GCE Business Structure A2

7/23/2019 GCE Business Structure A2

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GCE Business

Business StructureA2 Level


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Objectives

Evaluate the arguments for and againstprivatisation of state-oned industries

Anal!se the reasons for recent groth ininternational trade and the developmentof multinational businesses

Evaluate the impact of multinationalbusinesses on the countr! in hich the!become established


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Business sectors

"rivate sector comprises businessesoned and controlled b! individuals or

groups of individuals

"ublic sector comprises organisationsaccountable to and controlled b! central orlocal government


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"rivatisation

"rivatisation means selling state-onedand controlled business organisations to

investors in the private sector

#he main aspect is the transfer ofonership of nationalised $state-oned%industries into the private sector b!creating public limited companies&


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E'amples of privatisation

(apan "ost $(apan%

)ippon #elegraph and #elephone $(apan%

British #elecom $*+% British Gas $*+%

British Aira!s $*+%

British "etroleum $*+% British ,ail $*+%

eutsche #ele.om $German!%

S.oda $C/ech ,epublic%


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"rivatisation

"rivatisation0 Consumerism and #hatcherism in the 134s

http566&!outube&com6atch7v89cG:;


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#he arguments for and against privatisation

Arguments forprivatisation

Arguments againstprivatisation

#he prot motive of private-sector businesses ill lead tomuch greater ecienc! than hen

a business is supported andsubsidised b! the state

ecision ma.ing in state bodiescan be slo and bureaucratic

?ar.et forces ill be alloed tooperate5 failing businesses ill be

forced to change or die andsuccessful ones ill e'pand0unconstrained b! governmentlimits on groth& "rots of most ofthe privatised businesses haveincreased folloing their sell-oD

Sale of nationalised industries

#he state should ta.e decisionsabout essential industries& #hesedecisions can be based on the

needs of societ! and not just theinterests of shareholders& #his ma!involve .eeping open businessactivities that private companiesould consider unprotable&

Brea.ing up nationalised

industries0 perhaps into severalcompeting units0 ill reduce theopportunities for cost savingthrough economies of scale


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"rivati/ation of ?#,


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Bac.ground of ?#,CL

?ass #ransit ,aila! $?#,% is the rapid transit raila! s!stem in ong +ong& Originall! opened in 1


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Ih! as ?#, privati/ed7

onald #sang0 the former nancial secretar! ofthe ong +ong government in 1 described

the privati/ation of the ?#, as a JmilestoneJsince it ill benet the econom! of ong +ongand help enhance ong +ongFs status as aninternational nancial center& "rivati/ation of

the ?#, ill reinforce the governmentFscommitment to a free mar.et and bring aboutfurther improvements in ecienc!0 productivit!and Ke'ibilit! of the ?#,&


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Advantages

After ?#, as privati/ed0 it .eeps ma.ingmore and more mone! hich benetsshareholders&


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Advantages

E'pandingrapidl!hich

directl!benets thepassengers&


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Advantages

Creating more jobs opportunities forthe local people& $ 140444 in 244 to

120444 in 2411%

,einvest its prot bac. into the

business0 improving its facilities andservices&e&g& "latform screen doors


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isadvantages

E'panding lines causing so much trouble to the localpeople&e&g& istorical villages such as Choi =uen :illage in =uen

Long has to be moved to another place due to theconstruction of Guang/hou Shen/hen ong +ongE'press ,ail Lin.&

+eep increasing its tic.et price since 2414 in order togenerate more prot according to the Mare adjustment?echanismN $#he tic.et price as readjusted 4&1 - 4&>higher on 1


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"ublic-private partnerships

$"""% "ublic-private partnerships are

government services or business ventures

that are funded and managed through apartnership of government and one ormore private-sector companies


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$"""%#here are to main t!pes of public-privatepartnerships $"""%5

1. Government funded privatel! managedschemes&

Qn these ventures0 the government ill provide allor part of the funding0 but the management of the

organisation ill be b! a private business that illuse privatesector methods and techniHues tocontrol it as ecientl! as possible&


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$"""%#here are to main t!pes of public-privatepartnerships $"""%5

2. Private-sector funded government or state

managed&

Qn these ventures0 hich ill often involve largesums of capital investment0 the government isreleased of the nancial burden of nding

ta'pa!ersR mone! to pa! for the project& Once theassets have been paid for0 the! are then managedand controlled b! a government department&


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)ature and scope of

international trading lin.sAll counties0 to a greater or lesser degree engagein international trade ith other countries& #his istrue no matter hich economic s!stem is in

place& #he groth of orld trade in recent !earshas been ver! rapid& Qn addition0 the hugee'pansion in trade beteen certain countries0 fore'ample China ith the *SA and the E*0 have

had a great impact on their economicdevelopment&


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ree trade and globalisation

ree trade means no restrictions or tradebarriers e'ist that might prevent or limit tradebeteen countries

#he most common forms of trade barriers aretariDs0 Huotas and voluntar! e'port restraints&

Ihen an! of these are used0 this isprotectionism&


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ree trade and globalisation

#ariDs are ta'es imposed on imported goods to ma.ethem more e'pensive than the! ould otherise be

9uotas are limits on the ph!sical Huantit! or value ofcertain goods that ma! be imported

:oluntar! e'port limits means an e'porting countr!agrees to limit the Huantit! of certain goods sold to one

countr! $possibl! to discourage the setting totariDs6Huotas%

"rotectionism means using barriers to free trade toprotect a countr!Rs on domestic industries


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Ihat are the benets of free

trade beteen nations7 B! bu!ing products from other nations $importing%0 consumers $and

producers% are oDered a much ider choice of goods and services

Qmports of ra materials can allo a developing econom! toincrease its rate of industrialisation

Qmporting products creates additional competition for domesticindustries and this should encourage them to .eep costs and pricesdon and ma.e their goods as ell designed and of as high Hualit!as possible

Countries can begin to specialise in those products the! are best at

ma.ing if the! import those that the! are less ecient at comparedto other countries& #his is called comparative advantage&

Specialisation can lead to economies of scale and further cost andprice benets


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Ihat are the drabac.s of free

trade beteen nations7 #here ma! be loss of output and jobs from those domestic rms that

cannot compete eDectivel! ith imported goods

#here ma! be a decline0 due to imports0 in domestic industries thatproduce ver! important strategicR goods0 for e'ample coal0

foodstuDsT this could put the countr! at ris. if there ere a conKictbeteen countries or another factor leading to a loss of imports

#he sitch from ma.ing goods that cannot compete ith imports tothose in hich the countr! has a comparative advantage ma! ta.e along time

)el! established businesses ma! nd it impossible to surviveagainst competition from e'isting importers

Some importers ma! dumpR goods at belo cost price in order toeliminate competition from domestic rms


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Qnternational trade and

globalisationQn recent !ears0 there have been moves toreduce international trade restrictions&

#hese measures have been a major factordriving the globalisationR process&

Globalisation means the increasingfreedom of movement of goods0 capitaland people around the orld


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globalisation#he recent moves toards free trade have been driven b!51.The World Trade Organisation (WTO)

#his is made up of countries committed to the principle offreeing orld trade from restrictions&

2.Free-trade blocs

#hese are groups of countries0 often geographical groupedthat have arranged to trade ith each other ithout

restrictions& #he best e'amples are )A#A $*SA0 Canada0?e'ico in the )orth American ree #rade Association%0ASEA) $Association of South East Asian )ations% and theEuropean *nion $E*%&


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globalisationGlobalisation and Qndian CoDee ouses

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"olitical ecisions and #radeissing !ordsQn dicult times0 voters e'pect to be protected b! their governments& Qn 2440ith unemplo!ment shooting ahead0

or.ers ere prepared to ;;;;;;;;;;; for British jobs for British or.ersR& #hisputs pressure on governments to nd a!s to bloc. imported goods& Qn (anuar!244 the government of Qndia placed a P month ban on to! ;;;;;;;;;;; fromChina& Britain cannot do the same due to its membership of the;;;;;;;;;;;;;;;; *nion&

Iithin the E&*& there is free movement of goods and labour& #he E&*& as a holecan and does ta' imports from

(apan or China0 but no individual member has that poer& #he term;;;;;;;;;;;;;;;;;;;;;;; is used for policies that attempt to protect people fromoverseas competitors& #here are three t!pes of trade protection5 Huotas0 tariDs

and non-tariD barriers& ,estrictions on foreign or.ers arriving in Britain arealso a form of protectionism&

"uro#ean$ im#orts$ #rotectionism$ stri%e.


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"olitical ecisions and #radeTrue or false&

#ariDs are ta'es placed solel! on imported goods9uotas are no longer used b! developed countries such as America andSit/erland&

Companies can overcome trade barriers b! opening a factor! behind theprotectionist alls

)on-tariD barriers include regulations that ma.e it hard $and more e'pensive% to

ta.e goods into a countr!

Find The Word formed b' the rst letter of the terms dened belo!

A government polic! that disrupts imports&

Ihat ,ussia might do if America decided to bloc. imports from ,ussia&

A product made overseas0 but bought in this countr!#he person ho loses out if a government places tariDs or Huotas on imports

#he trading bloc that provides Britain ith a huge free trade area for Britishe'ports


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?ultinational businesses

A multinational business is a businessorganisation that has its headHuarters in onecountr!0 but ith operating branches0 factoriesand assembl! plants in other countries

?ultinational businesses are more than just

importers and e'portersT the! actuall! producegoods and services in more than one countr!&


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Ih! become a

multinational7#here are several reasons h! businesses start opoperate in countries other than their main base0

1&loser to main mar%ets this ill have anumber of advantages5

- Loer transport costs for their nished goods

-

Better mar.et information regarding consumertastes as a result of closeness to them


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Ih! become a

multinational72. *o!er costs of #roduction apart from

loer transport costs of the completed items0there are li.el! to be other cost savings5

- Loer labour rates due to the much loerdemand for local labour compared todeveloped economies

- Cheaper rent and site costs0 again resultingfrom loer demand for commercialpropert!


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Ih! become a

multinational7+. ,void im#ort restrictions b!

producing in the local countr! there ill be

no import duties to pa! and no otherimport restrictions

. ,ccess to local natural resources

these might not be available in thecompan!Rs main operating countr!


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"otential problems for

multinationalsSetting up operating plants in foreign countries is notithout ris.s& Communication lin.s ith headHuartersma! be poor& Language0 legal and culture diDerences

ith local or.ers and government ocials could lead tomisunderstandings& Coordination ith other plants in themultinational group ill need to carefull! monitored toensure that products that might compete ith each otheron orld mar.ets are not produced or that conKicted

policies are not adopted& inall!0 it is li.el! that the s.illlevels of the local emplo!ees ill be lo and this couldreHuire substantial investment in training programmes&


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Evaluation of the impact on

hostR countries ofmultinational operations#he potential benets are clear0

#he investment ill bring in foreign currenc! and0 if

output from the plant is e'ported0 further foreigne'change can be earned

Emplo!ment opportunities ill be created and trainingprogrammes ill improve the Hualit! and ecienc! oflocal people

Local rms are li.el! to benet from suppl!ing servicesand components to the ne factor! and this illgenerate additional jobs and incomes


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hostR countries ofmultinational operations#he potential benets are clear0

Local rms ill be forced to bring their Hualit! andproductivit! up to international standards either tocompete ith the multinational or to suppl! to it

#a' revenues to the government ill be boostedfrom an! prots made b! the multinational

#he total output of the econom! ill be increasedand this ill raise gross domestic product


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hostR countries ofmultinational operationsoever0 the e'pansion of multinational corporationsinto a countr! could lead to these drabac.s0

E'ploitation of the local or.force might ta.e place& ueto the absence of strict labour and health and safet!rules in some countries0 multinationals can emplo!cheap labour for long hours ith fe of the benets thatthe staD in their homeR countr! ould demand

"ollution from plants might be at higher levels thanalloed in other countries


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hostR countries ofmultinational operationsoever0 the e'pansion of multinational corporationsinto a countr! could lead to these drabac.s0

Local competing forms ma! be sHuee/ed out ofbusiness due to inferior eHuipment and much smallerresources than the large multinational

Some large Iestern-based businesses0 such as

?conaldRs and Coca-Cola0 have been accused ofimposing IesternR culture on other societies b! thepoer of advertising and promotion


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hostR countries ofmultinational operationsoever0 the e'pansion of multinationalcorporations into a countr! could lead to thesedrabac.s0

"rots ma! be sent bac. to the countr! here thehead oce of the compan! is based0 rather than.ept for investment in the host nation

E'tensive depletion of the limited naturalresources of some countries has been blamed onsome large multinational corporations


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A2 Business Structure5 ?ultiple

ChoiceIhich of the folloing is not generall! considered to bea li.el! benet of privatisation7

a raises revenue for the state to fund other activities

b subjects the business to mar.et forces and0 therefore0improves ecienc!

c enables the business to secure funds from stoc.

mar.etsd increases the opportunities for cost savings througheconomies of scale


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ChoiceIhich of the folloing is not considered to be ali.el! benet of free trade7

a Specialisation can lead to economies of scale&

b Qncreased competition encourages domesticindustr! to reduce costs&

c#here is increased consumer choice&d Qt reduces the e'posure of an econom! to adversechanges in the orld econom!&


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ChoiceA multinational corporation0 such as Coca-Cola0 is bestdened as a business that5

a sells its goods or services in more than one countr!

b is ver! large

c has its headHuarters in one countr!0 but ithoperating branches0 manufacturing

or assembl! plants in other countries

d emplo!s people from a variet! of ethnic bac.grounds&

Documents

GCE Business Structure A2