Chapter 29 - Business And The International Economy

Question 1

Globalisation

Answer 1

Increases in worldwide trade and movement of people and capital between countries

Question 2

Free trade agreements

Answer 2

When countries agree to trade imports/exports without barriers (tariffs/quotas)

Question 3

Protectionism

Answer 3

When governments protect domestic businesses from foreign competition using taxes and quotas (this can lead to trade wars)

Question 4

Import tariff

Answer 4

Tax placed on goods when they arrive into the country

Question 5

Import quota

Answer 5

Restriction of the quantity of goods that can be imported

Question 6

Reasons for increase in globalisation (3)

Answer 6

Increase in free trade agreements - reduced protection for industries
Improved and cheaper travel links and communication (including the internet)
Emerging market companies are rapidly industrialising (china used to import everything now they dominate the export market

Question 7

:O

Answer 7

:D

Question 8

Potential opportunities for businesses from globalisation (4)

Answer 8

Opening foreign markets by selling exports to other countries
Become multinational by opening up factories in other countries
Import products from other countries to sell in your country
Import supplies from foreign countries but produce final goods in home country

Question 9

Impact + problem with opening foreign markets

Answer 9

Increases potential sales
Can be expensive to sell abroad and there’s no guarantee your products will be as successful

Question 10

Impact + problem with becoming multinational

Answer 10

It could be cheaper to make goods in other countries
Quality may not be as good, there may be ethical issues and it may be difficult to set up operations abroad

Question 11

Impact + problem with importing goods to sell in home country

Answer 11

With no trade restrictions it could be profitable
Products may need maintenance/repairs and the parts/support may not be available from the manufacturer

Question 12

Impact + problem with importing materials/components to finish production locally

Answer 12

Could be cheaper to purchase supplies abroad with free trade which reduces cost
Suppliers may not be reliable and the the transport costs will be greater

Question 13

Threats to businesses due to globalisation (3)

Answer 13

Increased competition from foreign competitors
Increased investments from MNCs to set up operations in home country
International competitors may pay more causing employees to leave

Question 14

Impact of increasing imports into home market from competitors(2)

Answer 14

Competitors may offer cheaper/higher quality products causing sales of local businesses to fall
Increased competition forces local businesses to be more efficient

Question 15

Impact of increasing investments from MNCs to set up operations in home country(2)

Answer 15

Creates further competition as MNCs benefit from economies of scale and may be able to afford the best employees
Beneficial if your business can supply them

Question 16

Impact of international competition being able to pay employees more (stealing them lol) (2)

Answer 16

Employees will have more choice about where they want to work, businesses will have to fight to keep them
Encourages local businesses to use a range of motivational methods to keep their workers

Question 17

Main reasons behind the growth of MNCs

Answer 17

Firms merge with foreign businesses to make it easier to sell in foreign markets

Question 18

Multinational businesses

Answer 18

Also known as transnational businesses
Those with factories, production or service operations in more than one country

Question 19

Examples of MNC’s (3)

Answer 19

Oil: Shell
Tobacco: BAT
Car manufacturers: Toyota

Question 20

Benefits of becoming multinational (7)

Answer 20

You can produce goods in countries with low costs
You can extract raw materials which the company may need
Produce goods nearer to the market to reduce transport costs
Avoid trade barriers
Increase market share and expand into different markets to spread risks
Remain competitive with globally expanding rival businesses
Gain government grants to set up in particular countries

Question 21

Impact on stakeholders of a business becoming multinational (4)

Answer 21

Likely to receive increased dividends from higher profit
Employees have increased opportunity to gain promotion and work abroad
Suppliers may have increased/decreased sales to the MNC depending on where it is
Governments may gain higher tax revenue if profits are repatriated, or lose it if the MNC head office moves elsewhere

Question 22

Benefits to an economy where an MNC operates (5)

Answer 22

Jobs created
Increased investment
Increased exports
Increased funds to the government (taxes paid by multinationals)
Increased consumer choice

Question 23

Drawbacks to a country’s economy where an MNC operates (5)

Answer 23

Jobs created are not often skilled
Reduced sales for local businesses
Repatriation of profits (sent back to MNC’s home country, not kept where they are earned)
MNC’s often use up scarce + non-renewable primary resources in the host country
Large MNC could have an influence on the government and economy

Question 24

Exchange rate

Answer 24

The price of one currency in terms of another

Question 25

Effective of depreciation (2)

Answer 25

Exports are cheaper
Imports are more expemsive

Question 26

Currency depreciation

Answer 26

When the value of a currency rises and it buys more of another currency than before

Question 27

Businesses affected by exchange rate (2)

Answer 27

Export business
Import business

Question 28

Effective of appreciation

Answer 28

Raise price of exports
Import prices fall and demand rises

Question 29

Currency depreciation

Answer 29

When the value of a currency falls and it buys less of another currency