2.4 Globalisation

Question 1

What is globalisation?

Answer 1

The process through which world economies have become steadily more interconnected
The movement of goods, service enabling businesses to sell their products anywhere in the world

Question 2

What are the main aspects of globalisation?

Answer 2

• Imports and exports
• International competition
• Exchange rates

Question 3

What is a multinational company
(MNC)?

Answer 3

A business which produces goods and services in more than one country. Also called transnational corporations

Question 4

How has globalisation changed the ways in which businesses operate?

Answer 4

• Increased international trade
• Increased movement overseas to live and work and money has flowed between different countries
• MNCs have grown and have supplied products to markets across the world

Question 5

Why has the rate of globalisation increased through the years?

Answer 5

• Rising incomes allows consumers in many countries to buy goods and services by multinational companies
• Cost of transportation has fallen, making it possible to move raw materials and finished goods around the world
• Electronic communication has allowed all businesses to sell products to global markets

Question 6

What is international trade?

Answer 6

The selling of goods and services across national borders

Question 7

What are exports?

Answer 7

Goods and services produced by a business in one country and sold in another

Question 8

What are imports?

Answer 8

Goods and services bought from businesses located in another country

Question 9

What is a tariff?

Answer 9

Tax on foreign goods imported into a country

Question 10

What is a trade bloc?

Answer 10

When a group of countries form a group in which they agree to reduce tariffs between themselves

Question 11

What are the benefits of globalisation?

Answer 11

• Increased chances of growth
• Increased inward investment
• Access to wider market
• International specialisation
• Increased levels of efficiency due to more competition
• Access to cheaper labour and raw materials
• Transfer of knowledge, technology, and skills

Question 12

What are the disadvantages of globalisation?

Answer 12

• International competitors with cheaper costs
• Power of multinational brands
• Whole industry closures
• Movement away from manufacturing sector, and more towards tertiary sector
• Effects of events in other countries
• Threat of takeover from MNCs which can also cause loss of jobs

Question 13

What is growth?

Answer 13

When a business sells increased quantities of its products

Question 14

What is economies of scale?

Answer 14

When the cost of producing a single unit falls as output increases

Question 15

What is inward investment?

Answer 15

When governments, businesses, and individuals invest capital into another country, e.g. Building new factories or buying companies

Question 16

What is a takeover?

Answer 16

When one business buys control over another one

Question 17

How can businesses compete internationally?

Answer 17

• Improve design and quality of products
• Lower prices
• Target a specific market
• Provide more convenient locations for consumers

Question 18

What are exchange rates?

Answer 18

The price of one currency expressed in terms of another

Question 19

What is the effect of higher exchange rates?

Answer 19

• Fewer pounds are needed to purchase goods and service from other countries
• Products imported from other countries become cheaper
• UK exports overseas become more expensive
• Export sales decline

Question 20

What is the effect of lower exchange rates?

Answer 20

• Imports become more expensive as more pounds are required to buy a unit of foreign currency
• UK exports of products become cheaper as fewer units of foreign currency are required to buy them
• UK export sales increase

Question 21

Explain the term SPICED

Answer 21

Stronger
Pound
Imports
Cheaper
Exports
Dearer

Question 22

Explain the term WIDEC

Answer 22

Weaker
Pound
Imports
Dearer
Exports
Cheaper