Page 341 - Cambridge IGCSE Business Studies

26: Business and the international economy

Revision checklist Exam practice questions

● Globalisation is the process by which 1 Medico Technologies is a multinational company. It
countries are connected with each other manufactures medical equipment and is based in New
because of the trade of goods and services. Zealand. It is the main supplier of medical equipment to
● Globalisation is characterised by growth hospitals and clinics in New Zealand, Australia and Singapore.
in international trade and the global Medico Technologies has experienced rapid growth in the
recognition of brands. last few years. It has grown by setting up joint ventures and
● In order to grow and enter foreign markets, exporting directly. It is thinking of expanding further and

companies often set up operations setting up operations in emerging countries like Brazil.

in different countries to become
multinationals. a What is meant by ‘globalisation’? [2]
● Multinational companies pose both b What is meant by ‘multinational company’? [2]
advantages and disadvantages to a host
c Identify and explain two effects that the appreciation
country.
of exchange rates will have on Medico’s business. [4]
● Because of the disadvantages of

globalisation, countries often set tariff s and d Identify and explain two steps that the government
quotas to act as barriers. of Brazil can take to control the impact of MNCs and
● The exchange rate of a country is the value of protect local businesses. [6]
one currency compared to another.
e Do you think that the entry of a MNC such as Medico
● Supply and demand for a currency in the Technologies will have a positive impact on the host
international market is the main factor that
country, Brazil? Justify your answer. [6]
determines an exchange rate.
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● Exchange rate changes have a huge impact 2 Halim Leather is a leather manufacturing company in
on a country’s economy and businesses.
Bali, Indonesia. After ten very successful and profi table
● An appreciation in the exchange rate usually years it has recently become a public limited company
benefits importers and is not good for and been listed on the country’s stock exchange. The
exporters.
management is looking for ways to expand its market
● A depreciation in the exchange rate usually outside Indonesia. They want to start by exporting some of
benefits exporters and is not good for their products abroad and then eventually set up operations
importers.
in an attractive host country and become a multinational
company. The Indonesian currency, the Rupiah, has however
depreciated against all major currencies in the last year.

a What is meant by the term ‘host country’? [2]
b Identify two features of a public limited company. [2]

c Identify and explain two factors that the management
of Halim Leather should look for in the host country,
before setting up operations there. [4]

d If Halim Leather decides to export, explain two effects
of a depreciation of exchange rate of the Indonesian
rupiah against other major currencies on the company. [6]

e Do you think becoming a multinational company will
help Halim Leather grow successfully? Justify your
answer [6]

Total available marks 40