CH9: GLOBALISATION

GLOBALISATION:The growing trends towards worldwide markets in products, capital and labour.

The key features of globalisation that have on business strategy are:• increased international trade as barriers to trade

are reduced• growth of multinational businesses in all countries

as there is greater freedom for capital to be invested from one country to another

• freer movement of workers between countries

Business organisations that have their headquarters in one country, but with operating branches, factories and assembly plants in another country.

Multinational Companies:

Headquarters = Head Office

Multinational Companies:

LOTS MORE!

With the person next to you (2 or 3people)- list as much multinational companies as you could within 1 minute.

Free International Trade:International trade that is allowed to take place without restrictions such as ‘protectionist’ tariffs and quotas.

Tariff:Tax imposed on an imported product.

Quota:A physical limit placed on the quantity of imports of certain products.

Why become a multinational?

1.Closer to the main markets• Lower transport cost• Better market information• May be perceived as being more local than other

companies.

2.Lower Cost Of Production• Lower labour rates. • Cheaper rent and site costs.• Government grants and tax intensive.

3. Avoid import restrictions

4. Access to local natural resources

5.Take advantage of expanding markets in other countries

Why become a multinational?

WORD SEARCH TIME!!!

This word search contains 5 keywords that you’ve learnt from this chapter.

SOLUTION

Host countries of multinational:Benefits:• Inflow of foreign currency (investment & exports)• Creates employment opportunities• Tax revenue increased• Quality & Productivity gain from local firm• Output of the economy will increase (GDP)

Disadvantages:• Pollution• Competition causes local firm to close• Profits return to home country• Depletion of limited natural resources.

Regional Trade BlocsThere are four main types of trading agreements between nation:1. Free trade areas (FTA): When a group of countries have removed tariffs and quotas between themselves, while retaining the right to set tariffs/quotas towards non-members.

EXAMPLE: NAFTA (North American Free Trade Area: USA, Canada and Mexico)

2.Customs Union (CU):All the benefits of a free trade area AND countries adopt a common set of trade restrictions with non-members.

EXAMPLE: Mercosur- Argentina, Brazil, Paraguay, Uruguay and Venezuela

3.Common Market (CM):Extended version of Custom Union- They aim to create the trading conditions that would exist within just one country. They allowing the free movement of capital and people within member states and also imposing common product standards throughout the area.

EXAMPLE: European Union (EU)

4. Economic and monetary unions (EMU) :These attempt to create many of the economic conditions that exist within just one country.• Common Currency• One single interest rate

EXAMPLE: THE EURO-ZONE COUNTRY

Example of regional trade blocs:

ASEAN

Example of regional trade blocs:ASEAN (Association of Southeast Asian Nations)FREE TRADE AREAMember States:Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

Goals: • Accelerate economic growth, social progress and

cultural development in the region• Promote regional peace and stability and stick to

United Nations Charter.

DONE