Business| Globalisation

IB Business and Management BUSINESS ORGANISATION AND ENVIRONMENT 1.9 Globalisation
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Terms in this set (...)

Globalisation
The growing trend towards worldwide markets in products, capital and labour, unrestricted by barriers
Multinational companies
Business organisations that have their headquarters in one country, but with operating branches, factories and assembly plants in other countries
Free international trade
International trade that is allowed to take place without restrictions such a s'protectionist' tariffs and quotas
Tariff
Tax imposed on an imported product
Quota
A physical limit placed on the imports of certain products
3 key features of globalisation
1. Increased international trade as barriers to trade are reduced
2. Growth of multinational businesses in all countries as there is greater freedom for capital to be invested from one country to another
3. Freer movement of workers between countries
5 reasons to become a multinational
1. Closer to main markets
2. Lower costs of production
3. Avoid import restrictions
4. Access to local natural resources
5. Take advantage of expanding markets in other countries
7 benefits for host countries of multinationals:
1. Inflow of foreign currency (investment + exports)
2. Employment opportunities created
3. Local businesses benefit as suppliers
4. Quality and productivity gains from local firms
5. Tax revenues increased
6. Technology and management expertise gains
7. Output of the economy will increase (GDP)
6 disadvantages for host countries of multinationals IF NOT SUFFICIENTLY REGULATED AND MONITORED:
1. Exploitation of local workforce
2. Pollution
3. Competition forcing local firms to close
4. Imposition of Western culture
5. Profits returned to home country
6. Depletion of limited natural resources
Free trade areas
When a group of countries have removed tariffs and quotas between themselves, while retaining the right to set tariffs/quotas towards non-members
Customs unions
All the benefits of a free trade area AND countries adopt a common set of trade restrictions with non-members
Common markets
Members do away with duties and other trade barriers. They allow companies to invest freely in each member's country.
Economic and monetary unions
An attempt to create the economic conditions that exist in just one country for all members; e.g. a common currency, a single interest rate and agreement on fiscal policy.
Example of Free trade Areas
NAFTA (North American Free Trade Area: USA, Canada and Mexico)
Example of Customs Unions
Mercosur: Argentina, Brazil, Paraguay, Uruguay and Venezuela
Example of Common Markets
European Union (EU), not to be confused with the Euro-zone (i.e. Britain and Denmark are EU members but do not use the Euro as their currency)
Example of Economic and Monetary Unions
the euro-zone countries