Importance of Globalisation

• What are the key reasons businesses expand globally?

  • Access to new markets
  • Economies of scale
  • Diversification of risk
  • Access to skilled labour
• Why does globalisation allow for economies of scale?

  • Access to larger markets means higher ouput meaning lower fixed cost per unit
  • A global market increases the demand for raw materials meaning the business can exploit purchasing economies of scale leading to a lower variable cost per unit
• Why does globalisation diversify risk?

  • Operating in multiple countries protects the business from economic downturns in one region
  • Reduces dependency on one market
• What are the challenges of globalisation for business (evaluation)?

  • Political and cultural risks
  • Ethical concerns (e.g. labour exploitation, environmental impact)
  • Currency fluctuations and tariffs can hurt profitability
• What topics can the importance of globalisation link to?

  • Marketing mix (e.g. promotion) must adapt across markets
  • Methods of entering international markets
  • Organisational design (e.g. changing to decentralised decision-making)