2.4 Globalisation
Globalisation is the increasing interconnection of the world through trade and cultural exchange
- Businesses can be based anywhere in the world
- They can buy from anywhere in the world
- They can sell anywhere in the world
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
Chemical Engineering
Engineering
Jewelley
Pharmaceuticals
The Arts
Fashion
Oil Refining
Exchange Rates
- 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.
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