Local Residents: Globalisation often brings high-quality employment and training opportunities to developing regions, raising living standards. However, it can also lead to the exploitation of labor if local regulations are weak or if firms prioritize low costs over worker welfare.
Domestic Businesses: Local firms may benefit from becoming suppliers to large multinationals, gaining access to new technologies and management practices. Conversely, they may struggle to survive if they cannot compete with the lower prices and massive marketing budgets of global rivals.
National Governments: Multinationals contribute to a country's economic growth through tax revenue and infrastructure investment, such as roads and power grids. However, governments may face challenges in holding these mobile corporations accountable for environmental damage or tax avoidance.
Currency Appreciation: When a currency's value increases, it becomes more expensive for foreigners to buy that country's exports, potentially leading to lower sales. However, it makes importing raw materials cheaper, which can reduce production costs for domestic manufacturers.
Currency Depreciation: A weaker currency makes a country's exports cheaper and more competitive in the global market, often boosting sales volume. On the downside, it increases the cost of imported goods and materials, which can lead to higher prices for consumers.
The SPICED Acronym: A useful mnemonic for remembering the effects of currency movements is Strong Pound Imports Cheaper Exports Dearer. This principle applies to any currency experiencing an increase in value relative to others.
| Feature | Globalisation | Multinational Corporation (MNC) |
|---|---|---|
| Nature | A broad economic and social process | A specific type of business entity |
| Scope | Integration of global markets and cultures | Operation in multiple countries |
| Goal | Efficiency and interconnectedness | Profit maximization and market share |
| Scenario | Impact on Exporters | Impact on Importers |
| --- | --- | --- |
| Appreciation | Negative: Products become more expensive abroad | Positive: Foreign supplies become cheaper |
| Depreciation | Positive: Products become more price-competitive | Negative: Cost of foreign supplies increases |
Identify the Stakeholder: When answering questions about the impact of globalisation, always specify whether you are discussing the impact on the business, the consumer, the worker, or the government. Each group experiences different benefits and drawbacks.
Exchange Rate Calculations: Always use the formula when converting from the base currency. To reverse the calculation, divide the target currency by the exchange rate to find the original value.
Avoid Generalisations: Do not simply say globalisation is 'good' or 'bad.' Instead, use terms like 'economies of scale' to explain benefits and 'external shocks' to explain risks. This demonstrates a higher level of business understanding.
Check the Context: If a business both imports raw materials and exports finished goods, a change in exchange rates will have a mixed impact. Explain how the increased cost of imports might offset the increased competitiveness of exports.
