Ch 29 - Businses and the Intl world Flashcards
What are the reasons for globalisation
Increasing numbers of free trade agreements
Improved and cheaper travel links and communications between all parts of the world have made it easier to transport products globally
Many ‘emerging market countries’ are industrialising very rapidly
Opportunities of globalisation
Start selling exports to other countries
Open factories/operations in other
countries
Import products from other countries to sell to customers in ‘home’ country
Import materials and components from other countries – but still produce final goods in ‘home’ country
Business impact (pro and con both) of
Start selling exports to other countries
Increases potential sales. Helps extend the product’s life cycle.
Con:
Can be expensive to sell abroad.
Not 100% sure if foreign customers will buy the product just because domestic customers do.
Lack of knowledge ab the foreign markets. Would need sumn like a Joint Venture
Business impact (pro and con both) of
Open factories/operations in other countries
It could be cheaper to make some goods in other countries than ‘at home’
con:
Quality may not be as good. Also may be ethical issues (child labour, working conditions, etc)
Business impact (pro and con both) of
Import products from other countries to sell to customers in ‘home’ country
Could be profitable
con:
products may need to be repaired and maintained. The business selling it in the home country may not have the same resources and parts that are needed for that maintenance that foreign firms have.
Business impact (pro and con both) of
Import materials and components from other countries. Produce final goods in home country
Raw materials etc could be cheaper abroad
Con:
Increased transport costs. Not sure if suppliers r reliable.
Threats of globalisation
Increasing imports into home market from domestic competitors
Increased competition from foreign competitors that have set up production in the country
Employees may leave businesses that cannot pay the same or more than international competitors
Business impact (pro and con both) of
Increasing imports into home market from foreign competitors
Local businesses sale may fall
pro:
increased comp could force local businesses to become more efficient
Adv of being an MNC (to business)
Produce goods in countries with lower raw materials and labour cost
Extract raw materials from other countries. Your home country may not have enough
Produce goods closer to market to reduce transport costs
Avoid trade barriers such as import tariffs and quotas (if you produce in those countries not counted as import)
Increase market share especially if home country’s market has been saturated. Extend product’s life cycle
How does being an MNC benefit a shareholder
Higher dividends cuza higher profit
How does being an MNC benefit employees
Increased opportunities to gain promotion as the business gets larger and has operations across many countries
opportunities to work and live abroad
How does being an MNC affect suppliers
Increased/decreased sales depending on where the MNC has production set up
Impact of MNC on govt
Higher/lower tax revenues depending on where the MNC has set up.
Benefits to an economy of an MNC setting up (host country)
Reduce unemployment
Increased investment - output increases
Increased exports - extra output sold abroad
More tax revenue
Increased customer choice
Drawbacks to an economy of an mnc setting up (host country)
Jobs created are usually unskilled labour jobs.
Reduced sales for local business
Repatriation of profits - sent back to home country
MNC use up the host country’s scarce and non-renewable resources
Misuse their influence in the economy by forcing govts to give them grants with the threat of them leaving. Govts may give in since if they leave it may cause massive job losses, etc
