Globalisation - International Business Unit5.pptx

BTEC International Level 3
Globalisation and International Trading Associations

1. Unit 5: International Business BTEC International Level 3 Globalisation and International Trading Associations February 2024

2. BTEC Level 3 International Business BTEC LEVEL 3 International Business SPECIFICATIONS The Certificate is for learners who are interested in developing business-sector knowledge and skills alongside other fields of academic study. In today’s world of international business, success is driven by people with the skills to balance satisfying their customers’ needs by providing great products and services. Recognized by the Chartered Institute of Management

3. The impact of globalisation is one of the key challenges that are facing business organisations today It demands creative strategies that allow businesses to reap the rewards gained by operating in the global economy, while at the same time addressing the risks that arise when conducting international business We should consider the risks faced by organisations that are involved in international business in order to understand that although the global economy gives businesses opportunities for growth and profits, it also brings with it considerable challenges Introduction

4. The focus of unit 5 is on the implications of globalisation for businesses which includes: International Communications and Technology International Currencies Trading blocs The notion of International Mobility of Labour and Capital Unit 5: International Business

5. This Unit gives learners the opportunity to understand how globalisation can have an impact on all businesses regardless of their size It also allows us to focus not only on the major players in the global economy but also the small and medium sized businesses in the local economy who are directly involved in international business or who are influenced by changes in international markets It is rather important to develop a profound understanding of two key areas: What are the factors that influence the growth of globalisation? How small and medium sized businesses can exploit these factors to their own advantage? Learning objectives / opportunities

6. Learners are required to: Engage with and explore the issues and challenges prompted by globalisation Example: the dominance of large international corporation in some countries can exert a negative influence on competition of local businesses Engage with and explore the positive side of globalisation such as large International businesses can be a stimulus for the development of a country’s infrastructure and the up-skilling of its workforce Engage with and explore the features of different types of trading blocs and identify the influence of these trade associations on the activities of a business and the inherent risks associated with international business which is the main topic of our discussion today Learning objectives / requirements

7. Globalisation and its impact on global business – Types of Globalisation, benefits and draw backs World Trade Organisation “WTO” – Free Trade / Protectionism - Barriers to international business and why do they exist and their implications on international businesses International Trading Associations, Custom Unions and Free Trade Areas, aims and features Learner’s activity to recap today’s learning and engage in discussions about globalisation and international trade blocs Today’s Key discussion areas

8. Today we will share a presentation that addresses the different types of international trading associations and trading blocs / agreements that exist in different regions of the global economy paying attention to their similarities and unique features PPT Presentation covering international economic environment Discussing and investigating factors that influence international business Short Video on the importance of economic cooperation and its impact on businesses In class and small group discussions on the international business environment Unit 5: Our approach

9. Globalisation Its impact on international business Introduction

10. What is Globalisation? Globalisation It is the free movement of goods, services, people, capital, information and technology enabling businesses to sell their products anywhere in the world

11. The development of Globalisation Globalisation development In recent years the world has increasingly become one market. New technology, economic development and improved travel have all meant businesses can produce and sell products anywhere in the world

12. SOCIAL POLITICAL A measure of how easily information and ideas are passed between people in their own country and between different countries including access to internet and social media The amount of political cooperation there is between different countries that impacts positively on being global ECONOMIC Countries that trade with many other countries and have a few trade barriers are economically globalised Types of Globalisation

13. Improved communications Improved transportation Free trade agreements Global Banking The growth of MNC’s The development of communication technologies such as internet, email and mobile phones have been vital to the growth of globalisation Satellite channels such as CNN and SKY have provided worldwide marketing avenues for concepts and products of globalisation The development of refrigerated and container transport, bulk shipping and improved air transport has allowed the easy mass movement of goods throughout the world This assist and ease the expansion of globalisation MNC’s and rich capitalists have always promoted free trade as a way of increasing their own wealth and influence International Organisations such as the World Trade Organisation and the IMF The International Monetary Fund also promote free trade Modern communication technologies allows vast amount of capital to flow freely and instantly throughout the world The equivalent of $6.6 trillion Forex transactions happen every single day through international stock exchanges in New York, London and Tokyo stock markets www.ig.com/uk/forex The rapid growth of MNC’s such as Microsoft, McDonalds, Nike, Apple, Tesla is a cause as well as a consequence of globalisation The investments of MNC’s in farms, mines and factories is a major part of globalisation which in turn allows MNC’s to produce goods and sell them globally Drivers of Globalisation

14. Changed food supply Division of labour Less job security Damage to the environment Cultural impact Food supply is no longer tied to the season We can buy food anywhere in the world at anytime of the year Because of MNC’s search for the cheapest location to manufacture and assemble components. Production processes may be moved from developed to developing countries where costs are lower In the global economy jobs are becoming more temporary and insecure A survey of American workers showed that people now hold 7 to 10 jobs over their working lives More trade means more transport which uses more fossil fuels and causes pollution Climate change is a serious threat to our future YouTube connects people across the planet As the world becomes more unified, diverse cultures are being ignored MNC’s can create a monoculture as they remove local competition and thereby force local firms to close Effects of Globalisation

15. Benefits of Globalisation Increased global markets accessibility Access to cheap labour and raw materials International specialisation Increased level of efficiency due to increased level of competition Transfer of knowledge, skills and technology

16. Drawback of Globalisation International competitors with cheaper costs Power of multinational brands and its detrimental effects on local smaller brands Whole industry closures in some markets There has been a move from the manufacturing sectors into the tertiary sector in the UK market

17. Why does international trade matters to the UK About 28% of the goods and services we produce are sold abroad (exports) while 30% of what we buy comes from other countries (imports) Imports and exports generate revenue for businesses in different countries thus leading to business growth International trade allows countries to expand their markets and access goods and services that otherwise may not have been available domestically

18. World Trade Organisation (WTO) Free trade Protectionism Learning Aim B1

19. The World Trade Organisation The World Trade Organisation (WTO) is the only international organisation dealing with the global rules of trading between nations Its main function is to ensure that trade flows as smoothly, predictably and freely as possible

20. What is free (Open) trade Free (Open) trade is an Economic Policy of not discriminating against imports from and exports to other countries Buyers and sellers from separate economies may trade without the domestic government applying tariffs, quotas, subsidies or prohibitions on their goods and services

21. Key benefits of free trade (arguments against protectionism) Countries can benefit from comparative advantage Businesses can better achieve economies of scale Encourages competition and economic efficiency Enables businesses to grow beyond their domestic borders

22. What is protectionism Protectionism involves any attempt by a country to impose restrictions on trade in goods and services The main aim of protectionism is to cushion and protect domestic businesses and industries from overseas competition and prevent the outcome resulting solely from the interplay of free market forces of supply and demand

23. Tariffs Three main types of protectionism Import Quotas Domestic and Export Subsidies

24. Protectionism / Tariff A Tariff is a tax or duty that raises the prices of imported products and causes a reduction in domestic demand and an expansion in domestic supply For example and until recently Mexico imposed 150% tariff on Brazilian chicken. The United States has an 11% import tariff on imports of bicycles from the United Kingdom.

25. Protectionism / Import Quotas Quotas are volume limits of the level of imports allowed or a limit to the value of imports permitted into a country in a given time period For example until 2014 South Korea maintained a restricted quotas on imported rice It has now replaced the quota with import tariffs designed to protect South Korea’s rice farmers

26. Protectionism / Subsidies A subsidy is a payment to encourage domestic production by lowering their costs Well known subsidies include common Agriculture policy in the EU or Cotton subsidies for US Farmers and farm subsidies introduced by countries like Russia In 2012 the US imposed tariffs on Chinese manufacturers of Solar Panel cells judging that they benefited from unfair export subsidies after a review that split the US solar industry

27. International Trading associations Custom Unions and Free trade areas Aims and features Learning Aim B1

28. Trading blocs Trading blocs are usually groups of countries in specific regions that manage and promote trade activities. Trading blocs lead to trade liberalisation (the freeing of trade from protectionist measures) and trade creation between members, since they are treated favourably in comparison to non-members The World Trade Organisation (WTO) permits the existence of trading blocs, provided that they result in lower protection against outside countries than existed before the creation of the trading bloc

29. Two main types of trading blocs (EAEU) EURASIAN ECONOMIC UNION MERCOSUR (COMMON MARKET OF SOUTH AMERICAN NATIONS) USMCA (THE UNITED STATES, MEXICO, CANADA AGREEMENT) ASIAN-AUSTRALIA- NEW ZEALAND FREE TRADE AREA (AANZFTA) FREE TRADE AREAS Custom unions and common markets THE EUROPEAN UNION (EU)

30. The European Union (Custom Union) Established in 1968, makes it easier for EU companies to trade, harmonises customs duties on goods from outside the EU and helps to protect Europe’s citizens, animals and the environment. In practice, the Customs Union means that the customs authorities of all EU countries work together as if they were one. They apply the same tariffs to goods imported into their territory from the rest of the world, and apply no tariffs internally. In the case of the EU, this means that there are no customs duties to be paid when goods are transported from one EU country to another. The customs duty from goods imported into the EU makes up around 14% of the total EU budget as part of its ‘traditional own resources.’ Customs controls at the EU’s external borders protect consumers from goods and products which could be dangerous or bad for their health. They protect animals and the environment by fighting illicit trade in endangered species and by preventing plant and animal diseases. Customs authorities work together with policy and immigration services in the fight against organised crime and terrorism.

31. MERCOSUR (Common market of South American Nations) Established in 1991, The Southern Common Market (MERCOSUR for its Spanish initials) is a regional integration process, initially established by Argentina, Brazil, Paraguay and Uruguay, and subsequently joined by Venezuela and Bolivia* -the latter still complying with the accession procedure. MERCOSUR is an open and dynamic process. Since its creation, its main objective has been to promote a common space that generates business and investment opportunities through the competitive integration of national economies into the international market. As a result, it has established multiple agreements with countries or groups of countries, granting them, in some cases, the status of Associated States – this being the situation of the South American countries. These participate in activities and meetings of the Bloc and have trade preferences with the States Parties. MERCOSUR has also signed commercial, political or cooperation agreements with a diverse number of nations and organizations on all five continents.

32. EURASIAN Economic Union (EAEU) The Eurasian Economic Union is an international organization for regional economic integration. It has international legal personality and is established by the Treaty on the Eurasian Economic Union. The EAEU provides for free movement of goods, services, capital and labor, pursues coordinated, harmonized and single policy in the sectors determined by the Treaty and international agreements within the Union. The Member-States of the Eurasian Economic Union are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic and the Russian Federation. The Union is being created to comprehensively upgrade, raise the competitiveness of and cooperation between the national economies, and to promote stable development in order to raise the living standards of the nations of the Member-States.

33. The United States-Mexico-Canada Agreement (USMCA) The United States-Mexico-Canada Agreement (USMCA) entered into force on July 1, 2020. The USMCA, which substituted the North America Free Trade Agreement (NAFTA) is a mutually beneficial win for North American workers, farmers, ranchers, and businesses. The Agreement creates more balanced, reciprocal trade supporting high-paying jobs for Americans and grow the North American economy. Agreement highlights include: •   Creating a more level playing field for American workers, including improved rules of origin for automobiles, trucks, other products, and disciplines on currency manipulation. •  Benefiting American farmers, ranchers, and agribusinesses by modernizing and strengthening food and agriculture trade in North America. •   Supporting a 21st Century economy through new protections for U.S. intellectual property, and ensuring opportunities for trade in U.S. services. •   New chapters covering Digital Trade, Anticorruption, and Good Regulatory Practices, as well as a chapter devoted to ensuring that Small and Medium Sized Enterprises benefit from the Agreement.

34. Asian, Australia, New Zealand Free Trade Area (AANZFTA) AANZFTA entered into force in January 2010 for Australia. The Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) is an agreement between ASEAN Member States (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam), Australia and New Zealand. It delivers extensive tariff reduction and greater certainty for services suppliers and investors. The Agreement remains the highest quality of ASEAN's FTAs with its partners. AANZFTA is complemented by the bilateral FTAs with Indonesia, Malaysia, Singapore, Thailand and New Zealand. Australia, Brunei Darussalam, Malaysia, New Zealand, Singapore and Vietnam are also signatories of the “Comprehensive and Progressive Agreement for Trans-Pacific Partnership” (CPTPP), which entered into force for Australia, New Zealand and Singapore on 30 December 2018; for Vietnam on 14 January 2019.

35. The World Economic Forum – China’s pledge to world’s economy

36. Unit 5 End of unit activities Learners Activity guidance IN CLASS ACTIVITY EXTENDED ACTIVITY We will ask learners to write a short comparative study of 500 words on these barriers to international trade exploring your own national economy and the existing barriers to imports then compare this with another country using trade reports from the WTTIS website Use different resources available to you in class including the interactive board to present your work Use business style write up for your article as you would expect when you read the economist, the Financial Times or business insider Your comparative study on barriers to international trade should explore your own national economy compared to another country that your national economy trade with We will now ask the learners to work in pairs to research the ways in which countries construct barriers to international trade and prepare an article for a business magazine on the economic and business impact for erecting such barriers. Select 2 models of trade barriers and share your article with the class Now that we have come to the end of this session where we talked about the trading blocs, different types of trading associations that exist in the global economy. We also talked about barriers to international business and why they exist and their implications on the business including currency fluctuations and risks / opportunities associated with it

37. Unit 5 assessment guidance End of unit activity Activity

38. Learning Aim (A) Learning Aim (B & C) Learners must produce a comprehensive report that explores both the positive and negative factors that influence the growth or reduction in scale of business activities that take place in the global economy Learners must produce a comprehensive case study of a self selected international business organisation and undertake an in-depth exploration of how its involvement in international business contributes to its mission, values and long term strategic goals/aims Central to this exploration will be the preparation of SWOT Analysis (Strength – Weaknesses – Opportunity – Threats) STEEPLE Analysis (Social and Culture – Technological – Economic – Environmental – Political – Legal and Regulatory – Ethical) Your research activity should include different source materials and present your findings in a variety of formats including reports, business articles and presentations. Your data analysis should inform and justify any conslusions or recommendations Unit 5: Assessment guidance This unit is assessed internally through two internal assignments in the form of reports One assignment for learning Aim A One assignment for learning Aim B & C

39. Learning Aims Key contents area Assessment approach Examine the influences on the growth of globalisation (A1) Globalisation (A2) Factors affecting Globalisation A critical review of current factors impacting the development and growth of international business (B) Explore the structure of the global economy (B1) International Trading Associations (B2) The Finance of international trade (B3) Barriers to international business (B4) Exchange rates A Case study investigation of an international business organisation examining current and potential strategies (C ) Examine strategic and operational approaches to developing international business (C1) Strategic aims and objectives (C2) External influences (C3) Operational implications Unit 5: International Business Aims Contents Assessment Unit Assessment Model

40. Thank you