Globalisation: the concept of globalisation, the growth of multinational companies, how globalisation influences business location, international branding and how businesses compete internationally, and the opportunities and threats globalisation brings.

What this topic is asking

OCR J204 topic 6.3 wants you to explain the concept of globalisation, the growth of multinational companies, how globalisation affects business location, international branding, how businesses compete internationally, and the opportunities and threats it brings. It is an external influence: globalisation opens up new markets and cheaper supplies, but it also brings new competitors, so the marks come from weighing both.

The concept of globalisation

It has grown because of cheaper, faster transport (containers, air freight), better communications and the internet (which lets a business sell online to anyone), and the lowering of trade barriers between countries. The result is that even a small business can buy materials from one continent and sell to customers on another.

Multinational companies

Multinationals locate different activities where it suits them: production in countries with cheaper labour or materials, sales in large or wealthy markets. They benefit local economies through jobs and investment, but are sometimes criticised for low wages, poor conditions or avoiding tax in the countries where they operate.

Globalisation and business location

The trade-off is that producing far from the customer adds transport costs and time, and relying on distant suppliers adds risk if delivery is disrupted.

International branding and competing internationally

The same globalisation that lets a UK business sell abroad also lets foreign businesses compete in the UK, so it is both an opportunity and a threat.

Opportunities and threats

Whether globalisation helps or harms a particular business depends on whether it can seize the wider markets and cheaper supplies while coping with the stronger competition.

Try this

Q1. State one factor that has driven globalisation. [1 mark]

• Cue. Any one of cheaper transport, better communications, the internet, lower trade barriers.

Q2. Moving production abroad saves $8$ per unit in labour but adds $3$ per unit in shipping, on $10{,}000$ units. Calculate the net annual saving. [2 marks]

• Cue. $(8 - 3) \times 10{,}000 = 50{,}000$.