How does the growth of world trade open up and threaten businesses?
The meaning of globalisation, the reasons it has grown, the opportunities it offers (new markets, cheaper resources, multinationals) and the threats it brings (more competition), and the role of tariffs and trade barriers.
A focused answer to AQA GCSE Business 3.2.4, covering the meaning of globalisation, why it has grown, the opportunities and threats it brings to UK businesses, and the role of tariffs and trade barriers.
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What this dot point is asking
AQA wants you to explain what globalisation means, why it has grown, the opportunities and threats it creates for UK businesses, and how tariffs and trade barriers affect international trade.
What is globalisation?
It has grown because of improvements in transport (cheaper, faster shipping and air freight) and communication, the spread of the internet (which lets firms sell and coordinate worldwide), and the reduction of trade barriers through trade agreements. The result is that a customer in Britain can buy goods made anywhere, and a British firm can sell to, and source from, almost anywhere. This cuts both ways for UK businesses, which is the balance AQA wants you to weigh: globalisation opens up huge new markets and cheaper supplies, but it also lets powerful foreign competitors into the home market.
Opportunities of globalisation
Multinationals such as global car makers and technology firms locate production where costs are lowest and sell where demand is highest, which is the clearest expression of globalisation. For a UK firm, becoming a multinational can mean cheaper production and access to local markets, but it also adds the complexity of managing operations and supply chains across borders and currencies.
Threats of globalisation
The main threat is increased competition, because foreign firms can now sell into the UK market more easily, taking sales from domestic businesses. Smaller firms may struggle to compete with large multinationals on price.
Tariffs and trade barriers
Tariffs protect domestic firms but raise costs for businesses that import materials, and can lead to higher prices for customers. Trade barriers can trigger retaliation: if one country imposes tariffs, another may respond with its own, which harms exporters on both sides. This is why changes to trade agreements (for example, the UK leaving the EU single market) have a big effect on businesses that trade across borders, altering the cost and ease of importing and exporting.
Try this
Q1. State what is meant by a multinational. [1 mark]
- Cue. A business with operations in more than one country.
Q2. Explain one opportunity globalisation gives a UK business. [2 marks]
- Cue. Access to new overseas markets, increasing potential sales and revenue.
Exam-style practice questions
Practice questions written in the style of AQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
AQA 20193 marksExplain one way that globalisation could threaten a small UK manufacturer. (Paper 2, Section B)Show worked answer →
A 3-mark explain question: one threat developed through a chain.
Globalisation lets foreign firms, often large low-cost producers abroad, sell into the UK market more easily. A small UK manufacturer may not be able to match their lower prices, because large overseas firms benefit from cheaper labour and economies of scale. The consequence is lost sales and pressure on the small firm's prices and profit, and it may be forced to cut costs or find a niche to survive.
Markers reward the chain from more foreign competition to the small firm being undercut to lost sales. A bare statement that there is more competition caps at one mark.
AQA 20219 marksA UK clothing business is considering moving its production to a lower-cost country overseas. Analyse the opportunities and threats this decision could create for the business. (Paper 2, Section C)Show worked answer →
A 9-mark analyse question rewarding developed chains on both sides applied to the business.
Opportunity chain: producing overseas where labour and materials are cheaper lowers the firm's costs, so it can either cut prices to compete or widen its profit margin, and it gains access to local markets near the new site.
Threat chain: relocating risks lower or inconsistent quality control at a distance, longer and less reliable supply chains, possible tariffs or trade barriers on goods brought back to the UK, and reputational damage if customers object to job losses or poor overseas conditions. A strong answer weighs the cost saving against the risks and judges that the decision depends on whether quality and reputation can be protected. Markers reward developed application, not a list.
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Sources & how we know this
- AQA GCSE Business (8132) specification — AQA (2017)