Business Studies - Globalization

Globalization

Globalization is the term now widely used to describe increases in worldwide trade and movement of people and capital between countries. There are several reasons for this increase in Globalization. Increasing numbers of Free trade agreements and economic unions between countries have reduced protection for industries. Consumers can purchase goods and services from other countries with no or few import controls. Improved and cheaper travel links and communications between all parts of the world have made it easier to transport products globally. Many emerging market countries are industrializing very rapidly.

Potential Opportunities for Businesses

Opportunity and its impact on businesses Start selling exports to other countries - This increases potential sales. But it can be expensive to sell abroad.  Become a multinational - It could be cheaper to make some goods in other countries than home. But will the quality be as good? it is expensive to set up operations in other countries. Import products from other countries to sell at home - With no trade restrictions, it could be profitable. But the products may need maintenance, will the parts and support be available from the producer in the foreign country? Import materials and components from other countries - It could be cheaper to purchase these supplies from other countries. But will the suppliers be reliable? Will the greater distance add too much transport costs?

Potential threats to businesses

Threats and its impact on businesses Increasing imports from foreign competitors - If these competitors offer cheaper products, sales of local businesses might fall. But the increased competition could force the local businesses to become more efficient. Increasing investments from multinationals to set up operations in home country - This will increase further competition. But some local firms could become suppliers to these multinationals and their sales could increase. Employees may leave businesses that cannot pay the same or more than international businesses - Businesses will have to make efforts to keep their best employees. But this might encourage local firms to use a range of motivational methods to keep their workers.