Business & the International Economy (Edexcel IGCSE Business): Flashcards
Exam code: 4BS1
1/380Still learning
Know0
- FrontGlobalisation
Define globalisation.
Was this flashcard helpful?
Cards in this collection (38)
Define globalisation.
Globalisation is the economic integration of different countries through increasing cross-border movement of people, goods, services, technology and finance.
What is the difference between imports and exports?
Imports are goods/services bought from another country; exports are goods/services sold to another country.
Name three reasons for increased globalisation.
Developments in technology, improved transport, deregulation, government commitment, market saturation, and familiarity with global brands.
Deregulation, such as the removal of barriers, has made trading internationally easier.
Deregulation, such as the removal of trade barriers, has made trading internationally easier.
Give one opportunity globalisation offers businesses.
Access to large markets, economies of scale, cheaper or specialist labour, and favourable taxation.
How can globalisation help a business achieve economies of scale?
Higher output from increased sales reduces costs, improving profit and competitiveness.
True or False?
Globalisation has reduced levels of poverty in developing countries since the 1990s.
True.
Since the 1990s, globalisation has reduced poverty, and raised employment, living standards, health and education.
Give one threat of globalisation to a business.
Increased competition, needing a profitable niche, international takeovers, and greater risk from external shocks.
A domestic PLC may be vulnerable to an international by a foreign rival, as capital flows easily across borders.
A domestic PLC may be vulnerable to an international takeover by a foreign rival, as capital flows easily across borders.
True or False?
Globalisation makes businesses safer from economic shocks in other parts of the world.
False.
Interconnected systems mean economic difficulties spread — e.g. the 2016 Brexit vote caused financial shocks worldwide.
How can a small domestic business survive increased competition from globalisation?
By adapting or exploiting a profitable market niche — e.g. Walkers dominates the lunchbox market.
Globalisation has been driven partly by developments in , allowing faster communication and online sales worldwide.
Globalisation has been driven partly by developments in technology, allowing faster communication and online sales worldwide.
True or False?
Global markets have many more customers than domestic markets, increasing potential revenue.
True.
Global markets have many more customers, so higher sales can increase revenue and profit.
Define a multinational company (MNC).
An MNC is a business registered in one country with manufacturing operations or sales outlets in different countries.
Give a real example of a multinational.
Starbucks is headquartered in the USA but has 32,000 stores in 80 countries.
On what basis do multinationals choose their locations?
Cost advantages and access to markets.
Give one benefit of operating as a multinational.
Low costs, high sales potential, a high profile, the ability to bypass trade barriers, and low tax liabilities.
Multinationals can locate their head office in low-tax countries such as Ireland or to reduce tax.
Multinationals can locate their head office in low-tax countries such as Ireland or Cyprus to reduce tax.
Give one drawback of being a multinational.
Legal and tax complexities, public relations problems (e.g. accusations of exploiting workers), and political instability in host countries.
True or False?
Around 60,000 multinationals are responsible for about half of global trade.
True.
Roughly 60,000 multinationals account for around half of global trade.
How can a multinational benefit local residents in a host country?
Well-paid job opportunities and training — e.g. Diageo employs and trains 6,500 workers in African countries.
How can a multinational benefit a national government?
Its exports improve the country's balance of payments, and it may invest in infrastructure.
Multinationals may pay taxes and business rates to local , which can be reinvested in the local economy.
Multinationals may pay taxes and business rates to local councils, which can be reinvested in the local economy.
True or False?
Multinationals only ever have positive impacts on the countries they operate in.
False.
MNCs can also cause environmental damage, pay minimal tax, use low wages or child labour, and leave once resources are used.
How can a multinational benefit local businesses in a host country?
They may share knowledge and technology — e.g. Samsung transferred patented technologies to support SMEs in South Korea.
Define a stakeholder.
A stakeholder is any individual, group or organisation with an interest in a business's operations.
Define an exchange rate.
An exchange rate is the price of one currency in terms of another (e.g. £1 = €1.18).
Define currency appreciation.
Appreciation is when the value of a currency rises (e.g. £1 = €1.18 rises to £1 = €1.25).
Define currency depreciation.
Depreciation is when the value of a currency falls (e.g. £1 = €1.18 falls to £1 = €1.05).
How does appreciation of the pound affect UK exports and imports?
It makes exports more expensive and imports cheaper.
True or False?
When the pound depreciates, UK exports become more attractive to overseas buyers.
True.
Depreciation makes exports cheaper and more attractive, and imports less attractive.
What is the formula to convert one currency into another?
Value of currency 1 × exchange rate = value of currency 2.
If fabric costs £8,500 and the rate is £1 = €1.18, what is the cost in euros?
£8,500 × 1.18 = €10,030.
To convert from euros back to pounds, you the euro value by the exchange rate.
To convert from euros back to pounds, you divide the euro value by the exchange rate.
Which type of business benefits from currency appreciation?
Importing businesses benefit from appreciation, as overseas raw materials become cheaper.
Which type of business benefits from currency depreciation?
Exporting businesses benefit from depreciation, as their products become cheaper and sales are likely to rise.
True or False?
When the pound appreciates, a UK exporter's sales are likely to rise.
False.
Appreciation makes exports more expensive abroad, so an exporter's sales are likely to fall.
When the pound depreciates, importers' costs rise, so they may seek suppliers to reduce costs.
When the pound depreciates, importers' costs rise, so they may seek domestic suppliers to reduce costs.
Sign up to unlock flashcards
or