GLOBALISATION

The increase in worldwide competition between business.

HOW BUSINESSES ARE AFFECTED BY
INTERNATIONAL COMMUNITY
• More competition from foreign firms- as the are many businesses from
other countries that will be providing the same service or the same
product. Hence, less customers that will buy the product leading to
less sales.
• No government protection- as the government cannot provide loans,
tax credits and tax deductions. Hence they can be strained by higher
currencies
•
EXCHANGE RATE
• The price of one currency in terms of another.
HOW BUSINESS CAN BE AFFECTED BY
CHANGING EXCHANGE RATE
• APPRECIATION-it occurs when the value of a currency arises. It
buys more of another currency than before.
•
• DEPRECIATION-it occurs when the value of a currency falls. It buys
less of another currency that before.
CURRENT EXCHANGE RATE
BARRIERS TO TRADE
• LANGUAGE- different countries uses different languages some of
which being a business owner, one might not be aware of them. This
leads to difficulty to trade amongst the customers and producers.
• Different currencies- when one sells at a different country the
currencies might be higher than the other which makes it expensive
for the business. Hence high sales
• Strict laws- a country might set legal price limits on products to
protect customers. Hence lower prices leads to lower profits made by
the business.
FORMATION OF FREE TRADE
ASSOCIATIONS
• This is reducing barriers and limits on international trade.
• E.g. SADC, SACU
• They even share or use sea ports for free
•
ADVANTAGES OF FREE TRADE
• Increases market share- as there are many people who can buy the
products
• Easy to export-as there are no barriers and no charges when selling
goods btwn countries.
• Cheaper goods- as there are low or no charge when exporting goods
DISADVANTAGES OF FREE TRADE
• Competition from imported foreign goods- as better goods may be
imported into the country leading to low demand.
• Leads to loss of jobs-
ADVANTAGES OFGLOBALISATION
• Cheaper goods- as there is higher competition, businesses reduce
prices to increase customers willing to buy the goods.
• Large market share- there are many people to buy the goods than just
within the countries.
• Easy access to raw materials- as a business can acquire the raw
materials from other countries
• High quality goods produced- due to profit motive of the businesses,
quality is ensured so as to meet consumer needs and satisfaction.
•
DISADVANTAGES
• Loss of skilled manpower-
• may increase dumping of poor quality goods to less developed
countries- as they want to make profit, they will produce more goods
compromising the quality and then send it to under developed
countries to maximise profits. Hence minimum satisfaction of
customers from the under developed countries.
• Increased competition- as there are many businesses that sell the same
product from different countries some of which are developed and
they will produce goods of better quality. Hence low sales of the
goods.