ACCA Applied Knowledge · Business and Technology · Competitive factors
Which of the following is most likely to be an effect of globalisation on a business operating in a domestic market?
Globalisation most likely brings increased competition from overseas firms, because lower trade barriers and better communications let foreign rivals enter domestic markets. It also widens supplier choice and increases exchange rate exposure, so the other options describe the opposite of its usual effects.
- AIncreased competition from overseas firmsCorrect
- BGuaranteed protection from foreign rivals
- CReduced exposure to exchange rate movements
- DLower availability of international suppliers
Explanation
Globalisation reduces trade barriers and improves communications, so foreign rivals can enter domestic markets, increasing competition. It also widens supplier choice and typically increases, not reduces, exposure to exchange rates. Protection from foreign rivals is the opposite of globalisation.
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