UNIT 6 - Chap 29: Business & the international economy Flashcards
What is Globalisation? is the term used to describe increases in world-wide trade and movement of people and and money between countries.
is the term used to describe increases in world-wide trade and movement of people and and money between countries.
Reasons for an increase in globalization: (4)
Increasing number of free trade agreements. Consumers can purchase goods and services from other countries with few or no import controls such as tariffs.
The internet has allowed the development of e-commerce where goods can be bought and sold online
Improved and cheaper travel links makes it easier to transport products globally
Emerging markets such as China have developing manufacturing industries so can export many products
Opportunities for Businesses (due to globalisation) (4)
Can start selling products to customers in other countries
Can open up branches in other countries to sell products/services
Can open their factories in other countries- benefitting from cheaper labour and rental costs
Can import raw materials from other countries which may be cheaper
Threats for Businesses (due to globalisation) (2)
Increased competition from international businesses
Employees may leave the business and work for other international businesses if their pay is higher
What is an import tariff?
An import tariff is a tax placed on imported goods when the arrive into the Country, making them more expensive.
What is an import quota?
An import Quota is a restriction on the quantity of a product that can be imported
Why the Government introduces import tariffs and quotas (3)
Introducing these are a form of protectionism. They protect domestic businesses from overseas competition that otherwise might close them down.
If they impose a tariff, overseas products will be more expensive for domestic customers meaning customers may buy from domestic firms instead.
If they impose a quota, the amount of products imported is limited. Therefor, domestic firms have less competition from overseas firms
What is a Multinational businesses?
Multinational businesses are those with factories or service operations in more than one country
Benefits to a business of becoming a multinational (5)
Producing goods in other countries can mean lower wage costs
Producing goods nearer to your target market will cut transportation costs
Can avoid barriers to trade such as tariffs and taxes. E.g. open factory in the place where you buy your raw materials from to avoid import tarrifs
To increase sales by opening up in anther country e.g. Starbucks
To gain grants form particular countries to set up in that Country e.g. Qatar
Impact of Multinationals on stakeholders (4)
Employees have opportunities to move and work abroad in the overseas branch/factory
The business will usually see an increase in profit and so shareholders will se an increase in dividends
The government will receive more tax revenue if a firm opens up or relocates to their country
Suppliers of raw materials may lose sales if the factory relocates to another coumtry
Potential benefits to a country or economy where a MNC is located (4)
Jobs are created, which reduces the level of unemployment.
Taxes are paid by the multinationals, which increases the funds to the government.
Increased exports – some of the extra output may be sold abroad, which will increase the exports of the country.
Increased consumer choice – there is more product choice for consumers and more competition.
Potential drawbacks to a country and/or economy where a MNC is located (3)
Reduced sales for local businesses – local firms may be forced out of business. Multinationals are often more efficient and have lower costs than local businesses.
Repatriation of profits – profits are often sent back to a multinational’s ‘home’ country and not kept in the country where they are earned.
Multinationals often use up scarce and non-renewable primary resources in the host country.
