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What is Globalization and what does it include?
Globalization is growth to a global or worldwide scale. Includes:
- Trade- Buying and selling goods and services.
- Investment- Investing money for profit or material result.
- Capital- A valuable resource of a particular kind.
- Labour- Interaction of workers and employers.
Positives of Globalisation:
Creates employment and increases revenue for Government.International relations for fair trade, environmental protection and human rights.Promotes competition and lowers prices.Improves standard of living.
Negatives for Globalisation:
Vulnerable countries, no worker protection.Widens the gap between rich and poor.Exploit the lack of environmental protection.Encourages materialism and individualism.
Impact on employment -
Lack of government support to grow domestic business and employment. Developed countries have lost jobs due to labour. Labour shortages could be solved with the flow of capital.
Spread of skills and technology-
Globalisation spreads new inventions, shops available online. Globalisation also takes place in education- specialised school such as John Curtin for sport.
International Cooperation and understand-
Societies have become richer as they have welcomed people of other cultures. International marketing depends upon understanding culture.
Tax Havens and transfer pricing:
Countries with secretive tax and finance. Can be classified if:
Ø Lack of transparency- Difficult to access public records.
Ø Lack of information exchange- Resistant to sharing information.
Pricing of assets, servicesand supplies within an organisation. Example; when a parent company sells supplies.
Global business ethics-
Expect businesses to act ethically. Use economic and social influence to raise living standards.
As free trade agreements deregulate to labour markets workers can be more vulnerable to exploitation. Example; Sweatshops are used to increase profit because workers are paid little for their work.
- Aims to meet the needs of stakeholders whilst
- seeking to protect the environment.
Being more efficient with resources and reducing waste resulting in reduction of costs.
Sustainable businesses improve staff moral, productivity.
Publication relations and Public Image-
Used to show business in a positive light.
- Business commit to providing decent working conditions. Aim is to improve and protect rights of workers.
- Example; Cadbury.
- Selling products that are considered unsafe in countries that do not have the same product laws.
- Example; Halcion was banned in UK but sold later in the US.
Corporate Social responsibility (CSR) -
Strategic commitment by companies to ethical conduct. CSR aims to make business operations sustainable.
Financial activity regulation-
Regulate financial activity to protect rights of consumers and encourage healthy competition.
Reseal Price Maintaince-
Wholesaler controls the retail price of its good and services. Anti-completive because consumers pay a higher price and retailers do not set a discount price.
Managers of competing businesses agree to work together to exploit a market. When two or more business colludes they form a cartel. A cartel is an illegal anti-completive arrangement between two more competing businesses.
Forms of cartel conduct include:
Ø Market Sharing- Competitors agree to divide their market and to not compete with each other.
Ø Markets Size Fixing- Businesses agree on an amount of produce produced and manipulate prices through price and demand.
Ø Bid Rigging- Two or more competitors agree on bids they will make when tending for contracts.
Form of collusion between competitors to fix prices. Illegal under the Trade Practices Act 1974. Instead of businesses competing on prices, a high price is set.
Refers to creations of the mind, inventions. Values intellectual property based on cost of creating and values income on the intellectual property that has been generated.
Free Trade Agreements-
- Government supports business growth and expansion overseas; increases GDP (Gross Domestic Product). Government collects more taxes, nation’s wealth increases.
- Example; Tariffs on agriculture products like wheat.
Government Policy and Global Innovation-
- To encourage innovation and
- support business confidence government gives business grants and incentives.
Global expansion and technology-
Technology has created new industries and business opportunities for global expansion. Such as online companies.