Globalization refers to the increasing integration of countries through trade and cultural exchange. It has been enabled by free trade agreements, improved infrastructure for transportation and communication, and the industrialization of emerging economies. For businesses, globalization allows access to new markets, cheaper resources and labor abroad, and greater profits through international trade. However, it also increases competition from foreign firms and the risk of losing domestic jobs and market share.

2.  Globalization refers to the changes in the
world where we are moving away from self-
contained countries and toward a more
integrated world. Globalization of business is
the change in a business from a company
associated with a single country to one that
operates in multiple countries.

3.  Increasing number of free trade agreements–
these are agreements between countries that
allows them to import and export goods and
services with no tariffs or quotas.
 Improved and cheaper transport (water, land, air)
and communications (internet) infrastructure
 Developing and emerging countries such as
China and India are becoming rapidly
industrialized and so can export large volumes of
goods and services. This has caused an increase
in the output and opportunities in international
trade, allowing for globalisation

4.  Allows businesses to start selling in new foreign
markets, increasing sales and profits
 Can open factories and production units in other
countries, possibly at a cheaper rate (cheaper
materials and labour can be available in other
countries)
 Import products from other countries and sell it
to customers in the domestic market- this could
be more profitable and producing and selling the
good themselves
 Import products from other countries and sell it
to customers in the domestic market- this could
be more profitable and producing and selling the
good themselves

5.  Increasing imports into country from foreign
competitors- now that foreign firms can compete in
other countries, it puts up much competition for
domestic firms. If these domestic firms cannot
compete with the foreign goods’ cheap prices and
high quality, they may be forced to close down
operations.
 Increasing investment by multinationals in home
country- this could further add to competition in the
domestic market (although small local firms can
become suppliers to the large multinational firms)
 Employees may leave domestic firms if they don’t pay
as well as the foreign multinationals in the country-
businesses will have to increase pay and conditions
to recruit and retain employees

6.  when governments protect domestic firms
from foreign competition using trade barriers
such as tariffs and quotas
 Import quota is a restriction on the quantity
of goods that can be imported into the
country.
 Tariffs are taxes on imports.
Imposing these two measures will reduce the
number of foreign goods in the domestic
market and make them expensive to buy,

7.  firms with operations (production/service) in
more than one country.

8.  To produce goods with lower costs– cheaper material and
labour may be available in other countries
 To extract raw materials for production, available in a few
other countries. For example: crude oil in the Middle East
 To produce goods nearer to the markets to avoid transport
costs.
 To avoid trade barriers on imports. If they produce the
goods in foreign countries, the firms will not have to pay
import tariffs or be faced with a quota restriction
 To expand into different markets and spread their risks
 To remain competitive with rival firms which may also be
expanding abroad

9.  More jobs created by multinationals
 Increases GDP of the country
 The technology that the multinational brings
in can bring in new ideas and methods into
the country
 As more goods are being produced in the
country, the imports will be reduced and
some output can even be exported
 Multinationals will also pay taxes, thereby
increasing the government’s tax revenue
 More product choice for consumers

10.  The jobs created are often for unskilled tasks. The more skilled
jobs will be done by workers that come from the firm’s home
country. The unskilled workers may also be exploited with very
low wages and unhygienic working conditions.
 Since multinationals benefit from economies of scale, local firms
may be forced out of business, unable to survive the competition
 Multinationals can use up the scarce, non-renewable resources
in the country
 Repatriation of profit can occur. The profits earned by the
multinational could be sent back to their home country and the
government will not be able to levy tax on it.
 As multinationals are large, they can influence the government
and economy. They could threaten the government that they will
close down and make workers unemployed if they are not given
financial grants and so on.

11.  The exchange rate is the price of one
currency in terms of another currency.
 For example, €1=$1.2. To buy one euro,
you’ll need 1.2 dollars.

12.  A currency appreciates when its value rises.
 The example above is an appreciation of the
Euro. A European exporting firm will find an
appreciation disadvantageous as their
American consumers will now have to pay
more $ to buy a €1 good (exports become
expensive)
 Their competitiveness has reduced.

13.  A currency depreciates when its value falls.
 An American exporting firm will find a
depreciation advantageous as their European
consumers will now have to pay less € to buy
a $1 good (exports become cheaper).
 Their competitiveness has increased.