and imports

Question 3

Free trade

Answer 3

no restriction on the limit or prevention of trade between two countries

Question 4

Tariffs

Answer 4

taxes imposed on imported goods to make them more expensive than their original price

Question 5

Quotas

Answer 5

the limit on the physical goods that are imported to a country

Question 6

Voluntary export limits

Answer 6

a country agrees to limit the physical goods that are sold and imported to one country

Question 7

Protectionism

Answer 7

using barriers to free trade in order to protect a country’s goods

Question 8

Benefits of free trade

Answer 8

Wider choice of goods and services
Increases business competitiveness
Increases rate of industrialisation

Question 9

Globalisation

Answer 9

the increasing freedom of movement of goods, capital and people around the world

Question 10

Multinational business

Answer 10

a business that has its headquarters in one country, but its factories, assembly plants and branches in other countries

Question 11

Benefits of becoming a multinational business

Answer 11

1. Closer to the main markets
   - Lower transport costs
   - Understanding local consumer tastes
   - Gaining local consumer loyalty
2. Lower costs of production
   - Lower labour rates
   - Cheaper rental cost
   - Government grants and incentives given
3. Avoids import restrictions
4. Access to the country’s natural resources

Question 12

Drawbacks of becoming a multinational business

Answer 12

1. Language and cultural differences
2. Coordination between headquarters and other branches is difficult
3. Skill of employees may be low in other countries -> require additional training costs

Question 13

Benefit of multinational business on host countries

Answer 13

Bringing in foreign currency -> increase the rate of foreign exchange
Increased business competitiveness
More employment opportunities
Raises GDP -> increases total output of the economy

Question 14

Drawback of multinational businesses on host countries

Answer 14

Domestic businesses unable to compete with imported goods hence they close down
Exploitation of local workforce
Pollution levels increase

Question 15

Privatisation

Answer 15

selling state owned and controlled business sectors to investors in the private sector

Question 16

FOR privatisation

Answer 16

• Profit-motive can increase sales revenue and profit of the business
• Stronger motivation -> managers and employees are now responsible for the business’ success
• Decision-making can be made much quicker
• No government restriction on growth of the business

Question 17

AGAINST privatisation

Answer 17

• The state should take decisions on essential industries instead of privatising them (e.g. water, electricity)
• Competing with privately run businesses can increase competition for state-owned businesses
• Privatising companies may exploit consumers with high prices, leading to less sales for the business