Business and globalisation

Welcome to the Global Stage!

In this chapter, we are looking at how businesses expand beyond the UK to trade with the rest of the world. As a business grows, the whole world becomes its marketplace. We call this globalisation. We’ll explore how businesses buy and sell abroad, the hurdles they face, and how they change their strategy to win over customers in different countries.

1. What is Globalisation?

Globalisation is the process by which business and organizations develop international influence or start operating on an international scale. Essentially, the world is becoming "smaller" because it is easier than ever to trade with people in different countries.

Imports and Exports

When a business goes global, it deals with two main activities:

1. Imports: These are goods or services bought from overseas and brought into the UK.
Impact: UK businesses can buy cheaper raw materials from abroad, but they also face competition from foreign companies selling products to UK customers (like Samsung competing with UK tech brands).

2. Exports: These are goods or services produced in the UK and sold to customers in other countries.
Impact: This allows a business to grow much larger by finding millions of new customers outside the UK.

Multinationals (MNCs)

A multinational is a large business that has facilities and other assets in at least one country other than its home country.
Example: Nike, Coca-Cola, and Apple are all multinationals because they have offices, factories, or shops all over the world.

Changing Business Locations

Sometimes, as a business grows, it moves its production to another country. Why?
- Lower costs: Labour or raw materials might be cheaper in countries like China or Vietnam.
- Closer to the market: It might be cheaper to build cars in the USA if that is where you sell most of them.
- Avoiding barriers: Moving inside a trade bloc to avoid paying taxes.

Quick Review: The Basics

• Globalisation: The world becoming more connected.
• Imports: Buying from abroad (In).
• Exports: Selling to abroad (Exit).
• Multinational: A business operating in many countries.

Key Takeaway: Globalisation opens up massive opportunities for sales (exports) and cheaper supplies (imports), but it also brings tough competition from every corner of the globe.

2. Barriers to International Trade

Even though the world is connected, trading between countries isn't always "free." Governments sometimes put up "hurdles" to protect their own local businesses.

Tariffs

A tariff is a tax on imports.
When a government puts a tariff on a product, it makes that product more expensive for customers to buy.
Example: If the USA puts a 10% tariff on British chocolate, the price goes up in American shops. People might then choose to buy American chocolate instead because it’s cheaper.
Memory Aid: Tariff = Tax.

Trade Blocs

A trade bloc is a group of countries that agree to trade with each other with few or no tariffs.
Analogy: Think of a trade bloc like a "VIP Club." If you are in the club, you trade for free. If you are outside the club, you have to pay a fee (tariffs) to sell your goods to the members.

Common Mistake to Avoid

Don't confuse tariffs with quotas. While both are trade barriers, the Edexcel syllabus focuses specifically on tariffs (the tax) and trade blocs (the groups). If you see a question about trade barriers, focus your answer on how tariffs make imports more expensive and less competitive.

Key Takeaway: Tariffs make it harder for a business to compete on price in a foreign country, while being part of a trade bloc makes international expansion much easier.

3. How Businesses Compete Internationally

If a business wants to succeed in a new country, it can't always do things the exact same way it does in the UK. It needs to adapt!

The Use of the Internet and E-commerce

The internet has changed everything for small and growing businesses.
- 24/7 Access: Customers in Japan can buy from a UK shop while the UK owner is asleep.
- Lower Costs: A business can sell globally through a website without needing to open physical shops in every country.
- Social Media: Businesses can use targeted ads to find customers in specific countries very cheaply.

Changing the Marketing Mix (The 4 Ps)

To compete internationally, a business often has to change its Marketing Mix:

• Product: Does the product need to change for local tastes or laws?
Example: McDonald’s sells the 'McSpicy Paneer' in India because many people there don't eat beef.
• Price: The business must consider the local currency and how much people in that country can afford to pay.
• Promotion: Language and culture matter! A joke in a UK advert might be offensive or confusing in another country.
• Place: How will customers get the product? In some countries, people prefer small local markets over big supermarkets.

Don't worry if this seems like a lot to remember! Just think: if you were moving to a new country, you’d have to change your clothes (product) and the language you speak (promotion). Businesses have to do the same thing!

Did you know?

When Coca-Cola first entered the Chinese market, the name was sometimes translated into characters that sounded like "Kee-Kou-Kee-La," which can mean "bite the wax tadpole." They quickly changed it to something that meant "to allow the mouth to be able to rejoice!" This is why Promotion and local knowledge are so important.

Key Takeaway: Success abroad requires using the internet to reach customers and "localising" the marketing mix so the product fits the new culture and market.

Final Summary Checklist

Check your understanding:
1. Can you explain the difference between an import and an export?
2. Do you know why a business might become a multinational?
3. Can you explain how a tariff affects the price of a product?
4. Can you give an example of how a business might change its Product or Promotion to sell in a different country?