2.4 Globalisation

Globalisation is the increasing interconnection of the world through trade and cultural exchange

This means:

Pros and Cons of Globalisation

Pros

Access to a larger market can increase sales and profit
Costs can be reduced by purchasing from cheaper countries
Transport costs can be reduced by locating production closer to raw materials
Locating near to key markets reduces transport costs or import taxes
Production costs can be reduced by moving manufacturing to countries with lower wages

Cons

Businesses located in the UK can find it difficult to compete with businesses based abroad
Exchange rate fluctuations can affect profits
If a business uses cheap labour with poor working conditions, it can result in bad publicity
Different countries have different trading laws to comply with

The UK has an enviable reputation for quality and innovation, especially in…

Design

Chemical Engineering

Engineering

Jewelley

Pharmaceuticals

The Arts

Fashion

Oil Refining

Different countries use different currencies
When buying and selling in other countries, businesses will typically use their currency
An exchange rate is the price at which one currency is traded for another
Exchange rates are affected by the local and global economies, and frequently change — many times a day!
This is the same as exchanging your pounds for euros or dollars when you go on holiday

In your exam, you will not be asked to convert between currencies.

A strong pound is when the value of the pound increases compared to other currencies

A weak pound is when the value of the pound decreases compared to other currencies

When the value of pound increases:

More foreign currency can be purchased for the same cost
It costs less to buy foreign goods and services, which is good for businesses which import goods into the UK
It costs more for foreign businesses to buy British goods, which is bad for UK businesses exporting goods from the UK

When the value of pound decreases:

Less foreign currency can be purchased for the same cost
It costs more to buy foreign goods and services, which is bad for businesses which import goods into the UK
It costs less for foreign businesses to buy British goods, which is good for UK businesses exporting goods from the UK