Globalization Overview and Impacts
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Questions and Answers

What are the four main characteristics of globalization?

  • Exporting, importing, manufacturing, distribution
  • Increasing foreign ownership of companies, increasing movement of labor & technology across borders, free trade in goods/services, easy flows of capital (finance) across borders (correct)
  • Increased competition, transfer of skills, collaboration opportunities, unique selling point (USP)
  • Economic integration, cultural exchange, technological advancements, political cooperation

    • Globalization is a recent phenomenon, emerging only in the past few decades.

    False (B)

    What is a multinational corporation (MNC)?

    A business registered in one country with manufacturing operations or outlets in different countries.

    Consumers now source products ______ recognizing global brands wherever they travel.

    <p>globally</p> Signup and view all the answers

    Match the impact of globalization on domestic businesses with its description:

    <p>Increased competition = Domestic businesses face pressure to improve efficiency and compete with global brands. Transfer of skills = Domestic workers can gain skills from international competitors, and global businesses can learn from local expertise. Collaboration opportunities = Domestic and global businesses can benefit from partnerships and joint ventures. Unique Selling Point (USP) = Domestic businesses can differentiate themselves through unique features or attributes.</p> Signup and view all the answers

    How does globalization impact domestic businesses?

    <p>It creates new markets for domestic products but makes it harder to compete with global brands. (B)</p> Signup and view all the answers

    Globalization always leads to job losses in developed nations.

    <p>False (B)</p> Signup and view all the answers

    Why do multinational corporations (MNCs) grow?

    <p>MNCs can grow due to factors such as access to cheaper resources, larger markets, lower production costs, and government incentives.</p> Signup and view all the answers

    Which of the following factors has NOT been cited as a significant contributor to the growth of multinational corporations (MNCs)?

    <p>Increased government regulation (A)</p> Signup and view all the answers

    MNCs always bring their profits back to their home country.

    <p>False (B)</p> Signup and view all the answers

    What is one key benefit for a firm in becoming a multinational?

    <p>Reduced risk, economies of scale, new markets, tax incentives, or avoidance of trade barriers are all valid answers</p> Signup and view all the answers

    MNCs can benefit from ______ by setting up facilities in countries with low corporation tax rates.

    <p>tax incentives</p> Signup and view all the answers

    Which of the following is NOT a potential advantage of MNCs for a host country?

    <p>Potential for lower wages and poorer working conditions (A)</p> Signup and view all the answers

    Match the following reasons for becoming a multinational with their corresponding descriptions:

    <p>Economies of scale = Increased production leads to lower costs per unit. Risk management = Diversifying operations across multiple markets reduces vulnerability to economic shocks. New markets = Access to untapped customer bases and growth opportunities. Tax incentives = Lowering tax burdens by establishing operations in countries with favorable tax policies.</p> Signup and view all the answers

    One of the potential disadvantages of MNCs is that they can negatively impact local businesses in the host country.

    <p>True (A)</p> Signup and view all the answers

    How can MNCs benefit from setting up facilities closer to their customers?

    <p>Reduced transportation costs</p> Signup and view all the answers

    MNCs can help boost a host country's local economy by creating ______ and opportunities for local businesses.

    <p>jobs</p> Signup and view all the answers

    Which company is mentioned in the context of relocating production to countries with lower labor costs?

    <p>Nike (B)</p> Signup and view all the answers

    Flashcards

    Globalisation

    Economic integration of countries through movement of people, goods, services, technology, and finance.

    Four Main Characteristics of Globalisation

    1. Increasing foreign ownership, 2. Movement of labor & technology, 3. Free trade, 4. Easy capital flows.

    Impact on Domestic Businesses

    Domestic businesses facemore competition, must improve efficiency, and can leverage unique selling points (USPs).

    Unique Selling Point (USP)

    A feature that makes a product or business stand out from competitors.

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    Transfer of Skills

    Exchange of skills and knowledge between domestic workers and global businesses.

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    Multinational Corporations (MNCs)

    Companies registered in one country but operate manufacturing in several countries.

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    Competition from Global Brands

    Increased competition for local businesses from international brands.

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    Collaboration Opportunities

    Benefits of joint ventures or alliances between domestic and global businesses.

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    MNC (Multinational Corporation)

    A company that operates in multiple countries.

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    Deregulation

    The reduction of government rules to promote business operations.

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    Economies of Scale

    Cost advantages gained by increasing production.

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    Tax Incentives

    Financial benefits offered by governments to attract businesses.

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    Risk Management

    Strategies used to lower the potential for loss in business.

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    Local Economy Impact

    Effects of MNCs on job creation and business growth in host countries.

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    Impact on Local Businesses

    Effects of MNCs on domestic companies' competition and practices.

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    Wages and Working Conditions

    The level of pay and the environment in which employees work.

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    Technology Transfer

    Introduction of new technologies and skills to local businesses from MNCs.

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    Study Notes

    Globalization

    • Globalization is the economic integration of countries, facilitated by increased movement of people, goods, services, technology, and finance across borders.
    • This integration impacts national cultures, spreads ideas, accelerates industrialization in developing countries, and may lead to deindustrialization in developed ones.
    • Globalization isn't a new phenomenon, but advancements in technology and global connections have significantly increased interdependence in the past 50 years.
    • Consumers now recognize and source products from global brands worldwide.
    • Key characteristics of globalization include increased foreign ownership of companies, cross-border movement of labor and technology, free trade in goods and services, and easy movement of capital.

    Impacts of Globalization on Domestic Businesses

    • Globalization increases competition for domestic businesses, forcing them to improve efficiency to compete with global brands.
    • Some domestic businesses may reduce staff or require higher productivity to remain competitive.
    • Skills transfer can occur between global and domestic businesses, benefiting both.
    • Domestic workers gain international skills, while global businesses gain local expertise.
    • Domestic businesses can compete by highlighting unique selling points, leveraging local advantages.
    • Cooperation between domestic and global entities through joint ventures and partnerships is possible.

    Multinational Corporations (MNCs)

    • MNCs are businesses registered in one country but with operations in multiple countries.
    • Factors like globalization and deregulation contribute to MNC growth.
    • Easier global operations and increased MNC size are driven by globalization and trade liberalization.
    • Reasons for businesses wanting to become multinationals include managing risks, leveraging economies of scale, creating employment opportunities, expanding into new markets, avoiding trade barriers, and utilizing tax incentives.

    Benefits of MNCs

    • Economies of Scale: Increased output and reduced costs.
    • Profitability: Profit is often sent back to the home country (often debated).
    • Job Creation: Employment in host countries.
    • Market Expansion: Access to new markets.
    • Reduced Costs: Proximity to customers reduces transportation costs.
    • Risk Mitigation: Reduced risk by diversifying markets.
    • Tax Advantages: Potential for reduced tax obligations.
    • Cost Advantages: Lower labor costs in certain locations often drive production in other areas.
    • Trade Barrier Avoidance: Setting up operations in countries with protectionist measures.

    Impact of MNCs on Host Countries

    • Governments often welcome MNCs due to economic benefits.
    • Advantages include job creation, competitive wages compared to domestic firms, improved local business utilization, infrastructure investments, increased tax revenue, and potential technology transfer.
    • Disadvantages may include potential influence on local business culture, and possible negative impacts on competition, wages, working conditions, communities, and the environment.

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    Description

    This quiz explores the concept of globalization and its effects on domestic businesses. It highlights the economic integration of countries, the movement of goods and services, and the competition faced by local businesses. Test your understanding of how globalization shapes our world today.

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