BusinessStudies.net - GCSE Revision for AQA Business Studies

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

UK Quality and Innovation

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

Design illustration
Design
Chemicals illustration
Chemical Engineering
Engineering spanner illustration
Engineering
Jewellery illustration
Jewelley
Pharmaceuticals illustration
Pharmaceuticals
The arts illustration
The Arts
Fashion illustration
Fashion
Oil barrel illustration
Oil Refining

Exchange Rates

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

Strong Pound vs Weak Pound

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

Effects of a Strong Pound

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

Effects of a Weak Pound

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