Globalisation and multinational companies. Flashcards
What is globalisation?
the growing interdependence of the world’s economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, as well as flows of investment, people, and information.
What are global markets?
one which involves buying and selling goods and services in all countries around the world. It can also refer to the number of people, in various countries, who might want to buy a business’s goods and services.
What are developing markets?
refers to a country with a growing economy and a growing consumption population. These markets are expected to continue to develop at a relatively fast pace.
What are characteristics of developing markets?
-Substantial investment in productive capacity, which moves them away from traditional economies, such as agriculture and the export of raw materials.
-They have high potential for growth.
Causes of globalisation: reduction in trade barriers?
trade liberalisation (the removal of restrictions or barriers on the free exchange of goods between countries). The World trade organisation advocates for free movement of goods and services. This means international trade is more accessible.
Causes of globalisation: political change?
global trade has increased as countries such as China have allowed more privately owned businesses. More countries have joined the WTO.
Causes of globalisation: reduced transport costs?
large cargo ships and improvement of rail/airlines has meant the cost of internationally transporting goods has lowered.
Causes of globalisation: internet and communications?
allowed greater communication between countries. Ordering products from other countries online is now possible.
Causes of globalisation: increased investment flows?
the movement of money for the purpose of trade/production has increased, through the stock exchange or money markets.
Causes of globalisation: migration?
the movement of workers has increased, allowing them to find the right jobs for their skill set.
Causes of globalisation: customer tastes?
tastes in different countries are becoming more similar, as consumers are no longer restricted to national stereotypes. As emerging markets create increased wealth in populations, they can afford to advance their consumption and tastes.
Effects on businesses: increased competition?
Increased competition from products from emerging markets has meant some traditional UK industries have seen production moved abroad.
Increased competition can also push prices down for consumers.
Effects on businesses: opportunities for growth?
-Cheaper imports means domestic businesses can be more efficient and may experience lower costs for raw materials.
-New markets bring new opportunities to make sales quickly, helpful if the home market is saturated.
-Opportunities for partnerships with businesses overseas may improve services.
-Economies of scale can occur when selling to more customers.
Spreads risk.
How can global branding be used to achieve growth?
Creating brands that are recognised throughout the world, such as Apple or Coca-cola. Markets can be penetrated more easily and growth is achieved.
Advantages of global branding?
economies of scale from selling a similar product everywhere. Spreads risk and increases brand loyalty.
Disadvantages of global branding?
expensive to set up as it requires large advertising investment, the local market may not accept a brand that doesn’t meet local needs, dissatisfaction in one country is likely to affect all the others.
How can external growth be used for growth?
Merging with, or acquiring, a business in another country is the most common strategy for achieving external growth. The business can be rebranded with the parent company’s name (for example Santander taking over the Abbey Bank), or it can retain the original name (for example Walmart taking over ASDA supermarkets in the UK).
Advantages of external growth?
mergers can gain specialist knowledge and skills from the local market, which facilitates fast growth. Takeovers mean instant growth and increased resources. If the domestic market is saturated, then investing in foreign markets is one solution.
