Globalisation — AQA GCSE Business
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Globalisation explained
UK businesses compete internationally by choosing an appropriate offering.
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They may offer lower prices by sourcing or producing where costs are lower, or by achieving economies of scale. They may offer better quality through design, materials, reliability or customer service. They may offer a wider range of products to suit different markets, or a unique product or brand that rivals cannot easily copy. For example, a UK clothing firm might sell online at competitive prices, while a UK engineering firm might win contracts by offering high-quality, customised equipment. The best choice depends on costs, target customers, competitors and the firm's strengths. Competing internationally is assessed through questions that ask students to explain or analyse how a named offering helps a UK business win sales abroad.
Students should be able to demonstrate knowledge and understanding of globalisation and the benefits and drawbacks that it offers UK businesses.
Globalisation is the growing integration of world economies, shown by more international trade, investment, communication and movement of people. For UK businesses it brings benefits: access to larger markets, cheaper inputs from overseas, new sources of labour and ideas, and opportunities to build global brands. It also brings drawbacks: more competition from foreign rivals, greater exposure to exchange-rate movements and overseas economic problems, pressure on costs, and risks in international supply chains. For example, a UK manufacturer may export more easily and buy components more cheaply, but may also face lower-priced imports and disruption if a foreign supplier fails. Students should demonstrate knowledge of what globalisation is and understanding of both sides for UK businesses, using examples and chains of reasoning.
better designs
Globalisation exposes UK businesses to products from many countries, so design quality becomes a competitive weapon. A better design means a product or service that meets customer needs more effectively than rivals: easier to use, more reliable, more attractive or cheaper to produce. For example, a UK phone case maker might redesign a case with a slimmer profile and recycled material, making it more appealing than an imported alternative. Better design can raise demand, allow a higher price, cut waste and strengthen brand image. It also helps a business differentiate itself when many similar goods are available worldwide. However, design improvements cost money and time, and rivals may copy them quickly. Students should explain how better design affects competitiveness, not just state that it is good.
higher quality products at lower prices.
Globalisation can give consumers higher quality products at lower prices because businesses can source materials, components and labour from countries where costs are lower or expertise is stronger. For example, a UK retailer may buy clothing from a factory abroad that specialises in that product, reducing unit cost while maintaining or improving quality. Competition between global suppliers also pressures prices downward and encourages quality improvements. However, lower prices may come with risks: transport costs, tariffs, exchange-rate changes, supply-chain disruption and ethical or environmental concerns. Quality may also suffer if a supplier cuts corners. Students should explain the link between global sourcing, competition, quality and price, and assess when the benefit is likely to be achieved.
Exchange rates Students should understand the impact of exchange rates on the profit and sales of those businesses that import and/or export.
An exchange rate is the price of one currency in another, for example £1 buys a number of euros or dollars. A rise in the value of the pound (appreciation) makes imports cheaper for a UK business, lowering costs and supporting profit, but makes its exports dearer abroad, which can reduce sales. A fall (depreciation) does the reverse: imports cost more, squeezing profit, while exports become cheaper and may raise sales. For a business that both imports and exports, the two effects pull against each other, so the net impact on profit depends on which is larger. Students should trace the effect on sales and on profit separately, using a simple numerical illustration rather than performing a conversion.
Your focus
- Describe at least three ways a UK business can compete internationally through its offering.
- Explain how a chosen offering can attract or retain overseas customers for a named UK business.
- Evaluate which offering is most suitable for a UK business in a given international market context.
Show all 15 objectives
- Define globalisation and identify its main features.
- Explain at least two benefits and two drawbacks of globalisation for UK businesses.
- Assess how globalisation affects a named UK business and reach a supported conclusion.
- Define better design in the context of global competition.
- Explain how a design improvement can increase demand or allow a higher price.
- Evaluate whether better design is worth the cost and risk for a named business.
- Explain how globalisation can lead to lower prices for consumers.
- Explain how global competition can raise product quality.
- Assess the risks that may prevent higher quality and lower prices from being achieved.
- Describe what is meant by an exchange rate and distinguish appreciation from depreciation.
- Explain how a change in the exchange rate affects the costs, sales and profit of an importing business.
- Analyse how a change in the exchange rate affects a business that both imports and exports, recognising the opposing effects.
Globalisation exam tips
Marking Points
- Lower prices can help a UK business compete internationally when it can reduce costs through cheaper sourcing, efficient production or economies of scale, allowing it to attract price-sensitive customers in overseas markets.
- Better quality can help a UK business compete internationally by building a reputation for reliability, performance or design, which can justify a higher price and encourage repeat purchases from overseas customers.
- A wider range of products can help a UK business compete internationally by meeting the different needs and preferences of customers in several countries, increasing the number of potential buyers.
- A unique product or brand can help a UK business compete internationally by differentiating it from rivals, reducing direct price competition and making customers willing to pay more.
- The most suitable offering depends on the market, the strength of competitors and the resources of the business, so students should link the offering to the specific international context given in the question.
- Globalisation can be defined as the increasing integration of economies through trade, investment, technology and migration, which creates both opportunities and threats for UK businesses.
- A benefit is access to larger international markets, which can increase sales, spread risk across countries and allow UK businesses to grow beyond the size of the domestic market.
- A benefit is access to cheaper or more specialised inputs, such as raw materials, components or labour, which can lower costs and improve competitiveness.
- A drawback is increased competition from overseas businesses, which can reduce UK sales, put downward pressure on prices and force businesses to cut costs or improve their offer.
- A drawback is greater exposure to external risks, such as exchange-rate fluctuations, overseas economic downturns or supply-chain disruption, which can raise costs or reduce revenue.
- Students should demonstrate understanding by explaining how a benefit or drawback affects a UK business, not merely by listing it.
- Defines better design as improving how well a product or service meets customer needs compared with competitors.
- Explains that globalisation increases the number of rival products available, so design becomes a way to stand out.
- Gives a concrete example, such as a slimmer, more durable or more sustainable product design.
- Links better design to a business benefit, such as higher demand, premium pricing, lower waste or stronger brand image.
- Recognises a limitation, such as design costs, time to develop or the risk of imitation by competitors.
- Explains that globalisation allows businesses to source from international suppliers with lower costs or specialist expertise.
- Links lower production costs to lower prices for consumers.
- Explains how competition among global suppliers can improve quality as well as reduce price.
- Uses a concrete example, such as a retailer importing clothing or electronics from a specialist overseas supplier.
- Identifies risks or limitations, such as transport costs, tariffs, exchange rates, supply disruption or quality control problems.
- Defines an exchange rate as the price of one currency expressed in another currency.
- Explains that appreciation of the pound lowers the cost of imported raw materials or components, which can raise profit if selling prices are unchanged.
- Explains that appreciation makes UK exports more expensive for overseas buyers, which can reduce sales volume and therefore revenue.
- Explains that depreciation raises import costs, squeezing profit margins, while making exports cheaper and potentially increasing sales.
- Recognises that a business which both imports and exports faces opposing effects, so the overall impact on profit depends on the relative size of each effect.
- Applies the reasoning to a named business context, such as a UK manufacturer importing components and exporting finished goods.
Examiner Tips
- 💡Read the question carefully to identify which offering is being asked about, then apply it to the named UK business or market rather than writing generally.
- 💡Use connectives such as because, therefore and which means that to show the chain of reasoning from the offering to international competitiveness.
- 💡Where the question allows a choice, briefly justify why the chosen offering suits the business better than an alternative.
- 💡For knowledge questions, give a clear definition or feature of globalisation; for understanding questions, add a consequence for a UK business.
- 💡Use a named UK business or a realistic example to make benefits and drawbacks concrete and to show application.
- 💡When evaluating, weigh the benefits against the drawbacks for the specific business and context, and reach a supported judgement.
- 💡Use a named product or business to make the design improvement concrete.
- 💡Develop each point with a chain of reasoning: design change, customer response, business effect.
- 💡If asked to evaluate, weigh the benefit of better design against its cost and the risk of copying.
- 💡Use a specific product and country to show how global sourcing affects cost and quality.
- 💡Develop the chain: global sourcing, lower unit cost, lower price, higher demand, possible quality improvement.
- 💡For evaluation, compare the consumer benefit with the risks to the business and its reputation.
- 💡State clearly whether the pound has appreciated or depreciated before explaining any effect.
- 💡Link each effect explicitly to either sales or profit, using the words of the question.
- 💡Use a short chain of reasoning, for example cheaper imports lead to lower costs, which leads to higher profit, rather than a single assertion.
Common Mistakes
- Assuming that competing internationally always means charging the lowest price. Correction: lower price is only one possible offering; better quality, wider range or a unique product or brand can also win international sales.
- Treating all overseas markets as identical. Correction: customer needs, incomes and competitors differ between countries, so the offering should be matched to the market.
- Listing an offering without explaining how it helps the business compete. Correction: each point should show the link between the offering and the reason overseas customers choose the business.
- Defining globalisation only as selling abroad. Correction: globalisation also includes buying, investing, communicating and moving people across borders.
- Giving only benefits or only drawbacks when the question asks for both. Correction: plan the answer to include at least one benefit and one drawback, each with an explanation.
- Writing about globalisation in general without linking it to UK businesses. Correction: apply each point to how a UK business is affected, for example through costs, sales or competition.
- Treating better design as only about appearance; correction: design also covers function, reliability, ease of use and production efficiency.
- Assuming better design always raises profit; correction: higher costs or lower sales may reduce profit, so the net effect must be considered.
- Ignoring the global context; correction: link the design improvement to competition from imported or international rivals.
- Assuming lower price always means higher quality; correction: quality depends on supplier control and standards, not price alone.
- Ignoring hidden costs; correction: include transport, tariffs, exchange-rate movements and supply-chain risk in the analysis.
- Treating globalisation as only about price; correction: it can also improve quality through access to specialist skills and technology.
- Assuming a stronger pound always harms a business: correction is that it helps importers through lower costs but harms exporters through higher prices abroad.
- Treating sales and profit as the same thing: correction is that a change in sales volume affects revenue, while profit also depends on costs, so the two must be analysed separately.
- Confusing appreciation with depreciation: correction is that appreciation means the currency rises in value, while depreciation means it falls.