External business environment - globalisation

Question 1

Reasons for increasing pace of globalisation

Answer 1

• removal of global trade barriers, negotiations with Asia
• advances in communications and technology
• increasing opportunities for global travel, due to low cost flying
• new opportunities in emerging markets, Asia

Question 2

Globalisation strategies

Answer 2

• glocalisation, McDonald’s altering recipes in different countries
• trying to remain personal, HSBC 2002 - ‘The world’s local bank’

Question 2

Methods of multinationals growing - internal + other

Answer 2

• organic (natural growth)
• de-merger (splitting company into subsidiaries)
• outsourcing (using other firms to carry out some services)

Question 3

Methods of multinationals growing - integration

Answer 3

• horizontal integration (same stage of production)
• backward vertical integration l (going back to suppliers)
• forward vertical integration (going forward to customers)
• conglomerate integration (different company entirely)

Question 4

Issues raised as a result of growth

Answer 4

• duplication of effort - functions of business may be duplicated if other firm taken over
• duplication of staffing - inefficiencies created as certain roles duplicated, and agreements of trade union
• compulsory redundancies - if staff are made redundant, morale drops
• diseconomies of scale - higher unit costs if too large, larger production runs = increased waste
• clashes of culture - contrasting cultures leads to disputes when integrating