Business and the International Economy

Globalisation is the term now widely used to describe increases in worldwide trade and the movement of people and capital between countries. 

Free trade agreements exist when countries agree to trade imports/exports with no barriers such as tariffs and quotas. 

An import tariff is a tax placed on imported goods when they arrive into the country. 

An import quota is a restriction on the quantity of a product that can be imported. 

Protectionism is when a government protects domestic businesses from foreign competition using tariffs and quotas. 

Multinational businesses are those with factories, production or service operations in more than one country. These are sometimes known as transnational businesses. 

Benefits to being a multinational business

1. Produce at low costs
2. Extract raw materials which the company may need for production of refining.
3. Produce goods nearer the market to reduce transport costs.
4. Avoid trade barriers
5. Increase market share
6. Remain competitive with other businesses who may expand
7. Gan government grants

Impacts on shareholders

1. Likely to receive increased dividends
2. Employees may have increased promotion opportunities
3. Suppliers may have increased or decreased sales based on where it operates
4. Government may gain higher tax revenue 

Potential benefits to the economy

1. Jobs are created
2. Increased investment
3. Increased exports
4. Increased tax revenue
5. Increased consumer choice

Potential drawbacks to the economy

1. Most jobs created are often unskilled assembly-line jobs
2. Reduced sales for local businesses
3. Repatriation of profits – profits sent back to MNC’s home
4. Exhaustion of natural resources
5. High influence on government

Exchange rate is the price of one currency in terms of another currency.