Business and globalisation — Edexcel GCSE Business
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Business and globalisation explained
Business and globalisation covers 3 specification points, including ● imports: competition from overseas, buying… and ● tariffs ● trade blocs..
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Open a point below for its explanation and revision guidance.
The impact of globalisation on businesses: ● imports: competition from overseas, buying from overseas ● exports: selling to overseas markets ● changing business locations ● multinationals.
Globalisation integrates global economies, profoundly impacting businesses. Imports increase domestic competition as overseas firms enter the market, but also allow businesses to buy cheaper or higher-quality raw materials from abroad. Exports offer opportunities to sell to overseas markets, increasing potential sales and extending product life cycles. Businesses may change locations, moving manufacturing to countries with lower labour costs to improve profit margins. Finally, globalisation enables the rise of multinationals—companies operating in multiple countries—which benefit from economies of scale but face complex logistical and cultural challenges. For example, a UK clothing brand might buy cotton from India, manufacture in Bangladesh, and sell finished garments in Europe.
Barriers to international trade: ● tariffs ● trade blocs.
Barriers to international trade are measures designed to restrict the flow of goods between countries, often to protect domestic industries. Tariffs are taxes placed on imported goods, which increase their selling price. This makes imports less competitive, encouraging consumers to buy cheaper domestic alternatives. However, tariffs can increase costs for businesses relying on imported raw materials. Trade blocs, such as the European Union, are groups of countries that agree to reduce or eliminate trade barriers between themselves while maintaining them against non-members. While trade blocs encourage free trade within the group, they act as a barrier to businesses outside the bloc, who must still pay tariffs to export their goods into the member countries.
How businesses compete internationally: ● the use of the internet and e-commerce ● changing the marketing mix to compete internationally.
Businesses compete internationally by leveraging the internet and e-commerce to reach global markets without the need for physical stores. E-commerce allows 24/7 sales, reducing overheads and enabling targeted digital advertising to international customers. However, to succeed, businesses must adapt their marketing mix (Product, Price, Place, Promotion) to suit local preferences. For example, a product might need altering to meet local safety regulations or cultural tastes. Pricing strategies must account for exchange rates, tariffs, and local income levels. Promotion requires translating campaigns accurately and respecting cultural norms, while Place involves establishing reliable international distribution channels.
Your focus
- Explain how imports create both competition and supply opportunities for domestic businesses.
- Assess the benefits and drawbacks of exporting to overseas markets.
- Analyse the reasons why a business might choose to change its location or operate as a multinational.
Show all 9 objectives
- Define tariffs and explain how they impact the costs and pricing of importing businesses.
- Describe the function of a trade bloc and its impact on member and non-member countries.
- Evaluate the overall impact of trade barriers on a business's international competitiveness.
- Explain how the internet and e-commerce facilitate international trade.
- Analyse why a business might need to change its marketing mix when entering a foreign market.
- Evaluate the impact of adapting the marketing mix on a business's costs and competitiveness.
Business and globalisation exam tips
Marking Points
- Globalisation increases competition from overseas imports, forcing domestic businesses to lower prices or improve quality.
- Buying raw materials or components from overseas can reduce production costs and improve profit margins.
- Selling to overseas markets (exports) allows businesses to access larger customer bases and increase revenue.
- Changing business locations to countries with lower labour or property costs can significantly reduce fixed and variable costs.
- Multinationals benefit from global brand recognition and economies of scale but must adapt to local laws and consumer preferences.
- Tariffs increase the cost of imported goods, making them more expensive for consumers and reducing demand for overseas products.
- Domestic businesses benefit from tariffs on competitors' products as their own goods become relatively cheaper and more attractive.
- Businesses that import raw materials suffer from tariffs because their variable costs increase, potentially reducing profit margins.
- Trade blocs eliminate tariffs between member countries, facilitating cheaper and easier international trade within the group.
- Non-member businesses face significant barriers when exporting to a trade bloc, as they are subject to external tariffs and quotas.
- E-commerce enables businesses to access a global customer base with lower start-up costs compared to physical expansion.
- Products may require modification to comply with foreign legislation or to appeal to local cultural preferences.
- Pricing decisions must factor in additional costs such as shipping, import tariffs, and fluctuations in currency exchange rates.
- Promotional materials must be carefully translated and culturally adapted to avoid causing offence or misunderstanding in new markets.
- Place strategies must ensure efficient international logistics and distribution networks to deliver goods reliably.
Examiner Tips
- 💡When evaluating the impact of globalisation, always consider both the opportunities (e.g. new markets) and the threats (e.g. increased competition).
- 💡Use the context of the business in the case study to decide if changing location is realistic or beneficial for them.
- 💡Link the concept of multinationals to economies of scale to demonstrate a deeper understanding of why businesses expand globally.
- 💡When discussing tariffs, explicitly state the impact on both the importing business's costs and the final price paid by the consumer.
- 💡Use the concept of a trade bloc to explain why a business might relocate its factory inside the bloc to avoid external tariffs.
- 💡Always link trade barriers back to the impact on a business's profit margins and its ability to compete on price.
- 💡When evaluating international expansion, weigh the low cost of e-commerce against the high cost of adapting the marketing mix.
- 💡Use the context of the business to decide which element of the marketing mix needs the most adaptation, such as food products needing significant product adaptation.
- 💡Always link changes in the marketing mix to the potential impact on sales, costs, or brand reputation in the target country.
Common Mistakes
- Confusing imports and exports from the perspective of the UK business; correction: imports are goods brought into the UK (buying), exports are goods sent out (selling).
- Assuming globalisation only benefits large businesses; correction: small businesses also benefit by accessing cheaper overseas suppliers or selling globally via e-commerce.
- Stating that changing location only involves moving factories; correction: businesses also relocate services, such as call centres or IT support, to reduce operational costs.
- Defining a tariff as a ban on imports; correction: a tariff is a tax on imports, whereas a quota is a physical limit and an embargo is a ban.
- Stating that trade blocs completely stop international trade; correction: trade blocs promote free trade internally but create barriers for external, non-member countries.
- Assuming tariffs are paid by the exporting country's government; correction: tariffs are usually paid by the importing business, which often passes the cost onto the consumer through higher prices.
- Error: Assuming e-commerce guarantees international success without extra costs. Correction: Recognise that international e-commerce still incurs shipping, tariff, and website localisation costs.
- Error: Stating the marketing mix only involves changing the product. Correction: Explain that all four elements (Product, Price, Place, Promotion) may need adapting for international markets.
- Error: Believing that a successful domestic promotional campaign will automatically work abroad. Correction: Acknowledge that cultural differences and language barriers require tailored promotional strategies.