impact of globalisation on businesses
by ciaran clarke
1. Globalisation is the process of greater interaction and integration of people, businesses, cultures and governments of different countries across the world and allows product markets to operate across the globe.
2. Globalisation has meant increased competition from overseas for UK businesses This comes at the expense of domestic businesses, so demand will fall for UK goods and services This is particularly the case for low cost imports such as textiles
3. imports:
3.1. However, UK businesses benefit by buyings
3.2. This might be in the form of:
3.3. Finished goods
3.4. Semi-manufactured goods
3.5. Raw materials
3.6. UK businesses profit by adding value
3.7. For example, supermarkets make it easy and convenient to buy foreign produced fruit and vegetables
3.8. Car manufacturers import components for producing cars in the UK
4. international trade
4.1. International trade is the exporting and importing of goods and services between countries.
4.1.1. good are tangible i.e you can touch them.
4.2. advantages of international trade: Global brand recognition
4.3. Wider market
4.4. Economies of scale
4.5. Easier to compete internationally if located in other countries
4.6. Take advantage of lower production costs
4.7. Possible tax advantages or grants
4.8. Spread risk
4.9. Disadvantages Communication and coordination problems Threat of political unrest Differences in culture and legal systems Media attention – may be seen as unethical Vulnerable to fluctuations in exchange rates
5. exchange rates: Each country has their own currency, for example: Japan=Yen Mexico=Peso UK=Pound If goods and services are bought by foreign businesses they will expect to be paid in their own currency. So we could need to change the British pound for the foreign currency. Exchange rates is simply the cost of switching one currency for another.
5.1. exchange rates change:
5.1.1. If the exchange rate of the pound increases then:
5.1.2. Prices of UK exports will increase and the price of UK imports will fall
5.1.3. If the exchange rate of the pound decreases then:
5.1.4. Prices of UK exports will decrease and the price of UK imports will increase