The international dimension
In business, no manager can operate without being affected by the international community.
Exchange rates
Exchange rates is the value of one currency compared to another.
How are exchange rates determined?
There are two type so currencies:
- Floating rates: The exchange rate of the currency is allowed to change freely depending on market forces, i.e supply and demand of the currency.
- Fixed rates: The exchange rate of the currency is set by the country's central bank.
How are businesses affected by changing exchange rates?
- Appreciation:
- Import prices fall.
- Export prices rise.
- Import prices fall.
- Depreciation:
- Import prices rise.
- Export prices fall.
- Import prices rise.
International economic organisations
- Economic and political unions. (e.g. the EU)
- Free trade agreements. (e.g. NAFTA)
- Organisations working for free trade between countries. (WTO)
- Consists of 25 European countries.
- Creates a single market in the EU.
- To tariffs, quotas or any trade boundaries.
- This results in:
- A huge market benefiting from economies of scale.
- Increased competition resulting in better products.
- A huge market benefiting from economies of scale.
- To tariffs, quotas or any trade boundaries.
- Common currency.
- Issue of Euros are controlled by the European Central Bank.
- Interest rates for the Euro become the same.
- Issue of Euros are controlled by the European Central Bank.
- The social charter:
- The EU wants to improve working
conditions and make finding
josbs equal in the EU.
- The main conditions include:
- Workers can look for work anywhere in the EU.
- Workers must be consulted on important issues.
- Equal treatment of full/half time workers.
- Limits on maximum working hours.
- Improved health and safety rules at work.
- Workers can look for work anywhere in the EU.
- The EU wants to improve working
- Lower costs because:
- One price list throughout Europe can be used.
- No more charge through currency conversion.
- One price list throughout Europe can be used.
- Easier to:
- Trade with EU countries.
- Compare costs of supplies with EU countries.
- Trade with EU countries.
- No risk of losing out on exchange rate changes.
- More competition from non-UK firms.
- Consumers might buy cheaper products from other EU countries.
- The rate of interest might no longer suit UK firms.
Eliminates all trade barriers. Businesses within the free trade union are affected in the following ways:
- More competition from foreign firms.
- Consumers have more choice and prices are lower.
- Consumers have more choice and prices are lower.
- No 'protection' by governments.
- More opportunities for exporting.
- Efficient firms will be more successful.
- Efficient firms will be more successful.
trade between the member countries, ultimately improving living conditions for the people.
Globalisation
Globalisation is the word used to describe the increased worldwide competition and business
activity. Goods and services that once can only be found in one country has spread all around the world. There are several reasons for this:
- Free trade agreements encourage international trade.
- Improved travel links and communication.
- Countries that have been undeveloped before start to develop and export their own goods, leading to more international competition.
- More choices and lower prices for the consumer.
- Businesses look into more ways to become more efficient.
- Why many businesses merge to become multinationals.
- Why many businesses merge to become multinationals.
- Inefficient businesses go out of business.
- Free trade results in:
- More workers losing jobs, since governments can no longer protect them from foreign competition.
Multinationals are businesses that have factories, services, or operations in more than one country. It is important to note that, for a business to become multinationals, they must produce goods in more than one country.
Why do firms become multinationals
- To cut costs:
- Labour costs.
- Raw material costs.
- Labour costs.
- To extract raw materials not found elsewhere.
- To produce goods nearer to the market.
- To bypass trade barriers.
- To expand and spread risks.
- Jobs are created.
- New investment increases national output.
- Imports are reduced since there are more goods in the country. More exports.
- More taxes are paid to the government.
- Jobs created are usually unskilled jobs.
- Local firms are forced out of business since they can't compete with multinationals.
- Profits flow out of the country.
- Multinationals use up scarce resources.
- May influence the government.
That's all folks! This is the end of the book IGCSE Business Studies by Borrington Stimpson. I'm sorry if you are not satisfied with the presentation or layout of the blog, and I would really appreciate ideas and suggestions. I hope this summary helped with your studies. Good luck on your IGCSE exams! Thank you!
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