Podcast
Questions and Answers
What is one significant risk for domestic firms due to globalisation?
What is one significant risk for domestic firms due to globalisation?
Increased competition from international rivals can put domestic firms out of business.
How can businesses exploit a profitable niche in the context of globalisation?
How can businesses exploit a profitable niche in the context of globalisation?
Businesses can exploit a gap in the market to maintain sales and market share.
What risk do domestic public limited companies face concerning international rivals?
What risk do domestic public limited companies face concerning international rivals?
They risk being taken over by foreign rivals due to capital flowing easily across borders.
How do interconnected financial systems influence businesses in the context of globalisation?
How do interconnected financial systems influence businesses in the context of globalisation?
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What incident in 2021 impacted global distribution networks significantly?
What incident in 2021 impacted global distribution networks significantly?
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Study Notes
Threats of Globalization
- Increased Competition: International rivals pose a threat to domestic firms. International companies often enjoy lower costs due to economies of scale, enabling them to offer lower prices. Larger competitors may have greater resources for research, marketing, and distribution, putting smaller domestic businesses at a disadvantage. Access to cheaper labor or materials allows international competitors to reduce product costs.
Niche Market Development
- Profitable Niches: Globalization necessitates finding or creating a profitable niche. Failing to do so can lead to lost sales and market share. Exploiting a gap in the market can be very profitable. For example, Walkers Crisps benefits from dominating the market with its multipacks.
Vulnerability to Takeovers
- International Takeovers: Domestic companies, especially public limited companies, are vulnerable to takeover by foreign rivals. Ease of capital flow across borders allows foreign acquisitions. Most countries allow foreign companies to acquire domestic businesses. For example, Cadbury's (UK) was acquired by Kraft (US) in 2009.
Risk From External Shocks
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Interconnected Systems: Global economic difficulties can quickly impact businesses worldwide due to interconnected financial systems. The UK's 2016 EU referendum had immediate global financial repercussions, with significant stock market declines in even distant countries.
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Supply Chain Disruptions: Global distribution networks are vulnerable to disruptions, including natural disasters or other events like accidents or terrorism. The 2021 blockage of the Suez Canal by the Ever Given container ship highlights this issue, causing delays and impacts on industries reliant on global supply chains, including semiconductor manufacturing.
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Description
This quiz explores the various threats and opportunities posed by globalization on domestic businesses. It discusses increased competition from international firms, the importance of niche market development, and the vulnerability of domestic companies to foreign takeovers. Test your knowledge on how globalization reshapes the business landscape.
