Enterprise- Business Structure Flashcards
Define Local business?
Business only trades in 1 town/ city
Define National business?
Business only trades within a country
Define MNC (multinational business)
Business that have a headquarter in 1 country and operate all around the world
Define Globalisation (toàn cầu hoá)
The increasing freedom of movement of goods, capital, people around the world.
e.g) The EU is apart of globalisation process by joining many countries in Europe down under a roof.
Define free trade
No restrictions or trade barriers exist that might prevent or limit trade between countries
Define tariffs ( 1 dạng thuế)
Taxes imposed on imported goods to make them more expensive
Define quota ( thuế hạn nghạch)
Limits on the physical quantity or value of certain goods sold to one country
Define protectionism
Using barriers to free trade to protect a country’s own domestic industries.
What is the growing importance of international trading links and their impact on business activity
- The rise in the international trade is essential for the growth of globalization
- The restrictions to international trade would limit the nations to the services and goods produced within its territories, and they would lose out on the valuable revenue from the global trade.
Benefits of international trading on business (6)
- Increase sales and profits
- Extend sales potential of the existing products
- Maintain cost competitiveness in your domestic market
- Enhance potential for expansion of your business
- Gains a global market share
- Reduce dependence on existing markets
Negative of international trading on business
- Local industries may be overshadowed by their international competitors -> e.g) raw material goods production will face a decline in competitivity due to imported goods.
- Loss of output and jobs from local firms that cannot compete with imported goods
- New businesses may suffer to survive against competition from existing importers -> Prevent ‘infant industries’ from growing domestically
- Importers may apply penetration pricing in order to eliminate competition from domestic firms
Factors contributed to the growth of Globalization
- Transport costs decline
- Reduction & removal of trade barriers
- Growth of multinational companies
- Technological innovation (infrastructure) (phát triển cơ sở hạ tầng)
4 organizations promote free trade
- WTO - World Trade Organization
- IMF - International Monetary (tiền tệ) Fund (Quỹ tiền tệ quốc tế)
- OECD - Organization for economic Co-operation & development (Tổ chức kinh tế hợp tác và phát triển)
Why MNCs form and continue to grow? Benefit of being an MNC
- Avoid trade barriers (rào cản thương mại)
- Increase customer base & build loyalty
- Enjoy cheap production costs & cheap goods -> lower average costs
4.Build reputation & gain recognition among the market
Increased brand awareness & product recognition
Problems of being an MNC (3)
- Foreign government regulations:
-> Stricter business law
i,e: - higher tax on imports/ exports (tariff trade barrier)
- Quotas: limited amount of products can enter the country
- high operation costs
- Can’t control the currency price
- High labour costs,high cost for machines - Communication barriers: Language & timezones
- Cultural norm: Some product may not be suitable/ appeal for a certain group or region customers
Benefits of MNCs to the Host country? (4)
- Bring in new technology & knowledge (innovation)
- Create jobs opportunities -> lower number of unemployments
- Provide high quality, modern facilities & services
- Create good relationship between host & MNC’s home country
Negative of MNCs to the Host country (6)
- Exploit labor and resources
- Pushing local firms out of business
- Polluting the environment
- Economic Leakage: (most of the money made by the company is ending up in the home country not the Host)
- Culture erosion of the Host by MNC’s home country
- Evade tax (trốn thuế) by practicing transfer pricing ( bán lại hàng cho công ty mẹ)
Positive of MNC’s to the Home country (5)
- Acquisition of raw materials from abroad (Mua lại nguyên liệu từ nước ngoài)
- Helping Mnc’s home country create good relationship with the Host country
- Help promoting the home country’s cultural & traditions
- Technology & management expertise acquired from competing in global market
- Inflow of income from overseas profits, royalties & management contracts
Negative of MNC’s to the home country (4)
- Not employed home country’s employers-> Prefer employing in the host countries
- Home country may lose its monopoly (exclusively) on strategic technologies & equipment to MNC’s host country
- MNCs transfer the capital from the home country to various host countries causing unfavorable balance of payment (bất cân bằng trong thanh toán, chi trả)
- Neglect the home country’s industrial and economic development due to it’s more profitable investing in other countries
Define privatisation ( Tư nhân hoá)
a process of selling state-owned & controlled business organisation to investors in the private sector
Positive of privatisation (8)
- Reduces burden (ganh nang) on the government
- Decision making in state bodies can be slow and bureaucratic ( quan liêu)
- The profit motive of private sector businesses will lead to increase in efficiency than when a business is supported & subsidised by the state
- Build stronger motivation since it puts responsibility for success in the hands of the managers & staff -> They have a direct involvement in the work they do-> Greater sense of empowerment
- Create a competitive environment since market forces will be allowed to operate: failing business will bắt buộc to change or die & successful 1’ll expand, ko bị limit on growth by the government.
- Raise finance for govr due to the sale of nationalised industries -> spent on state project
- Brings healthy competition due to regulatory bodies( bộ tự pháp) Ofwat & Oftel in UK, can be used to ensure no consumer exploitation.
- Private businesses will have access to the private capital markets -> increased investment in these industries
Negative of privatisation (7)
- May disrupt welfare motive (care more about profit than the people)
- May affect strategic industries ( may affect long term plan)
- Chance of rising of private monopoly -> if privatised and they could exploit consumers with high price
- Breakup of state units will reduce the opportunities of cost saving through economies of scale
e. g) Gas industry, bán 1/2 cho private business -> Government have 1/2 left. Nếu giờ đi mua gas từ nước ngoài they won’t have enough resource to earn economies of scale. - (Problem of accountability )Through state ownership, an industry will controled by a responsible minister -> if they sell it away -> Possible for company to exploit employees.
- Wastages of resources possible
