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Theme 4A-Level

Global Business

Globalisation, global markets and business expansion, global marketing, and global industries & companies (multinationals).

4.1

Globalisation

›Growing economies
›International trade & business growth
›Factors contributing to globalisation
›Protectionism
›Trading blocs

Growing economies

Growth rate: annual change in GDP. Emerging economies (India, China, Brazil) grow faster than developed ones due to growing manufacturing sectors and lower labour costs.

Growing middle classes: raise demand for domestic and imported goods — boosting international firms' profits.

GDP per capita: GDP divided by population — measure of average income.

HDI (Human Development Index): composite measure of development on a 0–1 scale, combining three indicators:

Life expectancy: average number of years a person is expected to live — proxy for health and living standards.

Education: mean and expected years of schooling — proxy for knowledge and skills.

GNI per capita: gross national income divided by population — proxy for standard of living.

0–1 scale: closer to 1 = more developed; closer to 0 = less developed.

Limits: ignores within-country inequality and relies on patchy data.

Group	Countries	Why important
BRICS	Brazil, Russia, India, China, South Africa	Largest emerging powers, huge consumer markets
MINT	Mexico, Indonesia, Nigeria, Turkey	Next-wave growth economies

International trade & FDI

Imports: goods/services bought from abroad.

Exports: goods/services sold abroad. Exports bring revenue in; imports send money out.

Specialisation: a country or business focusing on a particular good/service. Brings economies of scale and competitive advantage but creates dependence on one industry.

FDI (Foreign Direct Investment): investment by foreign firms giving more than 10% share ownership in domestic firms. Often via mergers, takeovers, JVs or new factories (e.g. Honda/Toyota in UK).

Inward FDI: foreign business invests locally (e.g. Chinese investment in Kenyan railways).

Outward FDI: domestic business expands abroad (e.g. Dyson moving manufacturing to Malaysia).

FDI impacts: economic growth, GDP and tax, job creation, knowledge transfer.

Factors driving globalisation

Trade liberalisation: reduction of tariffs and barriers — opposite of protectionism. Driven forward by:

GATT (1947): General Agreement on Tariffs and Trade — post-war treaty that cut tariffs through successive negotiation rounds.

WTO (1994): World Trade Organisation — replaced GATT, oversees global trade rules and settles disputes between member countries.

Reduced transport & communication costs: containerisation, telecoms, internet.

Growth of MNCs: setting up or buying businesses abroad.

Migration: provides a global labour force (~3bn workers) — migrants, exporters, MNC employees, offshored workers.

Structural change: economies shift primary → secondary → services as they develop (e.g. UK as a knowledge economy).

Political summits & trading blocs: EU, WTO, etc. reduce protectionism and open trade.

Protectionism

Protectionism: protecting domestic industries from foreign competition.

Tool	How it works	Effect
Tariffs	Tax on imports	Raises import prices, generates revenue, pushes buyers to domestic goods
Quotas	Physical limit on import quantity	Caps foreign supply, supports domestic producers
Legislation	Safety / anti-counterfeit rules (e.g. CE mark)	Excludes non-compliant imports
Domestic subsidies	Government funding for local firms	Lowers their costs, makes them competitive vs imports

All four tilt the playing field toward domestic producers — but risk retaliation.

Trading blocs

Trading bloc: agreement between countries to reduce trade barriers.

Benefits: free flow of goods/services, stable currency, larger labour market, EoS, attracts investment, protection from outside dominance.

Drawbacks: more competition, discourages trade outside the bloc, reduced domestic control over the economy.

Bloc	Members	Notes
EU	27 European countries (19 use the euro)	Single market, free movement
ASEAN	Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam	Free trade area in SE Asia
USMCA	USA, Canada, Mexico (formerly NAFTA)	Free trade across North America

✎

Exam practice

Test yourself — 4.1

Edexcel style

Cover the notes and time yourself: 4-mark ≈ 5 min, 8-mark ≈ 10 min, 10/12-mark ≈ 15 min.

Growing economies & international trade

4 marks
Explain one reason why emerging economies have grown quickly in recent decades.
8 marks
Explain two benefits to UK businesses of the growth of emerging economies.
10 marks
Assess the importance of BRICS and MINT economies to a UK exporter of consumer goods.
12 marks
Assess the impact of international trade on the growth of a developing economy.

Factors contributing to globalisation

4 marks
Explain one factor that has contributed to the growth of globalisation.
8 marks
Explain two ways in which improvements in technology have accelerated globalisation.
10 marks
Assess the importance of reduced transport and communication costs to the globalisation process.
12 marks
Assess the impact of globalisation on a UK-based manufacturing business.

Protectionism

4 marks
Explain one reason a government might impose tariffs on imported goods.
8 marks
Explain two effects of a government introducing quotas on imports.
10 marks
Assess the importance of protectionist policies for protecting domestic industry.
12 marks
Assess the impact of rising global protectionism on a UK business that exports to the USA.

Trading blocs

4 marks
Explain one benefit to a business of operating within a trading bloc.
8 marks
Explain two potential drawbacks of trading bloc membership for a domestic business.
10 marks
Assess the importance of trading bloc membership to the competitiveness of a small exporter.
12 marks
Assess the impact on UK businesses of leaving the EU single market.

Mark 4.1 as revised

4.2

Global markets & business expansion

›Conditions that prompt trade
›Assessment of a country as a market
›Assessment as a production location
›Reasons for global mergers/joint ventures
›Global competitiveness

Push & pull factors

Offshoring: relocating part of operations abroad (often manufacturing or back-office) to access lower wages, trade blocs, tax advantages and larger talent pools.

Outsourcing: contracting a function (e.g. payroll) to a third party — foreign or domestic. Flexible and cheaper, but creates dependency, security and reputational risk.

Push factors (out of home market)	Pull factors (towards foreign market)
Saturated domestic markets, low growth	Larger customer base, faster growth
High domestic competition	Economies of scale
Rising domestic costs	Risk spreading across markets
Strict domestic regulation	Government incentives & lower tax

Most overseas moves are driven by a mix of push and pull — rarely just one.

Assessing a country as a market

Disposable income: level and growth determine spending power on non-essentials.

Ease of Doing Business (EODB) index: covers 11 indicators including labour regulation.

Infrastructure: transport, telecoms, Wi-Fi; measured by the Logistics Performance Index (LPI).

Logistics Performance Index (LPI): World Bank score (1–5) rating a country's trade logistics — customs efficiency, infrastructure quality, shipment tracking and delivery timeliness.

Political stability: riots, protests, looting raise risk.

Exchange rate volatility: wild swings make pricing and profit unpredictable.

Product life cycle stage: plus extension strategies (promotional pricing, product adaptation, entering new markets).

Assessing a country as a production location

Costs of production: UK is expensive, so firms offshore.

Skills & labour availability: high unemployment can be desirable when seeking workers.

Infrastructure: transport links, suitable buildings, reliable power.

Location in a trade bloc: for tariff-free market access.

Government incentives: low tax, deregulation, subsidies.

Ease of doing business: labour rules, construction permits, land, time to build.

Political stability & natural resources: access to inputs and predictable rules.

Likely ROI: investment costs include moving factory, machinery, hiring staff, moving HR.

Reasons for mergers & joint ventures abroad

Spread risk: via JVs and mergers across different geographies.

Acquire brands & patents: national/international brand names and IP (e.g. Honda VTEC).

Secure resources & supplies: lock in upstream access.

Maintain or increase global competitiveness: critical market data, local knowledge, customer and trend insights.

JV benefits: shared risk, shared patented tech, faster product launch, access via trade blocs.

JV drawbacks: shared profits, limited control, culture and objective clashes.

Global competitiveness

Exchange rates: value of one currency in another.

Appreciation: rise in currency value — exports become dearer abroad, imports cheaper at home.

Depreciation: fall in currency value — exports become cheaper abroad, imports dearer at home.

SPICED (tip): Strong Pound → Imports Cheaper, Exports Dearer — quick way to remember appreciation's effect (reverse it for depreciation).

Competitive advantage strategies: low-cost leadership (low prices, low variable costs, EoS) or differentiation (unique product/service at premium price).

Skill shortage: more vacancies than candidates. UK shortages in STEM — chemical, biological, social and humanities scientists, and welding trades. Differentiation strategies suffer most.

✎

Exam practice

Test yourself — 4.2

Edexcel style

Cover the notes and time yourself: 4-mark ≈ 5 min, 8-mark ≈ 10 min, 10/12-mark ≈ 15 min.

Conditions that prompt trade

4 marks
Explain one reason why a UK business might choose to sell overseas.
8 marks
Explain two push and pull factors that encourage a business to trade internationally.
10 marks
Assess the importance of a saturated domestic market as a driver of international trade.
12 marks
Assess the impact of exchange rate movements on a UK exporter's decision to trade abroad.

Assessment of a country as a market

4 marks
Explain one factor a business should consider when assessing a country as a new market.
8 marks
Explain two reasons why disposable income levels affect the attractiveness of a country as a market.
10 marks
Assess the importance of ease of doing business when choosing a new overseas market.
12 marks
Assess the impact of political stability on the attractiveness of an emerging market to a UK retailer.

Assessment as a production location

4 marks
Explain one reason a business might locate production in a developing country.
8 marks
Explain two factors (other than wage costs) that influence choice of production location.
10 marks
Assess the importance of infrastructure quality when choosing an offshore production location.
12 marks
Assess the impact of offshoring production on a UK manufacturer's costs and reputation.

Global mergers, joint ventures & competitiveness

4 marks
Explain one reason a business might enter a joint venture rather than a full merger overseas.
8 marks
Explain two benefits of a global merger between two competing MNCs.
10 marks
Assess the importance of joint ventures when entering an unfamiliar overseas market.
12 marks
Assess the impact on global competitiveness of a UK business forming a strategic alliance with an Asian rival.

Mark 4.2 as revised

4.3

Global marketing

›Marketing approach
›Marketing mix
›Cultural / social factors

Global vs glocal marketing

Global marketing: standardising products between countries with only fine-tuning of the marketing mix.

Benefits: EoS, simpler advertising, consistent brand image, lower research cost.

Glocalisation: adapting the marketing mix to local needs.

Benefits: cultural fit, avoids misunderstandings, competes with local brands.

Strategy	Approach	Example
Ethnocentric	Standardise everywhere	Standardised TVs; Walmart's failed Germany entry (2006)
Polycentric	Adapt to each local market	McDonald's vegetarian menu in India, teriyaki in Japan
Geocentric	Global product with local tweaks	PlayStation with culturally adapted controllers

The more local the consumer behaviour, the more polycentric the strategy has to be.

Global niche markets

Global niche: a small market in each country but profitable when summed worldwide. Highly specialised, loyal customers, premium prices (e.g. gaming equipment, costumes, golf).

Benefits: charge premium price (inelastic demand), less competition, strong brand, spread risk across markets, suits e-commerce.

Drawbacks: no EoS, constant adaptation, may attract new entrants, vulnerable to fashion and trend shifts.

Cultural & social factors

Cultural factors: beliefs, moral values, traditions, languages, laws.

Social factors: lifestyle, religion, wealth, family structure, education, politics.

Direct translation without localisation can backfire: globalisation has reduced (but not eliminated) mistranslation risk.

Cultural sensitivity is essential when adapting marketing globally.

	High-context (East Asia)	Low-context (Europe / US)
Relationships	Build trust first	Get down to business
Negotiation style	Slow, ritualistic	Efficient, contractual
Value placed on	Personal relationships	Expertise & legalistic contracts

✎

Exam practice

Test yourself — 4.3

Edexcel style

Cover the notes and time yourself: 4-mark ≈ 5 min, 8-mark ≈ 10 min, 10/12-mark ≈ 15 min.

Marketing approach

4 marks
Explain one reason a business might use a glocal rather than a global marketing approach.
8 marks
Explain two benefits of using a global marketing strategy.
10 marks
Assess the importance of adapting marketing to local tastes when entering a new international market.
12 marks
Assess the impact on a fast-food chain of standardising its marketing mix across global markets.

Marketing mix

4 marks
Explain one reason why a business might adapt its product for a specific international market.
8 marks
Explain two ways pricing strategies may differ between developed and developing markets.
10 marks
Assess the importance of adapting the promotional mix for a Western brand entering the Chinese market.
12 marks
Assess the impact of digital marketing on the ability of a small business to sell internationally.

Cultural / social factors

4 marks
Explain one cultural factor that could affect the marketing of a food product overseas.
8 marks
Explain two risks of failing to adapt marketing to local cultural expectations.
10 marks
Assess the importance of cultural sensitivity when launching a new brand in an emerging market.
12 marks
Assess the impact of language, religion and consumer taste on a UK retailer expanding into the Middle East.

Mark 4.3 as revised

4.4

Global industries & MNCs

›Impact of MNCs
›Ethics
›Controlling MNCs

Impact of MNCs

MNC (Multinational Corporation): a business operating in more than one country (e.g. Coca-Cola in 200+ countries).

FDI is the key mechanism by which MNCs invest in other countries.

Balance of payments: inflows − outflows of money to the rest of the world.

Examples of harm: Apple factory conditions in China; Coca-Cola extracting 1.5m litres of water in India causing agricultural shortages.

Positives	Negatives
Jobs and skills base	Environmental damage
Higher standards of living	Poor working conditions, low-paid jobs
Infrastructure & capital injection	Local businesses can't match foreign EoS
Cultural exchange, tax revenue	Profit leakage and sudden pull-outs
Raises country profile, improves balance of payments	Exploitation, urbanisation, widening poverty gap

MNCs bring growth and risk in equal measure — net impact depends on host-country regulation.

Ethics

Different regulations: MNCs operate under different employment regulations and may exploit workers in LEDCs through low wages, poor conditions and child labour.

Shareholder vs ethical objectives: profit, dividends, growth, ROI and positive image can conflict with low emissions, safe waste disposal, fair wages and sustainable sourcing.

Emissions: 100 companies cause 71% of global emissions (Carbon Majors). Health impacts: asthma, cancer, skin issues.

Waste management: LEDCs have weaker regulation; MNCs dispose of plastic waste cheaply — Coca-Cola, Pepsi, Nestlé and Unilever dump around 500,000 tonnes across 6 developing countries (Tearfund, 2020).

Marketing ethics: misleading labelling (e.g. VW "clean diesel" — around $34bn in fines), inappropriate promotion (Nivea "White is purity" deodorant pulled).

Supply chain ethics: child labour (e.g. Primark Bangladesh factory protests), forced labour signs include threats, restricted movement, debt bondage, withheld wages, confiscated documents.

Tax havens: e.g. Ireland — cost developing countries around $160bn in lost tax revenue via transfer pricing.

Controlling MNCs

Political influence: governments pressure MNCs to change behaviour through regulation and policy.

Pressure groups & consumer activism: alongside the International Labour Organisation, push for ethical practices.

Corporate Social Responsibility (CSR): MNCs voluntarily take responsibility for supply chain, environment and communities to protect brand image.

Self-regulation: through codes of practice and reporting on emissions, labour standards and sourcing.

✎

Exam practice

Test yourself — 4.4

Edexcel style

Cover the notes and time yourself: 4-mark ≈ 5 min, 8-mark ≈ 10 min, 10/12-mark ≈ 15 min.

Impact of MNCs

4 marks
Explain one benefit to a host country of a multinational locating production there.
8 marks
Explain two potential drawbacks for a developing country of hosting a large MNC.
10 marks
Assess the importance of MNCs to the economic growth of emerging economies.
12 marks
Assess the impact of an MNC's decision to relocate production from a developed to a developing country.

Ethics

4 marks
Explain one ethical issue arising from an MNC's supply chain in a developing country.
8 marks
Explain two reasons why MNCs are increasingly held accountable for stakeholder concerns.
10 marks
Assess the importance of ethical behaviour to the long-term profitability of an MNC.
12 marks
Assess the impact on consumer trust of an MNC being accused of poor labour practices overseas.

Controlling MNCs

4 marks
Explain one reason why controlling the actions of MNCs is difficult for national governments.
8 marks
Explain two ways in which MNCs can be controlled by pressure groups and self-regulation.
10 marks
Assess the usefulness of international regulation in controlling the behaviour of MNCs.
12 marks
Assess the impact of tax avoidance by MNCs on the governments of the countries in which they operate.

Mark 4.4 as revised

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Business Decisions & Strategy

Theme 4 · Revision progress0% · 0/4 units