Business and the international economy

Identify and explain two possible effects that strict legal controls on product descriptions in advertisements could have on DWP.

Feb/March 2016

DGC is a public limited company. It has built a reputation for selling branded clothes and shoes of high quality to women. As a multinational business, it owns shops in 10 countries. In each shop, there is only a short chain of command between the shop manager and the sales employees. DGC plans to expand into country Z for the first time. It has already completed some secondary market research and discovered that country Z has cultural and social trends that differ from those in its current markets. The Managing Director believes DGC ought to open the shops in country Z as a franchise. By contrast, the Finance Director believes DGC should purchase its own shops by using an appropriate source of finance.

Feb/March 2019

Globalisation has transformed the way many businesses work. VKW manufactures cell (mobile) phones. It operates just-in-time inventory control. VKW sends 40% of its products abroad. To help keep total costs lower, it imports most of its raw materials. Every one of VKW’s 800 employees understands how important quality assurance is. The Operations Director has instructed all suppliers to make sure that child labour is not used. She is also worried that many governments intend to tighten import controls such as quotas.

Feb/March 2020

Explain two ways an appreciation in the exchange rate of country X could influence AF.

Feb/March 2024

BRZ trades in country X by selling outdoor apparel, including waterproof trousers and coats. Most of its stock is brought in from low-wage countries. The Operations Director commented, ‘Globalisation has changed how we do business. It offers many opportunities but I have to consider import quotas and exchange rates’. BRZ aims to behave ethically towards all of its stakeholders. The Operations Director is uncertain whether BRZ can be both ethical and profitable at the same time.

May/June 2015

Identify and explain four factors DD should take into account when cakes are packaged for export.

May/June 2015

KLG operates in country X. It makes electrical parts and sells them to washing machine manufacturers in country X. The Managing Director is intending to move the business to country Y, a low-cost country. She stated: ‘This would let us pay employees low wages for long hours because there are few legal controls over employment and health and safety. KLG cannot be both ethical and profitable. Changes in exchange rates and import tariffs could create difficulties for us once we begin exporting.’

May/June 2016

SJD operates in the private sector and produces steel for construction businesses. It intends to make 3500 of its 9000 employees redundant. The Operations Director commented: ‘Cheap steel imports and high business tax rates are harming our business. We also face ethical issues that need a response. The Government ought to do more to support steel producers. Some rivals are planning to shut their factories and move to other countries. SJD may have to follow the same course.’

May/June 2018

Refer to Appendix 3. Identify and explain how the exchange-rate movement could affect: AH. AH’s customers.

May/June 2018

Raul runs a small orange farm in country Z. As with all primary sector activities, farming gives rise to external costs and external benefits. Raul sells all 600 tonnes of his oranges straight to a drinks manufacturer in country E. The Government of country E plans to bring in either import tariffs or quotas. Raul said: ‘This might help country E’s Government meet one of its economic objectives, but what effect will it have on firms that export to country E?’

May/June 2021

VVA is a business located in country X. It makes school backpacks (bags). VVA sells through retailers as its distribution channel. The Managing Director is aware that demand can be influenced by many factors, including the stage of the business cycle and the degree of competition in the market. VVA imports 45% of its raw materials. The Managing Director is concerned that import tariffs and import quotas being introduced, together with an appreciation in country X’s exchange rate, will have an impact on VVA.

May/June 2023

Explain four reasons that may lead a business to become a multinational company.

May/June 2023

Rafael’s business works within an international setting and is looking at expansion.

Oct/Nov 2015

UDig is a major mining business in the private sector. It provides firms in country B with 30% of the coal they require. UDig currently operates eight mines, but it intends to shut two of them, and this would put 1800 employees at risk of redundancy. The Managing Director stated: ‘I blame the rise in value of country B’s exchange rate and the new legal restrictions, including those intended to protect the environment. The Government should assist UDig so that these mines stay open.’

Oct/Nov 2016

AHP is a multinational company that manufactures mobile (cell) phones in Europe, in country X. 80% of its sales come from Europe. Some people are worried about AHP’s effect on the environment. The Operations Director stated that AHP always aims to comply with all legal controls and that globalisation has brought many opportunities for AHP and its stakeholders. The Operations Director is intending to move its factories to a low-cost country in Asia. Raw materials would have to be transported an extra 4000 kms. Interest rates are expected to rise across Europe.

Oct/Nov 2018

Identify and explain two sources of finance PP could choose for its expansion.

Oct/Nov 2018

NBV is an international company with operations in several countries. It produces building materials such as bricks. In the previous year, NBV’s financial accounts reported capital employed as $144 billion. NBV operates in 18 countries and has a total workforce of 400 000. NBV suffers from some diseconomies of scale. All raw materials are bought from the countries where it operates so that exchange rate problems are avoided. NBV intends to open a factory in Country B for the first time. Some people believe this choice will create only disadvantages for other businesses in country B.

Oct/Nov 2019

Explain the effect of the following changes on GJ. • Depreciation in the exchange rate of country Z • Increase in income tax in country Z

Oct/Nov 2020

FXN makes mobile phones. It operates as a multinational company. FXN is intending to construct a new factory in country Y. One reason for this is the government of country Y’s decision to bring in import quotas. The Managing Director stated: ‘The new factory will create 1200 jobs and help reduce unemployment in country Y. FXN will begin the recruitment process as soon as a decision has been reached about an appropriate site for the new factory’.

Oct/Nov 2023

Explain two reasons BB may choose to market its products in overseas markets.

Oct/Nov 2024