IB Business & Management Unit 1.7 The Impact of Globalisation

Learning Outcomes To understand the: Role and impact of globalization on the growth and evolution of businesses (AO3) Reasons for the growth of multinational companies (MNCs) (AO3) The impact of MNCs on the host countries (AO3)

Essential Question IS GLOBALISATION GOOD?

What is Globalisation? The process by which the world’s regional economies are becoming one integrated global unit

The Impact of Globalisation Increased Competition - foreign businesses forcing domestic producers to become more efficient – what could be the impact of this? Greater Brand Awareness – domestic producers have to compete with big brand names  the need to develop USP Skills Transfer – foreign businesses need to use local knowledge (labour)  two way transfer of knowledge and skills  development of new skills Closer Collaboration – perhaps through joint ventures, franchises or strategic alliances  domestic producers can create new business opportunities.

Reasons for Spread of Globalisation & Multinational Companies (MNC’s)? Improved Communications – through ICT and transport and distribution networks Dismantling of Trade Barriers – allowing easier movement of raw materials, components and finished products Deregulation of World’s Financial markets – allowing for easier transfer of funds and also tax avoidance Increasing Economic & Political power of the multinational companies - can benefit middle and low-income countries

Task Research and compare the top 10 GDP producing countries with the top 10 global companies by sales revenue What are the possible implications when a company is worth more than a country?

Task What might the advantages be of MNC’s on Host countries?

Advantages? Advantage Explanation Economic Growth MNC’s can boost the domestic economy through employment, taxes, skill development and capital investment New Ideas MNC’s may introduce new ways of doing business and new ways of interacting socially Skills Transfer MNC’s may help develop the skills of local employees  domestic businesses benefit from improved skills More Choice of Products The domestic market benefits from an increase in the variety of products Short-term infrastructure projects MNC’s can contribute to help improve infrastructure to increase productivity and efficiency

Disadvantages? Disadvantage Explanation Profits repatriated Bulk of the profits leave the host country Loss of Cultural Identity Cultural norms and products may suffer Brain Drain Highly skilled employees may look to work for the MNC in another country Loss of Market Share Domestic producers may be squeezed out of the market Short-Term Plans MNC’s may only exploit benefits of host country until a cheaper/better alternative is found

Task – In Pairs 30 mins For our chosen companies – research the positive and negative impacts that they are having on host countries Feedback with a 5 minute presentation

Homework Watch the globalisation video and be prepared to feedback your thoughts at the beginning of next lesson.