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Chapter 29

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4 views29 pages

Chapter 29

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Thwe Thwe Tun
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Chapter 29

Globalisation
 Globalisation is the term now widely used to describe
the increases in worldwide trade and movement of
people and capital between countries.
Globalisation
 World is one large market
 Same goods and services can be found
 Workers easier to move between countries
 Moving more freely from countries to
countries
Causes of increasing globalisation
 Increasing free trade agreements
 Reduce protection for industries, consumers can
purchase goods and services from other countries
 Improved travel links and communication
 Easier to transport globally, easy price comparisons,
online or e-commerce
 emerging markets are industrializing
 China and countries in South-East Asia countries
imports and own manufacturing export large quantities
Free trade agreements
 Free trade agreements exist when countries agree to
trade imports/exports with no barriers such as tariffs
and quotas
Opportunities of globalisation
.
Threats of globalisation
.
Globalisation and efficiency
 More choice and lower price for consumers
 Businesses look way for increasing efficiency
 Many firms find easier to sell in foreign markets
 Many production workers in richest countries have
lost their jobs owing to gloablisation
 Government can no longer protect own industries
against foreign competition and leas to serious
economic and social problems
Why govt. introduce tariffs and
quotas?
 Import tariff is a tax placed on imported goods when
they arrive into the country
 Import quota is a restriction of the quantity of the a
product that can be imported
 Protectionism is when a government protects domestic
businesses from foreign competition using tariffs and
quotas
Argument for free trade
 Foreign competitors able to produce much more
cheaply and local companies force out of the business
 Reduce employment and incomes
 But, many economists believe that
 It is better to allow local customers to buy imported
goods cheaply
 Local businesses produce and export goods and
services with competitive advantages
Multinational businesses
 Multinational businesses are those with factories,
production or service operations in more than one
country
 These are sometimes known as transnational
businesses
 Multinational businesses are some of largest
organizations in the world
 Oil companies: Shell, BP, Exxon Mobil
 Car manufacturers: Toyota, General Motors
Benefits MNCs
 Produce with low costs such as low wages
 Extract raw material which the company may need for
production
 Produce goods nearer the markets
 Avoid barriers to trade by countries
 Increase market share, spread risks
 Remain competitive with rival businesses
 Gain government grants
Impacts on stakeholder from MNCs
 Shareholders – increase profits
 Employees – gain promotion as business larger
 Suppliers- increases or decreased sales
 Government – higher tax revenue
Benefits of MNCs to Economy
 Jobs are created which reduces level of unemployment
 Increased investment – new technology, ideas
 Increased exports – export sold abroad, also imports
may be reduced as more goods are now made in the
country
 Taxes increase funds to the government
 Increase consumer choice – more choices for
consumers, more competition
Drawbacks of MNCs to Economy
 Jobs created are often unskilled assembly-line tasks.
Skilled jobs such as R&D, not usually created in host
countries receiving multinational
 Reduced sales for local businesses
 Repatriation of profits- profits are back to home
countries
 MNCs use scare and non-renewable resources in the
host country
 Large multinational companies can influence both
government and the economy of the host country
Exchange rates
 Exchange rate is the price of one currency in terms of
another currency
 Most currencies are allowed to vary or float on the
foreign exchange market according to the demand and
supply of each currency
 For example, demand for € greater than demand for $.
 €1=$1.5
Depreciation of exchange rate
 When the exchange rate is worth less against other
currencies
 If euro falls from €1=$1.5 to €1=$1
 The effect of this is to
 Make exports cheaper, exports from EU sell for a lower
price in America as it take fewer dollars
 Imports are more expensive as more euros have to be
given to buy the dollars
Appreciation of exchange rate
 Appreciation of exchange rate is worth more against
other currencies
 If euro dollars raise from €1=$1 to €1=$1.5, it means
more currency buys more of the other currency
 Raise the price of exports
 Import prices fall
How Exchange Rate affect
businesses
 Exporting businesses
 Exporters have a serious problem when the currency of
their country appreciates as they become less
competitive in foreign markets and may lose sales,
revenue and/or profits
Currency appreciation vs.
depreciation
 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

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