They are forms of protectionism - to protect domestic industries from competition that might otherwise close them down.

Foreign competitors might be able to produce products much more cheaply and fi they were allowed to import without any
restriction then local companies might be forced out of business. This would reduce employment and incomes.

Why are import tariffs

An import tariff is a tax put on the imported goods when they arrive in the country. They usually lead to the price of the
and import quotas so
imported goods being increased, making them less competitive than locally produced goods.
important?

An import quota is a regulation which limits the import of a good to a certain fixed quantity. This reduces the amount of these
The term now widely used to
goods that can be imported and often leads to an increase in the price of imported goods as they become less available. Both
Meaning of describe increases in worldwide
these effects are likely to lead to domestically produced goods having increasing sales.
Globalisation trade and movement of people and
capital between countries.
Meaning of
Multinational businesses are those with factories, production or service operations in more than one country. These are
Multinational
sometimes known as transnational businesses. Improved and cheaper travel links and
Businesses Many 'emerging market countries' are
Increasing numbers of free trade communications between all parts of
industrialising very rapidly. China and
agreements and economic unions the world have made it easier to
Produce goods in countries with low costs, such as low wages. For example, most sports clothing is produced in countries in South-East Asia used to
between countries have reduced transport products globally. The
Southeast Asia because wages are lower than in Europe. Reasons for import many of the goods they needed.
protection for industries meaning internet also allows easy price
Globalisation Now their own manufacturing
consumers can purchase goods and comparisons between goods from
industries are so strong they can export
services from other countries with few many countries. Online or e-commerce
Extract raw materials which the company may need for production or refining. For example, crude oil from Saudi in large quantities - at very competitive
or no import controls such as tariffs. is allowing orders to be placed from
Arabia is needed to supply oil refineries in the USA. prices.
anywhere in the world.

Produce goods nearer the market to reduce transport costs. For example, tiles and bricks are expensive to
This increases potential sales, perhaps in countries with fast-growing markets.
transport so the producer sets up a factory near the market in another country.
Online selling allows orders for goods to be sent in from abroad.
Chapter 29: BUSINESS Start selling exports to other
Benefits AND THE countries - opening foreign markets.
Avoid barriers to trade put up by countries to reduce the imports of goods. For example, sales of cars made in
INTERNATIONAL It can be expensive to sell abroad, and will foreign consumers buy products, even if
Japan are restricted in Europe. Japanese manufacturers now make cars in Europe too.
ECONOMY they were popular at home"?

Increase market share and expand into different market areas to spread risks. For example, if sales are falling in
It could be cheaper to make some goods in other countries than 'at home’.
one country the business may move to another country where sales are rising.

Open factories/operations in other

countries (become a multinational). Will the quality be as good? Might there be an ethical issue (for example, over poor
Remain competitive with rival businesses which may be expanding abroad.
working conditions)? It is expensive and/or difficult to set up operations in other
countries.
Gain government grants given to the business to set up operations in particular countries.
Opportunities
With no trade restrictions it could be profitable now to import goods and services
Shareholders are likely to receive increased dividends from higher profit. from other countries and sell them domestically.
Import products from other countries
to sell to customers in 'home'
country.
Employees may have increased opportunities to gain promotion as the business gets larger and The products will need maintenance and, perhaps, repairs- will the parts and
has operations across many countries; opportunity to live and work abroad. support be available from the producer in the foreign country?

Impact on the business'

Suppliers may have increased or decreased sales to the multinational depending on where it It could be cheaper to purchase these supplies from other countries now that
stakeholders
operates and is located. there is free trade - this will help to reduce costs. These supplies could be
Import materials and components purchased 'online'.
from other countries- but still produce
Government may gain higher tax revenue fi profits from operations abroad are repatriated, or it final goods in 'home' country.
may lose tax revenue if the multinational locates its head office elsewhere. Will the suppliers be reliable? Will the greater distance add too much to transport
Multinational Business Globalisation
costs?

Jobs are created, which reduces the level of unemployment.

If these competitors offer cheaper products (or of higher quality) sales of local
business might fall.
Increased investment - new investment in buildings and machinery increases Increasing imports into home market from
output of goods and services in the country. New technology can benefit the foreign competitors.
country by bringing in new ideas and methods. The increased competition could force the local businesses to become more
efficient.

Increased exports - some of the extra output may be sold abroad, which will
increase the exports of the country. Also, imports may be reduced as more goods This will create further competition- and the multinational may have economies
are now made in the country. Business Chapter 29- Flip of scale and be able to afford the best employees.
Learning Assignment Increasing investment from multinationals to
Nayani Snigdha, 10/7 Threats set up operations in home country.
Taxes are paid by the multinationals, which increases the funds to the government. Some local firms could become suppliers to these multinationals and their sales
LO: Analyse impacts of could increase.

Benefits globalization and evaluate the

Increased consumer choice - there is more product choice for consumers and pros and cons of multinational
more competition. In some professions, employees will now have more choice about where they work
business to an economy.
and for which business- businesses will have to make efforts to keep their best
Employees may leave businesses that cannot employees.
The jobs created are often unskilled assembly-line tasks. Skilled jobs, such as pay the same or more than international
those in research and design, are not usually created in the 'host' countries competitors.
receiving the multinationals. Might encourage local businesses to use a range of motivational methods to keep
Impact on the country's their workers.
economy

Reduced sales for local businesses - local firms may be forced out of business.
Multinationals are often more efficient and have lower costs than local
businesses.

Repatriation of profits - profits are often sent back to a multinational 'home'

Drawbacks
country and not kept in the country where they are earned.

Multinationals often use up scarce and non-renewable primary resources in the

host country.

As multinational businesses are very large, they could have a lot of influence on
both the government and the economy of the host country. They might ask the
government for large grants to keep them operating in the country - threatening
to leave the country with big job losses if these are not paid by the government.