Business and the international

economyDone by: Lucia Lameroli, Agustina Valladares and Nicole Rebour

Globalisation In worldwide trade and movement of peoplebetween countries.

Reasons for this: Improved and cheaper travel links and

communication. And internet allows e-commerce.

Free trade agreements. -Import and exports with few/no barriers.

Opportunities• Selling exports and opening foreign markets. -Increases sales. -Expensive to sell abroad

• Opening factories in other countries.-Cheaper to make goods.-Won’t know if the products will be good quality.

• Importing products to sell in “home” country.-Would be profitable.-Products need maintenance and maybe repairs.

• Import materials and components and produce final goods in “home” country.-Reduce costs.-Transport costs.

Threats• Imports from foreign competitors.

-Competitors offer cheap products = sales of local businesses might fall.

-Increasing competition = local businesses more efficient.

• investment from multinationals to set up operations in “home” country.

-Creates further competition.-Local firms being suppliers = larger sales.

• Employees leave the business that pay the same or less than multinationals.

-Employees choose where to work.-Businesses have to make effort to keep

them.

Why some governments introduce tariffs and quotas?Tariffs and quotas on

imports

Government raise revenue

and protects firms• Import quota: Restriction in the quantity of a product that can be imported.

• Protectionism: When governments protects domestic firms from foreign competition using tariffs and quotas.

•So this is done because…

Multinational businesses•Are those with factories, production or service

operations in more than one country, also known as transnational businesses. They include:

Oil companies Tobacco companies Car manufacturers

Why do firms become multinational?To:•produce goods in countries with low cost.•extract raw materials which the firm may

need from other country.•produce goods nearer the market to reduce

transport costs.•expand into different market areas to spread

risks.•remain competitive with firms expanding

abroad.

Advantages of multinationals•Jobs created.•New investment which increases

output of goods and services. •More exports.•Fewer imports.•More competition.•Taxes paid = raise revenue of the

government.

Disadvantages of multinational•Often unskilled jobs created.•Local businesses may be forced out of

business.•Repatriation of profits.•Multinationals often use scarce and non-

renewable resources.•Multinationals have influence on the

government and the economy of the host country. They might ask for grants.

Exchange RatesBuy products in have to

use local another country

currency

Exchange Rate: Is the price of one currency in terms of another.

How are exchange rates determined?

Demand of >Demand of Price of will

How are businesses affected by changing exchange rates?

Currency appreciation: Occurs when the value of a currency rises, it buys more of another currency than before.

Currency depreciation: Occurs when the value of a currency falls, it buys less of another currency. Exporting business:

Currency appreciation

Importing business:

Currency depreciation

•https://www.educaplay.com/es/recursoseducativos/2567841/business.htm