Year 10 GCSE Economics
3.4 Globalisation / Operating Overseas (p58)
Objectives:
Understand why UK firms choose to operate
overseas.
Understand the consequences for UK firms
of operating overseas.
Apply understanding to Dyson case study
Key terms
• Labour costs: Costs of employing workers (wages,
salaries taxes on labour) and also training and
recruitment costs.
• Foreign Direct Investment (FDI): When a business
from one country builds a factory in another.
Benefits of globalisation for UK firms
operating in overseas markets
•
•
•
•
Lower operating costs
Lower labour costs
Increases firms international competitiveness
Exchange rates (ER) if ER falls it lowers X
prices
• Firms are nearer to raw materials reducing
costs
• Firms are closer to emerging markets which is
beneficial for growth.
Drawbacks of globalisation for firms
operating in overseas markets
• UK jobs lost can create structural
unemployment
• Negative publicity in UK media
• Possibly increase distribution costs
• Face competition from domestic firms
• Exchange rate fluctuations can effect
business planning
• Overcome language cultural barriers
Operating Overseas
Opportunity
for growth in
new markets
Consumer
back lash
domestically
Availability of
labour
Closer to
suppliers
Possible
Cultural
barriers
Reduces wage
inflation
Domestic
competition
Cheaper
property costs
Possible
language
barriers
Increases
competitiveness
Increases
number of
consumers
Reduces
effects of
economic
downturn
Values
1
10
2
20
3
30
4
40
5
50
6
60
Possibly lower
No NMW
therefore lower 7
corporation
8
labour costs
tax
May need to
invest in
training
Less
Government
regulation
Which are the POSITIVES of operating overseas
70
80
9
90
10
100
11
110
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