Ch 6 Business structure (A Level)

Question 1

risk of international trade

Answer 1

• loss of output and jobs from domestic firms who cant compete effectively with imported goods
• decline in domestic industries due to imports, coal or food business, lead to risk for country’s survival
• impossible for newly established business to survive against existing importers
• importers may dumb goods below cost price to eliminate competition
• value of imports exceeds value of exports could lead to loss of foreign exchange

Question 2

define tarifs

Answer 2

taxes imposed on imported goods to make them more expensive then they would otherwise be

Question 3

define free trade

Answer 3

no restrictions or trade barriers exist that may prevent or limit free trade between countries

Question 4

define quotas

Answer 4

limits on physical quantity or value of certain goods that may be imported

Question 5

define protectionism

Answer 5

using barriers to free trade to protect an own countries domestic industries

Question 6

Define globalisation

Answer 6

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

Question 7

Define Multinational

Answer 7

Business organisation that has headquarters in one country, but with operating branches, factories and assembly plants in other countries

Question 8

Define privatisation

Answer 8

Selling state owned and controlled business organisations to investors in the private sector

Question 9

Arguments for privatisation

Answer 9

• Profit motive of private sector business will lead to greater efficiency then state owned business
• Decision making in state bodies can be slow and bureaucratic
• puts responsibility in hands of managers and workers, leads to higher motivation because of direct involvement in work, sense of empowerment
• temptation government to run state industry for political reasons, thus decisions not taken for commercial reasons
• government can raise finance by selling nationalised businesses to spend elsewhere
• Access to private capital markets increased investments in These industries

Question 10

Arguments against privatisation

Answer 10

• State should take decisions for essential industries. Decision making based on needs of society
• privately run business, difficult to achieve policy which benefits whole country e.g railway system

Industry can be made accountable

Private may exploit customers with high prices

Question 11

Mulitnational pros

Answer 11

-Closer to markets
•lower transport cost
•better market info about customer wants and needs
•viewd as local company gain customer loyalty

-lower cost of production
•low labour rates/cost (low demand for labour in developing countries)
•cheaper rents/real estate costs due to low demand for commercial property

• Avoid trade barriers
• access to local resources which may not be available in own country

Question 12

Multi national cons

Answer 12

Communication weak with hq

Language legal culture difference
Lead to issues with workers and government due to misunderstanding

Local employees lack of skills and training , requires substantial capital for training and development

Question 13

Multinational impact on host countries

Answer 13

Investment will bring in foreign currency further money from exporting

Employment created opportunities
Training and development improve quality and efficiency locals

Tax revenue to govt increased from multinational profits

Management expertise improve in community

Improve economy raise gdp

Question 14

Multinational negative impact on host country

Answer 14

Exploitation of workforce due to absence of strict labour health and safety

Pollution from the plants higher levels than other countries due to restrictions

Profits may be sent back to host country rather than kept for reinvestment

Depletion of natural resources, they have little to no interest in conservation of resources

Local business may go out of business due to larger multinational with better equipment