ZNOTES.ORGUPDATED TO 2020-22 SYLLABUSCAIE A2 LEVELBUSINESS (9609)SUMMARIZED NOTES ON THE THEORY SYLLABUSCAIE A2 LEVEL BUSINESS (9609)Voluntary export restrictions-an export country1.Business Structureagreeing to limit the quantity of exports sold to anothercountry1.1.Local,National and International1.4.Free trade and GlobalisationbusinessesFree trade is when countries face no trade bamriers whileLocal businesses operate in a small part of the country.exchanging goods and servicesGlobalisation is the increase in movement of labour,They do not have expansion objectivescapital and goods and services between countriesNational businesses have branches throughout thecountry but they do not operate in other countriesTrade blocs and trade organisations help encourageglobalisationInternational/multinational businesses operate in moreWorld trade organisation(WTO)-countries committed tothan one countryreduce trade restrictionsFree-trade blocs-groups of countries who trade without1.2.International Traderestrictions.Ex.NAFTA,ASEAN,EUBusinessesBenefits of free tradeProsConsWider choice of goods and servicesEconomies of scaleDiseconomies of scaleWider choice of raw materialsAccess to better informationHigher transport costsHelps developing countries increase the rate ofindustrialisationSpreads risksHigher competition and riskLow prices,improved qualityAccess to wider marketTrade barriers.Encourages specialisationCultural and languageEconomies of scaledifferencesUsing agents increases pricesSupply chain issues1.5.Multinational businessesCountryA business which produces in many countriesProsConsWhy become a multinational?Improved political and socialLoss of output and jobs·Avoid tariffslinksAccess to cheaper raw materialsHigher GDP,employmentDecline in domestic·Lower labour costsindustries due to increasedand living standardsLower transport costsimports·Closer to the marketHigh competition making it◆Better controldifficult for new businessesAccess to grants and subsidiesIncreased chances of·Economies of scaledumpingCheaper rent and site costsIf value of imports exceedsProblems for multinationalsexports,there's loss offoreign exchangeCultural differencesOverdependence on other·Legal regulationscountriesCoordination communication problemsDiseconomies of scale1.3.ProtectionismDifferences in skill levels of employees,increasingtraining costsProcess of protecting domestic firms from foreigncompetition with the use of trade barriers1.6.Host CountryTariffs-tax on importsQuotas-limit on the quantity of importsBenefitsDrawbacksEmbargoes-ban of particular importsWWW.ZNOTES.ORGCAIE A2 LEVEL BUSINESS(9609)BenefitsDrawbacks2.2.Synergy and integrationMay not reinvest profits inEconomic growththe countrySynergy means that the whole is greater than sum ofHigher employmentExploitation of labourpartsThe new,larger business will be more successful than theHigher tax revenueExploitation of naturalresourcestwo,formerly separate,businessesBetter infrastructurePollutionBetter skills for workers (if2.3.Types of integrationDrive out domestic firmsinvest in training)1.Horizontal integrationIncreased qualityReduction in cultural identity1.Integration in the same industry and stage ofIncreased businessproductionopportunities2.Economies of scale3.Lower competition4.More power over suppliers5.Scope for rationalisation1.7.Privatisation6.Monopoly,increased investigation7.ConflictsIt is the process of selling state-owned enterprises to the2.Vertical forward integration-private sector1.Integration in the same industry but forward◆Benefits-stage of production·Improved efficiency2.Control over promotionHigher revenue for the government3.A secure outlet for the firm's productsHigher tax revenue4.Lack of experience and expertise·Higher quality5.Uncompetitive behaviour,bad publicity·Higher competition3.Vertical backward integration-Minimal government influence1.Integration in the same industry but abackward stage of production·Higher investment2.Control over quality,price and delivery time·Drawbacks-3.Increased research developmentExternal costs may not be considered4.Control over competitors suppliesMonopolies may be formed5.Lack experience and expertiseExploitation of customers-higher prices6.Business may become complacentStrategic industries require government support and4.Conglomerate integration-control1.Integration in a different industryReduce opportunities of economies of scale2.Diversifies risks3.Share ideas4.Lack of experience,failure2.Size of Business5.Lack of clear focus and direction2.1.External growth2.4.Joint ventures and strategicalliancesBusiness expansion done through mergers and takeoversAlso known as integrationJoint venture is when two businesses come together towork on one project,sharing capital investmentReasons for-Strategic alliances are agreements between firms inShare research facilities and pool ideaswhich each agrees to commit resources to achieve an◆Economies of scaleagreed set of obj ectivesSave on marketing and distribution costs◆Larger customer base2.5.Problems of rapid growth·Higher market share·FinancialReasons against-·ExpensiveDiseconomies of scaleAddition fixed and working capital is needed·ConflictsIncreased long-term borrowing and lead to negativecash flowWWW.ZNOTES.ORG