External Influences - Global Context Flashcards
What is meant by globalisation?
Globalisation refers to the growth of ‘world markets’ whereby it becomes as easy to do business in other countries as it is in the domestic market.
What factors contributed to globalisation?
Internet, communication technologies, e-commerce, trade liberalisation, transport infrastructure and multinationals
What is a multinational?
a company operating in several countries.
What are the advantages of globalisation to multinationals?
new markets (less competition)
cheap labour
fewer regulations
incentives from governments
(grants, etc.)
Advantages of globalisation?
economies of scale reduce production costs and therefore prices paid by consumers
availability of cheap goods raises living standards
some benefit to LDCs when/if multinationals invest in infrastructure, education, etc.
job creation in LDCs
brings in foreign currency (‘hard’ currency) to LDC
Disadvantages of globalisation?
exploitation of natural resources in less developed countries (LDs)
exploitation of vulnerable workers in LDCs
and consequently no reduction in the gap between rich and poor countries
jobs lost in developed countries as firms move production to cheaper areas
What is global branding?
Global brands are brands that are recognised throughout much of the world.
What is meant by international trade?
International trade is the exchange of capital, goods and services across the borders of different countries.
The reasons for international trade?
Variety: trade enables countries to trade for previously UN-obtainable items
Economic efficiency: export markets development enables a business to gain economies of scale. Forcing UK firms to be more efficient.
Growth: access to millions of new customers.
International cooperation: trade leads to cooperation rather than conflict.
Specialisation - A country can specialise in what its resources are most suitable for.
The purpose of barriers to international trade?
Cheap imports by foreign competition can undercut and destroy businesses
New businesses won’t be strong enough to compete against multinationals
When a country persistently runs a large balance of payment deficit it might try to correct this by discouraging imports.
What examples of barriers are in place?
Quotas restricting number of imports
Tax (tariff) the goods entering the country from abroad
Subsidy paid to domestic industry to lower its production costs
Regulation of goods entering the country have to conform to complicated regulations
What is meant by an exchange rate?
The exchange rate is the value of one currency in terms of another.
