Global Context Flashcards
What is meant by globalisation?
The increased integration and interdependence of national economies
What factors have facilitated the growth of globalisation?
- reduction in trade barriers (tariff and quotas) (trade liberalisation)
- ease of transport
- the internet and rise of e-commerce
- communication technologies like smart phones
- easy movement of capital
- multinationals
Why are some businesses more affected than others by globalisation?
- their brand and products are more pleasing to consumers across the globe
- businesses whose products appeal to middle class may be more affected bc growing no. of consumers demanding these products
What are multinationals?
A business that has activities and operations in more than one country
Why are multinationals so powerful?
Can sometimes have greater revenue than a country’s GDP
Why are so many businesses keen to be multinationals?
- economies of scale can be obtained as production increases - operating in more countries = buying more raw mats - prices can be negotiated
- ability to take advantage of legal constraints
- they can enter new markets where less competition exists
- ability to are advantage of low wages
What are the positive effects of multinationals?
- provides employment opportunities in LEDC’s
- employment equips local people with skills
- leads to investment in local infrastructure
- leads to utilisation of local resources to supply factories
What are the negative effects of multinationals?
- employment often in exchange for low wages
- jobs are low skilled (no long term future)
- working practices can be unsafe
- child labour is often used which can mean that a child misses out on education
- local businesses can be driven out of the market
- profit often goes back to domestic country where multinational is based
What s global strategy?
A plan of action on a global scale (worldwide) (how a business plans to target growth beyond its borders)
What are the two approaches of global strategy?
- one size fits all approach - modify business model to adapt to foreign markets
- one for all, all for one approach - standardise products for all markets
Whats a global brand?
A brand that is recognised throughout much of the world
- distinctive through logo, name, colour, packaging and symbol
What threats does the rise in value and number of global brands present to local and national businesses?
- may be driven out as customers buy form global brands instead
- may result in downward pricing pressure as global brands may offer products more cheaply (EOS)
How could the presence of a global brand invigorate local markets/ businesses?
- inspire businesses with new ideas to develop their products/ run business
- could provide raw materials for global businesses to overtake outsourcing
What opportunities does globalisation provide?
- new markets, possibly with higher disposable incomes
- opportunity to move production into countries with lower labour costs
- investment opportunities in infrastructure and production (i.e. new factories)
What are the threats of globalisation?
- lower labour costs may damage reputation
- reduced domestic exports as businesses in developing economies begin to produce for themselves
- lack of local knowledge/ cultural differences may threaten global growth
