Globalisation and the evolving business (QCE Business Unit 4)
“Globalisation as a driver of business evolution - global supply chains, offshoring and outsourcing, the influence of trade agreements and exchange rates, the opportunities and threats of globalisation, and the implications for how an Australian business evolves and competes”
Globalisation is the growing integration of economies and markets across borders, a major driver of business evolution. It works through global supply chains (cheaper, specialised inputs but disruption risk), offshoring (moving activity overseas) and outsourcing (contracting to a third party), trade agreements (lower tariffs and easier access) and exchange rates (a lower AUD helps exporters, a higher AUD helps importers). It offers larger markets, cheaper inputs and global talent, but threatens businesses with foreign competition, currency exposure and supply-chain disruption. The evolving business responds by repositioning, redesigning supply chains, exporting and building risk-management capability.
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What this dot point is asking
QCAA wants you to explain how globalisation drives an Australian business to evolve: how global supply chains, offshoring and outsourcing, trade agreements and exchange rates change the way the business operates and competes, and how to weigh the opportunities against the threats. Unit 4 assessment commonly gives an evolving business in a global context and asks for an evaluative judgement.
The answer
What globalisation means for business
Globalisation is the increasing integration and interdependence of economies, markets and businesses across national borders, driven by trade, investment, technology and the movement of people. For business, it means both wider markets and inputs and stronger global competition.
Globalisation is a major external driver of business evolution: it forces Australian businesses to change how they source, produce, sell and compete.
Global supply chains
A global supply chain spreads the stages of production across countries - inputs from one place, manufacturing in another, assembly and distribution elsewhere - to use the most cost-effective or capable source for each stage.
- Benefit. Lower cost and access to specialised capability the business could not match domestically.
- Risk. Dependence on distant suppliers and exposure to disruption (the pandemic and shipping bottlenecks exposed how fragile long supply chains can be). Many businesses have since pursued resilience through diversifying suppliers or near-shoring.
Offshoring and outsourcing
These are often confused but distinct.
| Concept | What it is | About |
|---|---|---|
| Offshoring | Moving an activity to another country | Location (across a border) |
| Outsourcing | Contracting an activity to a third party | Ownership (in-house v external) |
They overlap as offshore outsourcing (contracting an overseas provider), but the dimensions are different. Offshoring lowers cost and accesses overseas capability but adds distance, time-zone, currency and reputational risk. Outsourcing lets the business focus on its core activity but means loss of control and dependence on the provider.
Trade agreements
Free-trade and economic-partnership agreements reduce tariffs and ease market access, lowering the cost and barriers of trading internationally. Australia is party to numerous agreements covering its major trading partners across Asia, the UK and the Americas, which make exporting and importing cheaper and more predictable. For an evolving business, a relevant trade agreement can open a new export market or cut input costs.
Exchange rates
The Australian dollar's value against other currencies directly affects globally engaged businesses.
- A lower AUD makes Australian exports cheaper and more competitive overseas, but makes imported inputs more expensive.
- A higher AUD makes imports cheaper but makes Australian exports dearer and less competitive.
Because exchange rates move constantly and unpredictably, a globally engaged business carries currency risk that it must manage (for example, through forward contracts or pricing in a stable currency).
Opportunities and threats
| Opportunities | Threats |
|---|---|
| Access to larger overseas markets | Foreign competitors and global platforms in the home market |
| Cheaper or specialised inputs (supply chains, offshoring) | Exchange-rate exposure |
| Access to global talent, technology and capital | Supply-chain disruption and dependency |
| Lower trade barriers via agreements | Reputational and ethical risk over offshore standards |
Implications for the evolving business
Globalisation pushes a business to evolve in several ways: it may reposition to compete with global rivals, redesign its supply chain for cost or resilience, enter export markets to grow beyond a small domestic base, and build the capability to manage currency and cross-border risk. Whether globalisation is net positive depends on the business - an exporter or input-importer with the capability to manage the risks gains, while a purely domestic business with no global advantage may mostly face the threat of new competition.
- Treating offshoring and outsourcing as the same
- Offshoring is about location (another country); outsourcing is about ownership (a third party). They overlap only as offshore outsourcing.
- Only listing opportunities (or only threats)
- Globalisation is genuinely double-edged; an evaluative answer needs both sides and a judgement.
- Getting the exchange-rate effect backwards
- A lower AUD helps exporters and hurts importers; a higher AUD does the reverse.
- Ignoring supply-chain risk
- Global supply chains cut cost but add disruption and dependency risk, which became a major business issue in recent years.
- Forgetting the "evolution" framing
- Unit 4 wants you to explain how globalisation makes the business change (reposition, redesign supply chains, export, build risk capability), not just describe globalisation in the abstract.
Examples in context
Example 1. Global supply chain and offshoring - an Australian apparel brand. A growing Australian fashion label designs in Melbourne but offshores manufacturing to factories in Asia to access lower production costs and specialised capability it cannot match domestically. The benefit is a competitive cost base; the risks are shipping disruption (felt acutely during pandemic-era port congestion), exchange-rate exposure when buying in US dollars, and reputational pressure to verify ethical labour standards. The business evolves by diversifying suppliers across more than one country to build resilience and by publishing a supplier code of conduct.
Example 2. Exchange rates and exporting - Australian resources and agriculture. Exporters such as miners and agricultural producers are highly exposed to the AUD. When the dollar falls, their Australian-dollar revenue from US-dollar-priced commodities rises and they become more competitive overseas; when it rises, margins compress. These businesses manage the currency risk with hedging and by competing on cost and quality, and trade agreements with major Asian partners have lowered the barriers to their export markets. This shows globalisation as both opportunity (large export markets) and risk (currency and price volatility).
Try this
Q1. Define globalisation and identify one opportunity and one threat it creates for an Australian business. [3 marks]
- Cue. Globalisation = growing integration of economies and markets across borders. Opportunity: access to larger overseas markets or cheaper inputs. Threat: foreign competition, exchange-rate exposure or supply-chain disruption.
Q2. Explain the difference between offshoring and outsourcing, with an example of each. [3 marks]
- Cue. Offshoring = moving an activity to another country (location), for example running a manufacturing plant in Asia. Outsourcing = contracting an activity to a third party (ownership), for example hiring an external IT support firm. Offshore outsourcing combines both.
Q3. Explain how a fall in the Australian dollar affects an Australian business that exports goods but imports its raw materials. [4 marks]
- Cue. Lower AUD makes exports cheaper and more competitive overseas, raising export competitiveness and AUD revenue; but it makes imported raw materials more expensive, raising input costs. The net effect depends on the balance of export revenue against import costs.
Exam-style questions
Questions in the style of QCAA exam questions on this dot point, each with a worked answer. They are written by ExamExplained unless tagged "Past paper"; the year shows the paper a question is modelled on.
Practice6 marksEvaluate the opportunities and threats globalisation presents to an evolving Australian business.Show worked answer →
A 6-mark answer needs both opportunities and threats, with application.
- Opportunities
- Globalisation opens access to larger overseas markets, so an Australian business can grow beyond a relatively small domestic market. It allows cheaper or specialised inputs through global supply chains and offshoring (for example, manufacturing in Asia or software development overseas), lowering cost. It gives access to global talent, technology and capital. Trade agreements such as the regional free-trade agreements Australia has signed reduce tariffs and ease market entry.
- Threats
- Globalisation also brings foreign competitors and global e-commerce platforms into the domestic market, intensifying competition. It exposes the business to exchange-rate movements that affect import costs and export revenue. Global supply chains create dependency and disruption risk, exposed sharply during the pandemic. Reputational and ethical risks arise from offshore labour and environmental standards.
- Evaluation
- Whether globalisation is net positive depends on the business: an exporter or input-importer with the capability to manage currency and supply risk gains; a purely domestic business with no global advantage may mostly face the threat of foreign competition. Markers reward balanced opportunities and threats, application to an evolving Australian business, and a justified evaluative judgement.
Practice4 marksExplain the difference between offshoring and outsourcing, and identify one benefit and one risk of each.Show worked answer →
A 4-mark answer needs both definitions and the benefit-risk pairs.
Offshoring is moving a business activity to another country, whether the business still does it itself (a captive offshore office) or has it done there. The activity crosses a border. Benefit: lower labour or production cost and access to overseas capability. Risk: distance, time-zone and cultural differences, exchange-rate exposure, and reputational risk over offshore labour conditions.
Outsourcing is contracting an activity out to a third party rather than doing it in-house; the provider may be local or overseas. Benefit: the business focuses on its core activities while a specialist provider handles the rest, often more cheaply. Risk: loss of control and quality oversight, dependence on the provider, and exposure of confidential information.
The two overlap when a business outsources to an overseas provider (offshore outsourcing), but the concepts are distinct - offshoring is about location (another country), outsourcing is about ownership (a third party). Markers reward both definitions, the location-v-ownership distinction, and a benefit and risk for each.