Edexcel International A Level Business: Global business (YBS11) – Revision Notes

These notes condense Unit 4 Global business (sections 4.3.1 to 4.3.4) of the Pearson Edexcel International Advanced Subsidiary/Advanced Level in Business specification (YBS11), Issue 1, September 2017. For full explanations and worked examples, read the study guide. Test yourself with the practice questions. Course hub: Edexcel A Level Business. Checklist: printable checklist. Find weak spots with the free diagnostics.

4.3.1 Globalisation

Point	Remember
Developed	High income per head, services-led, strong infrastructure
Developing	Low income per head, more agriculture, weaker infrastructure
Emerging	Fast growth, industrialising, opening to trade
GDP	Value of output in a period
GDP per capita	GDP ÷ population
HDI	Income plus health and education measures
Exports / imports	Sold abroad / bought from abroad
FDI	Investment in operations abroad
Specialisation	Concentrating on what is made efficiently, then trading

Growth gives businesses trade opportunities and shifts employment patterns (farming, then manufacturing, then services). The specification names the growing economic power of Asia, Africa and other regions.

Causes of globalisation: trade liberalisation and the WTO; political change; transport and communication costs falling; MNCs; investment flows (FDI); migration; labour force growth; structural change. Then state the impact on businesses: larger markets, cheaper inputs, more competition, more risk.

Protectionism

Tool	What it does	Effect
Tariff	Tax on imports	Raises import price; government gains revenue
Import quota	Limit on quantity	Restricts supply; raises price; no tax revenue
Legislation	Standards, rules	Can block foreign goods
Domestic subsidy	Payment to local firms	Lets local firms undercut imports

Reasons: protect jobs, young industries and security; reduce a trade deficit. Impact on businesses: exporters face barriers and retaliation; importers pay more; protected firms can become complacent.

Trading blocs. EU and single market (free movement of goods, services, capital and people; common external barriers). ASEAN (South-East Asia). NAFTA (USA, Canada, Mexico). Impact: easier access and scale for members; barriers for outsiders, who may invest inside the bloc.

4.3.2 Global markets and business expansion

Group	Items
Push	Saturated markets; competition
Pull	Increased sales and profitability; risk spreading; economies of scale
Cost	Off-shoring (own production abroad); outsourcing (another firm does it)
Life cycle	Extend the product life cycle in new countries

Market assessment checklist: disposable income (level and growth); ease of doing business; infrastructure; political stability; exchange rates; Porter’s five forces (new entrants, substitutes, buyer power, supplier power, rivalry).

Location checklist: production costs; labour skills and availability; infrastructure; trade bloc location; government incentives; ease of doing business; political stability; natural resources; likely return on investment.

Mergers, takeovers, joint ventures (reasons). Spread risk and gain scale; enter markets or blocs; acquire brands or patents; secure supplies; stay competitive; reduce competition; use local knowledge; meet legal requirements; reach supply chains and distribution; share costs and risks.

Uncertainty. Exchange rate appreciation makes exports dearer and imports cheaper; depreciation does the reverse. Skill shortages push up wages and weaken competitiveness.

Method: effect of an exchange rate change on a price

1. Write the rate as foreign currency per home unit.
2. Price in foreign currency = home price × rate.
3. Compare old and new, then work out the percentage change.
4. State who gains: exporters or importers.

Method: payback (standard form). Payback = initial cost ÷ annual saving or net cash inflow. Return on investment (standard form) = annual profit ÷ investment × 100.

4.3.3 Global marketing

Term	Meaning
Global marketing strategy	One approach across countries
Glocalisation	Global brand adapted to local tastes
Ethnocentric (domestic)	Home methods applied abroad
Geocentric (mixed)	Blend of standard and local
Polycentric (international)	Different approach in each country

4Ps abroad: adapt the product (size, design, packaging), price (income, tariffs, exchange rates), promotion (language, media, values) and place (local distribution). Ansoff: penetration, product development, market development, diversification. Porter’s matrix: cost leadership, differentiation, focus.

Niche markets: groups with distinct interests and values. Features: specialised needs, loyalty, less competition. Adapt the 4Ps accordingly. Cultural and social factors: cultural differences, tastes, language and unintended meanings, inappropriate branding and promotion.

4.3.4 Global industries and companies

Local economy: jobs, wages, conditions; local businesses; community and environment. National economy: growth; FDI flows; balance of payments; technology and skills transfer; consumers; business culture; tax revenues.

Ethics: stakeholder conflicts; emissions, waste and sustainability; supply chains (pay, conditions, exploitation, child labour); marketing (misleading labels, inappropriate activities).

Controlling MNCs: their power; political influence; legal control; consumer pressure; pressure groups; social media; self-regulation.

Worked reminders

Exchange rate. Hadlow Bikes sells a bike for 300 dollars abroad. At 4 zelds per dollar the buyer pays 1,200 zelds. If the rate becomes 5, the buyer pays 1,500 zelds, up 25% (300 ÷ 1,200 = 25%). Expect fewer sales unless the brand is strong.

Tariff. An importer pays 250 for a part. A 20% tariff adds 50. If a local rival sells the same part at 280, the tariff has made the rival cheaper by 20.

Payback. A relocation costing 900,000 saves 450,000 a year, so payback is 2 years. State whether this is quick given the time the firm expects to stay in the market.

Joint venture. An 8m project shared 75:25 costs the partners 6m and 2m. The smaller partner gains access at lower risk but also less control.

Judgement prompts

Use these to turn a list into an assessment.

• Expansion abroad: compare the size of the market with the risk. A big market with unstable politics or volatile exchange rates may not justify entry.
• Off-shoring: cost savings against quality control, shipping time and reputation.
• Joint venture or takeover: local knowledge and shared risk against loss of control and clashes of culture.
• Standardise or adapt: a global brand saves cost, but adaptation avoids cultural mistakes.
• Protectionism: good for protected jobs in the short run, but higher prices for consumers and the risk of retaliation.
• MNC impact: jobs and tax revenue against pressure on local firms and the environment. Say which stakeholder you are judging.
• Controlling MNCs: the stronger the MNC, the more control depends on consumers, pressure groups and social media.

Linking the sections

The four sections are one story. Globalisation (4.3.1) creates the conditions; push and pull factors (4.3.2) explain why a firm goes abroad; the marketing choices (4.3.3) decide how it sells once there; and the MNC sections (4.3.4) ask what its size means for host countries and stakeholders. In an extended answer, show one link across sections, for example: falling transport costs (4.3.1) make off-shoring (4.3.2) cheaper, but supply chain ethics (4.3.4) may then damage the brand.

Use data from Units 1, 2 and 3 as well: break-even, cash flow, and the strategic tools such as Ansoff and Porter all return in global contexts.

Must-know distinctions

• Off-shoring moves your own production abroad; outsourcing hands the work to another firm.
• A tariff raises price and brings revenue; a quota limits quantity.
• Ethnocentric uses home methods; polycentric tailors to each country; geocentric blends.
• GDP measures output; HDI adds health and education.

Quick self-test

1. A country has GDP of 45bn dollars and 9 million people. Find GDP per capita.
2. GDP rises from 200bn to 210bn. Find the percentage growth.
3. An imported good costs 250 and faces a 20% tariff. Find the new price.
4. An importer paying in dollars buys goods priced at 120,000 zelds. The rate moves from 2.0 to 2.5 zelds per dollar. Find the dollar cost before and after, and the percentage change.
5. A project costing 600,000 adds 90,000 profit a year. Find the return on investment.
6. A 900,000 relocation saves 450,000 a year. Find the payback period.
7. Name two push factors.
8. Name two pull factors.
9. A joint venture costs 8m and is shared 75:25. State each partner’s share.
10. Name the term for a global brand adapted to local tastes.
11. Give two ways of controlling an MNC.
12. State one reason why a strong currency may hurt an exporter.

Answers

1. 5,000 dollars.
2. 5%.
3. 250 × 1.2 = 300.
4. 60,000 dollars before and 48,000 after, a 20% fall. The dollar has appreciated, so imports priced in zelds are cheaper for the importer.
5. 15%.
6. 2 years.
7. Saturated home market; strong competition.
8. Higher sales and profitability; risk spreading (or economies of scale).
9. 6m and 2m.
10. Glocalisation (global localisation).
11. Any two: legal control, consumer pressure, pressure groups, social media, self-regulation.
12. Foreign buyers pay more in their own currency, so demand may fall.

Where marks are usually lost

• Listing factors without linking them to the business in the data.
• Mixing up off-shoring and outsourcing.
• Treating a quota as a tax.
• Giving a correct number but not interpreting it (for example, a payback figure with no judgement).
• Forgetting that a weaker currency raises import costs.
• One-sided answers to discuss, assess or evaluate questions with no reasoned judgement.
• Describing MNC effects in general terms rather than for the stakeholder named.
• Forgetting to show workings on calculate questions.

Frequently asked questions

What is the difference between a tariff and an import quota? A tariff is a tax on imports, which raises their price. An import quota is a limit on the quantity imported, which raises prices by restricting supply, and the government earns no tax revenue from it.

What is the difference between off-shoring and outsourcing? Off-shoring means moving production abroad. Outsourcing means paying another firm to carry out the work. Both can make a business more cost competitive.

What are push and pull factors in global expansion? Push factors, such as saturated markets and competition, drive a firm out of its home market. Pull factors, such as increased sales and profitability, risk spreading and economies of scale, attract it abroad.

What is glocalisation? Global localisation, or glocalisation, keeps a global brand but adapts products and marketing to local tastes. It sits between a single global strategy and a separate approach for each country.

Official syllabus

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Business, Specification, Issue 1, September 2017, Unit 4: Global business (first assessment June 2020).