While there are opportunities from globalization, there are threats as well to a country with benefits and drawbacks to businesses
Opportunities from globalization to a country
Free trade encourages increased international specialization
Improved communication and cheaper transportation
New business opportunities from increased investments, imports and exports
Access to skilled talent and technology across the world
Economic growth and development from global demand
Labour mobility enabling migration of workers to meet resource demand
Threats from globalization to a country
Competition against local business from imports and multinational corporations
Increasing competition for skilled labour and capital
Employment opportunity loss to lower income economies
Pollution and depletion of natural resources
Exploitation of lower income country workers
Poor quality product dumping
Foreign exchange risk on balance of payment
Benefits from globalization to a business
Access to cheaper raw materials
Access to materials not available in country
Access to new markets, increasing market share and brand awareness
Lower labour cost operating in another country
Reduced transportation cost from local distribution
Avoiding trade barriers in international trade
Achieving economies of scale from large production
Enjoying government subsidies/support and lower taxes
Drawbacks from globalization to a business
Increased cost due to legal control requirements
Exposure to foreign exchange risk
Limited control over operations in different countries
High cost/Large capital required to setup business
Competition from local businesses
High promotion cost to penetrate market
Higher cost from import/export tariffs
Read "What is globalization and its importance" and "what are multinational firms and their roles" to find out what globalization is about and "what are government policy instruments" to understand the role of governments in international trade. Also, read about challenges of expanding your business abroad in "What are the problems when growing your market abroad?"
RELATED CONCEPTS
International business
Import & Export
Employment
Developing economies
PAST YEAR QUESTIONS
What is meant by ‘exchange rate’? (2 marks) Oct/Nov 2019/12
Define ‘depreciation of an exchange rate‘ (2 marks) Feb/Mar 2022/12
Explain how each of the following external influences might affect LFP (6 marks) Oct/Nov 2020/13
Do you think GXC’s Managing Director should be worried about the recent appreciation of the exchange rate of country X’s currency? (6 marks) Feb/Mar 2019/12
Do you think the exchange rate is the most important factor for a business to consider when deciding whether to import parts for a high quality product? (6 mark May/June 2020/11
Do you think there are more opportunities than threats from globalisation for TRB? (6 marks) Oct/Nov 2018/12
Outline two opportunities of globalisation for GBR. (4 marks) Oct/Nov 2022/13
Read all post from Unit 6 - External Influences on Business Activity
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