Edexcel IGCSE Business · Revision Guide
Business & the International Economy
The big idea: the world's markets are all connected now — businesses buy, sell, hire, and set up shop across borders more than ever, and this "globalisation" creates huge opportunities but also real risks, all shaped by one wobbly, ever-changing number: the exchange rate.
🌍 Topic 1 — Globalisation
Why the world's economies have become so tangled together.
What Is Globalisation, Really?
Globalisation is the business and economic integration of different countries through increasing freedom in the cross-border movement of people, goods, services, technology, and finance.
Think of it like this: fifty years ago, most countries operated like separate, sealed rooms. A business in the UK mostly sold to UK customers, hired UK workers, and bought UK materials. Globalisation is the process of knocking down the walls between those rooms — so a t-shirt might be designed in the US, its cotton grown in India, the fabric woven in Bangladesh, sewn together in Vietnam, and sold in a shop in the UK. One product, five countries, one connected world economy.
Imports vs Exports — don't mix these up
| Term | Meaning | Effect on the country's money |
|---|
| Imports |
Goods and services bought by people/businesses in one country from another country |
Money leaves the country — but generates revenue for the foreign business |
| Exports |
Goods and services sold by domestic businesses to people/businesses in other countries |
Money comes into the country — extra sales revenue for the domestic business |
💡 Memory trick
Think "EXports EXit" — exports leave the country and bring cash home. Imports come IN, and cash goes OUT to pay for them.
The Six Reasons Globalisation Happened
Examiners love asking you to explain why globalisation grew. There are six drivers — learn them as a group.
- Developments in technology — faster communication, instant data transfer, and online sales mean a business in Manchester can sell to a customer in Manila in seconds.
- Improved transport networks — cheaper flights and better shipping/logistics mean international business travel and product distribution are far easier than they used to be.
- Deregulation — governments removed trade barriers (like tariffs) and simplified financial systems, making it legally and administratively easier to trade across borders.
- Government commitment — governments actively took steps (trade deals, agreements) to help people, products, and finance move more freely.
- Market saturation — when a domestic market is "full" (saturation means growth has maxed out at home), the only way left to grow is to target new markets overseas.
- Familiarity with global brands — more tourism and access to overseas media (social media, TV, streaming) means consumers everywhere now recognise and trust global brands like Coca-Cola or Nike.
🧠 How to remember all six
Try the phrase: "Tech, Transport, Deregulation, Government, Market saturation, Brand familiarity" → TTDGMB. Say it a few times — the goal isn't the acronym itself, it's forcing your brain to touch all six ideas in one go.
Opportunities of Globalisation for Businesses
Globalisation isn't just about bigger sales numbers — it opens up entirely new ways for a business to lower costs and grow.
| Opportunity | Why it helps | Real example |
|---|
| Large markets |
Global markets have far more customers than a domestic market alone — higher sales usually mean higher revenue and profit |
Huawei sells electronics in 170+ countries, earning CN¥73.05bn profit in 2023 |
| Economies of scale |
Higher output from bigger sales spreads fixed costs thinner, cutting the cost per unit and boosting competitiveness |
Unilever sells 400+ brands in 190+ countries — the 5th largest consumer goods company on Earth |
| Labour |
Businesses can hire from anywhere — filling domestic staff shortages, accessing cheaper labour, or hiring elite specialists |
Gillette manufactures its shaving products largely in China, where it owns two factories |
| Taxation |
Head offices can be based in countries with lower tax rates, reducing overall costs |
Smurfit Kappa is headquartered in low-tax Ireland but operates paper plants across the EU and North America |
There's also a bigger-picture benefit worth mentioning: globalisation has genuinely reduced poverty in developing countries since the 1990s — employment, living standards, health, and education have all improved, giving businesses a better-qualified, more productive workforce to hire from.
Practice Question 1
Explain two opportunities that globalisation creates for a UK-based clothing manufacturer. (4 marks)
Threats of Globalisation for Businesses
Globalisation is a two-way street — it opens your home market up to foreign competitors just as much as it opens foreign markets up to you. Four key threats:
1. Increased competition
International rivals can put domestic firms out of business. They often benefit from lower costs and greater economies of scale, letting them undercut domestic prices. They can also outspend small local businesses on research, marketing, and distribution, and may access cheaper labour or materials abroad.
2. Increased need to develop a profitable niche
If a business can't compete on price or scale against global giants, its survival strategy is to find and dominate a specific gap in the market. Example: Walkers Crisps dominates the UK lunchbox multipack market — a specific niche global competitors haven't targeted as effectively.
3. Vulnerability to international takeovers
Because capital (money) can flow easily across borders, and most countries legally allow foreign ownership of domestic businesses, domestic Public Limited Companies (plcs) risk being bought out — sometimes against their will (a hostile takeover). Example: in 2009, UK confectionery company Cadbury was acquired by US company Kraft in a hostile takeover.
4. Greater risk from external shocks
Because financial systems and supply chains are now interconnected worldwide, a problem in one part of the world quickly ripples out to affect businesses elsewhere.
- Financial shocks: the UK's 2016 vote to leave the EU caused immediate stock market falls as far away as Australia and Japan.
- Distribution shocks: in 2021, the grounded container ship Ever Given blocked the Suez Canal for six days, delaying deliveries of goods like semiconductors and disrupting technology manufacturing worldwide.
⚠️ Common mistake
Students often think globalisation is "good for big business, bad for small business" — too simple. Even large domestic plcs can be vulnerable to takeover, and even small businesses can thrive by exploiting a niche. Always think about the specific business in the question.
Practice Question 2
A small UK bakery chain is worried about the effects of globalisation on its business. Identify one threat it might face and suggest how it could respond. (3 marks)