What are opportunities and threats of globalization

While there are opportunities from globalization, there are threats as well to a country with benefits and drawbacks to businesses

Opportunities from globalization to a country

1. Free trade encourages increased international specialization

2. Improved communication and cheaper transportation

3. New business opportunities from increased investments, imports and exports

4. Access to skilled talent and technology across the world

5. Economic growth and development from global demand

6. Labour mobility enabling migration of workers to meet resource demand

Threats from globalization to a country

1. Competition against local business from imports and multinational corporations

2. Increasing competition for skilled labour and capital

3. Employment opportunity loss to lower income economies

4. Pollution and depletion of natural resources

5. Exploitation of lower income country workers

6. Poor quality product dumping

7. Foreign exchange risk on balance of payment

Benefits from globalization to a business

1. Access to cheaper raw materials

2. Access to materials not available in country

3. Access to new markets, increasing market share and brand awareness

4. Lower labour cost operating in another country

5. Reduced transportation cost from local distribution

6. Avoiding trade barriers in international trade

7. Achieving economies of scale from large production

8. Enjoying government subsidies/support and lower taxes

Drawbacks from globalization to a business

1. Increased cost due to legal control requirements

2. Exposure to foreign exchange risk

3. Limited control over operations in different countries

4. High cost/Large capital required to setup business

5. Competition from local businesses

6. High promotion cost to penetrate market

7. Higher cost from import/export tariffs

Read "What is globalization and its importance" and "what are multinational firms and their roles" to find out what globalization is about and "what are government policy instruments" to understand the role of governments in international trade. Also, read about challenges of expanding your business abroad in "What are the problems when growing your market abroad?"

RELATED CONCEPTS

1. International business

2. Import & Export

3. Employment

4. Developing economies

PAST YEAR QUESTIONS

1. What is meant by ‘exchange rate’? (2 marks) Oct/Nov 2019/12

2. Define ‘depreciation of an exchange rate‘ (2 marks) Feb/Mar 2022/12

3. Explain how each of the following external influences might affect LFP (6 marks) Oct/Nov 2020/13

4. Do you think GXC’s Managing Director should be worried about the recent appreciation of the exchange rate of country X’s currency? (6 marks) Feb/Mar 2019/12

5. Do you think the exchange rate is the most important factor for a business to consider when deciding whether to import parts for a high quality product? (6 mark May/June 2020/11

6. Do you think there are more opportunities than threats from globalisation for TRB? (6 marks) Oct/Nov 2018/12

7. Outline two opportunities of globalisation for GBR. (4 marks) Oct/Nov 2022/13

Read all post from Unit 6 - External Influences on Business Activity