How does globalisation create both opportunities and threats for a business?
The impact of globalisation on businesses (imports, exports, changing business locations, multinationals); barriers to international trade (tariffs and trade blocs); and how businesses compete internationally (using the internet and e-commerce, and changing the marketing mix).
A focused answer to Edexcel GCSE Business 2.1.3, covering the impact of globalisation (imports, exports, changing locations, multinationals), barriers to trade (tariffs, trade blocs), and how businesses compete internationally.
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What this dot point is asking
Edexcel wants you to explain the impact of globalisation on businesses, the barriers to international trade, and how businesses compete internationally.
What globalisation is
Globalisation means a business is no longer limited to its home country: it can sell abroad, buy from abroad, and operate in several countries. This brings both opportunities and threats, which is the balance the exam wants you to weigh.
The impact of globalisation
Imports cut both ways: a business can buy cheaper materials from abroad, but it also faces more competition as cheaper foreign goods enter its home market and undercut it. Exports are the opportunity side: selling to overseas customers opens huge new markets and can drive growth. Globalisation also lets businesses change where they produce, locating manufacturing in countries with lower labour or material costs. The largest businesses become multinationals, operating factories, offices and shops in many countries to be close to customers and cut costs.
Barriers to international trade
Trade between countries is not always free. A tariff is a tax on imports: it raises the price of foreign goods, protecting domestic producers but making imported materials dearer for businesses that rely on them, and making a business's own exports more expensive if other countries impose tariffs. A trade bloc is a group of countries that trade freely among themselves; being inside a bloc helps a business trade with members, but a business outside the bloc may face tariffs and find it harder to compete there.
Competing internationally
To win customers abroad, a business adapts. The internet and e-commerce make it possible to sell overseas without a physical presence, which has opened international trade to small businesses. A business also changes its marketing mix for each market: adjusting the product to local tastes, setting a competitive price for that country, promoting in the local language and through local channels, and choosing the right way to distribute. A mix that works at home may fail abroad without adaptation.
Try this
Q1. State one opportunity that globalisation creates for a business. [1 mark]
- Cue. Exporting to new overseas markets, or buying cheaper materials as imports.
Q2. Explain one way a business could compete in an overseas market. [3 marks]
- Cue. Use e-commerce to reach foreign customers, or adapt its marketing mix (product, price, promotion, place) to suit that country.
Exam-style practice questions
Practice questions written in the style of Pearson Edexcel exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Edexcel 20192 marksState two barriers to international trade. (Paper 2, Section A)Show worked answer →
A 2-mark state question, one mark per correct barrier.
The barriers Edexcel lists are: tariffs and trade blocs.
Markers want the barriers from the specification. A tariff is a tax on imports; a trade bloc is a group of countries that trade freely with each other but can disadvantage outsiders. Since only two are named, both should be given.
Edexcel 20226 marksDiscuss the impact of globalisation on a UK manufacturer of furniture. (Paper 2, Section B)Show worked answer →
A 6-mark discuss question rewards a two-sided analysis with a judgement.
Opportunity side: globalisation lets the manufacturer export and sell its furniture to overseas markets, widening its customer base and increasing potential sales, and the internet and e-commerce make reaching foreign customers easier and cheaper.
Threat side: globalisation also means more competition from imports, as cheaper furniture from low-cost overseas producers enters the UK market, which can undercut the manufacturer on price and reduce its sales at home.
A strong answer judges that globalisation is both an opportunity (new export markets) and a threat (foreign competition), and that the manufacturer's response, for example competing on quality and design rather than price, or exporting to grow, determines whether it gains or loses. Markers reward the balanced analysis, not a list.
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Sources & how we know this
- Pearson Edexcel GCSE (9-1) Business (1BS0) specification — Pearson Edexcel (2017)