PowerPoint Guide. The news icon is hyperlinked to a related article or website. Simply click to access

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1 PowerPoint Guide The news icon is hyperlinked to a related article or website. Simply click to access The film icon is hyperlinked to a related clip. Simply click to access The discuss icon indicates suggested points to discuss The writing icon indicates a written activity or question time

2 2.1 Growing the Business Impact of globalisation on businesses

3 Key elements to this topic Imports Exports Changing business Multinationals locations

4 What is globalisation? The free movement of goods, services, people, capital, information and technology, enabling businesses to sell their products anywhere in the world.

5 Different aspects of globalisation Benefits and drawbacks of globalisation Changing business locations Multinationals Imports and exports

6 Development of globalisation In recent years, the world has increasingly become one market. New technology, economic development and improved travel have all meant businesses can consider producing and selling anywhere in the world.

7 Benefits of globalisation Increased markets Access to cheaper labour and raw materials International specialisation Increased levels of efficiency, due to an increased level of competition Transfer of knowledge, skills and technology

8 Drawbacks of globalisation International competitors with cheaper costs Power of multinational brands Whole industry closures In the UK, there has been movement away from the manufacturing sector to the tertiary sector Effects of events in other countries

9 Why does international trade matter? International trade really matters to the UK. About 28% of the goods and services we produce are sold abroad (exports), while 30% of what we buy comes from other countries (imports). Exports and imports generate revenue for businesses in different countries leading to business growth.

10 What are imports? Imports are goods or services brought into one country from another. The most imported goods around the world are petrol and cars.

11 The impact of imports Foreign imports to the UK increase competition for UK firms Imports Consumers are able to buy goods and services from overseas leading to an increase in consumer choice

12 What are exports? Exports arise as a function of international trade, whereby goods and services produced by one country are sold to another country.

13 Time for some breaking news stories. Let s cross to our reporters

14 1 China 6 Hong Kong 2 USA 7 France 3 Germany 8 South Korea 4 Japan 9 Italy 5 Netherlands 10 UK UK China Germany Italy USA South Korea Netherlands Japan France Hong Kong According to Statista, which countries were the largest exporters in the world in Rank in order.

15 1 Whiskey 6 Wine 2 Chocolate 7 Gin 3 Beer 8 Beef 4 Salmon 9 Soft drinks 5 Cheese 10 Wheat Soft drinks Chocolate Whiskey Beer Wheat Gin Cheese Beef Wine Salmon In 2016, what were the UK s most popular food and drink exports. Select the top 5 and rank in order.

16 The biggest import by country

17 Chocolate sales boost UK exports The manufacture of cocoa, sugar and chocolate confectionary is now worth 1.1 bn to the UK economy. In the UK, more than 680 m of chocolate was bought by foreign customers. UK chocolate exports were up by 84% in 2017, compared to a decade ago.

18 Exporting success The Grown Up Chocolate company was founded in 2010 by James Ecclestone. Its indulgent, handmade chocolates are produced in its factory in Essex. The business is a British manufacturer that sells its chocolates both in the UK and overseas. 25% of its sales come from exporting overseas. This is an example of a good that is exported from the UK. As a result, money flows back into the UK.

19 Exports Exporting can involve physical products or invisible exports, such as services. Examples include banking, tourism, education or professional services, such as accountancy and legal services.

20 Take a look at this interactive map to see how the UK trades with the rest of the world

21 Global success for Rockfish Wellies Rockfish, a new Cornwall based manufacturer, is already exporting its boots to over 15 countries, including China. The UK high street is quite sewn up, so building a brand here is very difficult, but abroad they like to see new brands coming through all the time. - Rockfish MD Explain one benefit to Rockfish Wellies of exporting their boots overseas.

22 Changing business locations HJ Heinz moved production of HP sauce from Birmingham to Holland. Nestle plan to move production of Blue Riband biscuit to its plant in Poland. Toymaker, Hornby, owner of brands such as Scalextric, Airfix and Corgi moved production to China. In 2013, Hornby brought the manufacture of it s Airfix plane kits back to the UK.

23 Just a minute Identify one reason why businesses choose to change their business location

24 Reasons for changing business location To access lower manufacturing costs (particularly in countries which enjoy the advantage of lower labour costs) To access potentially better skilled & higher quality supply To makes use of existing capacity overseas To take advantage of free trade areas and avoid protectionism (this will be covered later) To make it easier to target international markets (where it is important to be located in, or near to, those markets)

25 Nestle propose to move production overseas Nestle recently announced proposals to move production of the iconic Blue Riband chocolate bar from the UK to Poland, resulting in over 300 job losses. This decision was made following increasing import costs and rising UK labour costs, compared to Poland. The company added, our factory in Kargowa, Poland, is the centre of excellence for this type of wafer-based product and is the logical place for us to propose future Blue Riband production.

26 Question time 1. Define the term imports 2. Outline two benefits to Nestle of moving production of its Blue Riband to Poland

27 What is a multinational company? A multinational company (MNC) is a business that has operations in more than one country. Note: that a business does not become a MNC simply because it sells its goods and services to more than one country. The key to being a MNC is that the business has operations in two or more countries.

28 Multinationals A key feature of the process of globalisation has been the increasing impact of MNCs as they expand their operations into more than one country.

29 Reasons for becoming a multinational company Operate closer to target international markets Producing closer to target markets may reduce transport costs (which will be important for bulky goods). Operating closer to the target market will provide better information on the local market and its specific needs. Gaining access to lower costs of production Many MNCs have taken advantage of lower production costs from operating in developing economies. For some businesses, it is more beneficial to set up their own operations in order to meet domestic demand, as well as supply demand in the host and nearby countries. Avoiding protectionism By producing in a host country, a MNC may be able to avoid restrictions on imports, such as tariffs and import quotas.

30 Be the Business Detective Your challenge is to investigate a MNC of your choice and create a business profile. The profile should contain the following: 1. When the company was founded? 2. What industry/sector does the MNC operate in? 3. What goods or services does it offer? 4. What brands does the company own? 5. How many employees does it have worldwide? 6. Identify two benefits to this business of it being a MNC Next lesson, you will be given 90 seconds to feedback your findings!

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