Globalisation Definition
The process of international integration from the interchange of products, ideas, and other aspects of culture. |
building a worldwide network of communication, transportation, and trade. |
The way countries and people of the world interact and integrate |
History (Past) of Globalisation
Early example of globalisation is Silk Road when trade routes were connected across Asia, Europe and Africa. |
The Industrial Revolution further progresses globalisations in the 18th and 19th century. |
Formation of international organisations e.g., United Nations, helped further increase globalisation |
Multinational Corporation - MNC
A multinational corporation has business offices and operations in two or more countries. |
It generates revenue outside of its home country |
These companies are often managed from a central office headquartered in the home country. |
Example of an MNC
The East India Company, established in 1600 was an early multinational corporation. |
McDonalds is a decentralised Multinational Corporation - Each franchisee globally operates as an individual owner |
Why become an MNC?
To increase profits and growth |
Increase global customer base and increase market share |
Global exposure |
Companies can benefit form tax structures or laws in other countries |
Key features of an MNC
Global business presence |
Business conducted in various languages |
More complex business models |
Jobs created in foreign countries |
Pays taxes in other countries |
Market definitions
market |
The area of economic activity in which buyers and sellers come together and the forces of supply and demand affect prices. |
Bond market |
The bond market offers opportunities for companies and the government to secure money to finance a project or investment. |
Stock market |
The stock market trades shares of ownership of public companies. |
Market Price definition
At the market price, quantity demanded by consumers should equal the quantity supplied by producers |
Market Price and Quantity
The market Price and market quantity are found where the demand and supply lines intersect on a supply and demand graph |
Different sectors of the economy
Household sector |
They provide their time and skills or labour (a resource) to Firms in exchange for income (wages) |
Financial sector |
They receive savings from households and firms |
Government sector |
They receive taxation revenue from households and firms in the form of income tax and company tax |
Financial records
What financial imformation do businesses need to make decisions |
The balance sheet provides valuable information about your business' liquidity, financial stability, and capital structure. Analysing your balance sheet will help you assess your business' ability to meet its short-term and long-term obligations and evaluate its overall financial position. |
How do businesses use financial information to make decisions. |
The financial position of a business is crucial to all decisions that it makes. Using financial information, a business should be able to identify what options it can afford when making decisions. This financial data can be used to forecast how decisions might affect the business' cash flow. |
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Types of Globalisation
Economic Globalisation |
How countries work and trade together as one big global economy, making international trade easier. |
Political Globalisation |
How institutions and countries can influence the whole world. the United Nations is an example of a globalised institution. |
Cultural Globalisation |
How cultures across the world intersect and act in a similar way. |
Digital Globalisation |
How nations share data, information and knowledge of digital platforms. |
Advantages and Disadvantages of Globalisation
Advantages |
Disadvantages |
Opportunities to do business with other countries |
Struggle to keep up with competition |
Reduced costs in manufacturing and trade |
Closure of local businesses because of global competitors |
Increase in trade and employment |
Loss of employment |
Access to new technologies and products |
Complex international trading laws |
Exposure to new cultural experiences |
Types of Multinational Corporations
Decentralised Corporation |
Has an office in home country and other offices that operate individually globally. |
Centralised Corporation |
Has a central headquarters in home country and offices that report to the head office |
Supply and Demand - Demand Defintion
The amount of a good or service a consumer is willing and able to buy at different prices. |
Supply and Demand definitions
Supply Schedule |
A table that summarizes supply |
Demand Schedule |
A table that summarises demand |
Profit |
Income produces get for goods and services, less their business expenses |
Supply - Producer
How much a good or service a producer is willing or able to sell at different |
Demand Schedule
Summaries the quantity demanded of an item by price |
Orders the quantity demanded on an item by price, lowest to highset |
Helps with market research |
Consumer - Demand vs Affordability
A consumer will buy less of a product when it becomes more expensive |
A consumer must be willing and able to buy a product |
A consumer must be able to afford a product |
The demand in a product might go down, if a consumer can find a cheaper product |
Circular flow model definition
Households and firms rely on one another as they exchange labour for income and goods and services for payments for those goods and services. |
What is an income statement
An income statement is a financial statement that shows you the company's income and expenditures. It also shows whether a company is making profit or loss for a given period. The income statement, along with balance sheet and cash flow statement, helps you understand the financial health of your business. |
How do businesses use a income statement
An income statement helps business owners decide whether they can generate profit by increasing revenues, by decreasing costs, or both. It also shows the effectiveness of the strategies that the business set at the beginning of a financial period. |
Balance sheet
What is a balance sheet |
The term balance sheet refers to a financial statement that reports a company's assets, liabilities, and shareholder equity at a specific point in time. Balance sheets provide the basis for computing rates of return for investors and evaluating a company's capital structure. |
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