BUSINESS STRUCTURE

LOCAL NATIONAL AND INTERNATIONAL

BUSINESSES
• Local business operate in a small and well defined
part of the country without the objective of expansion
and obtaining customers across the whole country
• National businesses have branches or operations
across most of the country without making attempt to
establish operations in other country .
• International business operate in more than one
country. They are often referred to as multinational
businesses
 INTERNATIONAL TRADE
•BUSINESSES
PROS CONS
Economies of scale Diseconomies of scale
Access to better information Higher transportation cost
Spread risks Higher competition and risk
Access to wider markets Trade barriers
Cultural and language differences
Using agents increase prices
Supply chain issues
 COUNTRY
PROS CONS
Improved political and social links Loss of output and jobs
Higher GDP, employment and standard of Decline in domestic industries due to
living increased imports
High competition making it difficult for
new business
Increased chances of dumping
If value of imports exceeds exports, there
is loss of foreign exchange
Overdependence on other countries .
 PROTECTIONISM
• Process of protecting domestic firms from foreign
competition with the use of trade barriers.
 TARIFFS: tax imposed on imports
 QUOTAS : Limit on the quantity of imports
 EMBARGOES: ban on particular imports
 VOLUNTARY EXPORT RESTRICTION :an exp.ort
country agreeing to limit the quantity of exports
sold to another country.
 FREE TRADE AND GLOBALISATION
• Free trade is when countries face no trade barriers while
exchanging goods and services .
• Globalisation is the increase in movement of labour , capital and
goods and services between countries .
• trade blocs and trade organisation help encourage globalisation .
• World trade organisation (WTO)-countries committed to reduce
trade restrictions
• Free trade blocs –groups of countries who trade without
restrictions EG: NAFTA(North american free trade association,
ASEAN(association of south east asian nations ), EU(european
union )
 BENEFITS OF FREE TRADE
• Wider choice of goods and services
• Wider choice of raw materials
• Helps in developing countries increase the
rate of industrialisation .
• Low prices, improved quality .
• Encourages specialisation.
• Economies of scale
• Improved living standards
 MULTINATIONAL BUSINESSES
• A business which produces in many countries

• WHY BECOME A MULTINATINAL?

 Avoids tariffs
 Access to cheaper raw materials
 Lower labour costs
 Lower transport costs
 Closer to the market
 Better control
 Access to grants and subsidies
 Economies of scale
 Cheaper rent and site costs
 PROBLEMS OF MULTINATIONALS
• Cultural differences
• Legal regulations
• Coordination & communication problems
• Diseconomies of scale
• Difference in skill levels of employees ,
increasing training costs
 HOST COUNTRY
BENEFITS DRAWBACKS
Economic growth May not reinvest profits
Higher employment Exploitation of workers
Higher tax revenue Exploitation of natural resources
Better infrastructure Pollution
Better skills for workers (if invested in Drive out domestic firms
training)
Increased quality Reduction in cultural identity
Increased business opportunities
 PRIVATISATION
• It is the process of selling state owned
enterprises to the private sector
BENEFITS DRAWBACKS
Improved efficiency External costs may not be considered
Higher revenue for the government Monopolies may be formed
Higher tax revenue Exploitation of customers –higher prices

Higher quality Strategic industries requires government

support and control
Higher competition Reduce opportunities of economies of scale

Minimal government influence

Wider choice
Higher investment