4.5.1.1 - Expansion of Markets
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Positive Effects of Market Expansion
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Today, we will discuss the positive effects of market expansion due to globalisation. Can anyone tell me how globalisation has helped businesses to grow?
I think it helps them reach customers in other countries.
Exactly! This access to international customers can significantly boost sales and profits. We can remember this as the 'ACE'—Access to Customers Everywhere! Can anyone think of examples of companies that have benefited from this?
Apple and McDonald's sell their products worldwide!
Right! Their global presence exemplifies how companies leverage market expansion. But what about the impact on quality and efficiency?
Isn’t competition a factor that pushes companies to improve their products?
Absolutely, competitive pressure drives innovation. This leads us to our final point for today, the cultural exchange that comes with globalisation. Can anyone provide an example of cultural exchange?
Like how people enjoy sushi not just in Japan but all over the world?
That's a perfect example! To summarize, we covered how globalisation allows access to international markets, boosts quality through competition, and facilitates cultural exchanges.
Negative Effects of Market Expansion
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Now, let's discuss the challenges that come with market expansion through globalisation. What concerns might local businesses have?
They might struggle to compete against big global companies.
Correct, this is a significant concern. We often see smaller businesses struggle to survive. Let's remember this with the acronym 'THREAT'—Small businesses face a Threat from Huge Entities Always Trying. What about economic inequality?
Isn't it that richer countries get richer while poorer ones lag behind?
Exactly! This disparity affects global dynamics. And regarding labor, what risks exist?
Some companies might ignore labor laws to reduce costs.
Spot on! And lastly, we must consider cultural erosion. What can you tell me about that?
Some places might lose their local culture due to global brands.
Precisely! To summarize, we learned that while globalisation has its benefits, it also poses significant challenges such as threats to local businesses, economic inequality, possible labor exploitation, and cultural erosion.
Introduction & Overview
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Quick Overview
Standard
This section explores the implications of globalisation on market expansion, highlighting its positive impacts such as increased sales, competition, and cultural exchange while also addressing the challenges faced by local industries and wealth inequality.
Detailed
Expansion of Markets
Globalisation has fundamentally altered the business landscape by providing unprecedented access to international markets. This phenomenon allows companies not only to increase sales but also to innovate and improve efficiency in response to global competition.
Key Points Covered:
- Positive Effects:
- Market Expansion: Businesses can tap into diverse international customer bases, which significantly boosts sales and profitability.
- Enhanced Quality and Efficiency: Exposure to global competition compels firms to innovate and improve their offerings continually.
- Access to Resources: Companies are better positioned to acquire modern technologies and capital from global markets, accelerating growth and adaptability.
- Job Creation: Increased production driven by a broader customer base can lead to more job opportunities.
- Cultural Exchange: Globalisation fosters cultural exchanges, which lead to a more diverse market and consumer base.
- Challenges:
- Local Industry Threats: Smaller businesses often struggle against the competitive advantages held by multinational corporations.
- Economic Disparities: Globalisation can exacerbate wealth gaps between developed and developing nations.
- Labour Exploitation Risks: In pursuit of lower costs, some businesses may exploit cheaper labor without adhering to fair labor practices.
- Cultural Erosion: The dominance of global brands can overshadow local cultures, leading to a loss of cultural identity.
The expansion of markets through globalisation presents a dual narrative—it offers tremendous opportunities for businesses to thrive, while simultaneously spotlighting the need to address the challenges posed to local industries and economies.
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Access to International Customers
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Chapter Content
Access to international customers boosts sales and profits.
Detailed Explanation
When businesses expand into international markets, they can reach customers beyond their local or national boundaries. This means that instead of selling products or services to a limited number of local customers, they can now sell to a global audience. This expansion enables companies to increase their sales volume, leading to higher profits. For example, small businesses that open online stores can sell to customers worldwide rather than just in their hometown, significantly increasing their potential market.
Examples & Analogies
Imagine a local bakery that makes delicious cookies. Initially, it can only sell its cookies to customers who live nearby. However, if the bakery opens an online store, it can ship cookies to customers all over the country or even internationally. This means more cookie lovers can enjoy its products, leading to increased sales and profits.
Improved Quality and Efficiency
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Chapter Content
Global competition drives innovation and quality improvement.
Detailed Explanation
When businesses operate in a global market, they face competition from companies around the world. This competition encourages them to improve their products and services to meet the needs and preferences of a wider audience. As a result, businesses often invest in research and development (R&D) to innovate and offer better quality products. For example, technology companies constantly update their devices to include the latest features that consumers expect, which enhances overall efficiency for production processes as well.
Examples & Analogies
Think of the smartphone market. Companies like Apple and Samsung constantly compete to release the latest smartphone with better cameras, faster processors, and more features. This competition pushes them to invest in R&D, which leads to improved products that ultimately benefit consumers.
Access to Global Capital and Technology
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Chapter Content
Firms can invest in modern technology and raise capital globally.
Detailed Explanation
Operating on a global scale allows firms to access a wider range of investment opportunities and cutting-edge technologies. By tapping into international capital markets, businesses can find investors who are willing to fund their projects, providing them with the financial resources necessary for growth. Additionally, they can leverage advanced technologies developed in other countries to improve their operations or to innovate new products. This not only enhances their competitive edge but can also accelerate their growth strategies.
Examples & Analogies
Consider a green energy start-up based in India that wants to develop solar technology. By participating in global investment roundtables, it can attract investors from Europe looking to invest in clean energy. Additionally, it can adopt technology innovations from other countries that have advanced solar panels, enabling it to produce more efficient energy solutions.
Employment Generation
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Chapter Content
Increased production and investment create jobs.
Detailed Explanation
As businesses expand into new markets, they often increase production to meet the demand of a larger customer base. This expansion often requires hiring additional workers, which leads to job creation. Additionally, new investments, particularly from foreign entities, can fuel the establishment of new facilities, providing even more employment opportunities. Thus, globalization can significantly impact local job markets positively.
Examples & Analogies
Picture a car manufacturing company that decides to sell its vehicles globally. To meet the higher demand, the company may need to hire more factory workers, engineers, and marketing personnel. Consequently, this creates dozens of new jobs in the community where the factory is located.
Cultural Exchange
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Chapter Content
Promotes understanding and sharing of values, products, and lifestyles.
Detailed Explanation
Global market expansion also facilitates the exchange of culture between different countries. As businesses enter new markets, they bring their products, values, and cultural practices with them, enriching local cultures and allowing for diverse interactions. This exchange can lead to greater cultural understanding among people from different backgrounds, which can help foster peace and collaboration across nations.
Examples & Analogies
Think about the popularity of sushi outside of Japan. As Japanese restaurants opened in various countries, they not only introduced sushi but also Japanese culture, such as dining etiquette and customs. This exchange of food and culture helps people appreciate the richness of different societies.
Key Concepts
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Market Expansion: The ability of businesses to reach international customers and boost sales.
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Economic Interconnectedness: The interdependence of national economies through trade and investment.
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Cultural Exchange: The sharing and merging of cultural practices and products across borders.
Examples & Applications
Apple, McDonald's, and Toyota serve customers worldwide, showcasing successful market expansion.
The rise of e-commerce platforms facilitates global sales, as seen with Amazon reaching markets beyond its home country.
Memory Aids
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Rhymes
Global trade helps businesses thrive, reaching markets, they come alive!
Stories
Once upon a time, small businesses thrived in their towns, until big corporations came from far away, like the giants of the land. They offered lower prices and better products, overshadowing the local shops. The townsfolk learned to adapt, blending their traditions with new global flavors, creating a rich tapestry of culture.
Memory Tools
Remember MAE: Market Access Everywhere for globalisation!
Acronyms
THREAT for challenges
Threat to local Hubs
Economic disparity
Risks of exploitation
Erosion of culture
Additional concerns
Try adapting!
Flash Cards
Glossary
- Globalisation
The process of integration and interaction among people, companies, and governments worldwide, particularly in trade and cultural exchange.
- Multinational Corporations (MNCs)
Companies that operate in multiple countries, often promoting integration through investments and efficient practices.
- Cultural Erosion
The diminishing of local cultures and traditions due to the influence and dominance of global brands and ideas.
- Economic Inequality
The unequal distribution of wealth and resources between countries, leading to disparities in development.
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