4.1 Flashcards
Define emerging economy
Emerging economies are economies that have increasing growth rates but relatvively low income perr head
Implications of Economic Growth for Individuals and Businesses
Impacts on businesses
-Trade Opportunities for Businesses as demand for goods and services increases
>Growing economies create new markets for goods and services= more customers=potential for increased profits
>More export opportunities to developed economies
>decreases COP
as businesses can benefit from lower labour costs and cheaper raw materials in emerging economies
> Increased FDI
>Encourages outsourcing or setting up production abroad due to lower costs.
Impacts on individuals
>Increased job creation
>Increased incomes= generates demand= opportunity for firms
>increased skills of workers and quality of education
>Migration of workers to cities
>Shift from agriculture to industry and services
Indicators of growth:
-Gross Domestic Product (GDP) per capita
>Measures the total value of goods and services produced in a country, divided by population.
>Shows average income level and economic productivity.
>Higher GDP per capita usually means higher living standards.
-literacy
>Measures the percentage of people who can read and write.
-health
>Includes life expectancy, infant mortality rates, access to healthcare.
-Human Development Index (HDI)
>HealthLife expectancy
>Education (mean years of schooling)
>Income GNi per capita at PPP
Define exports and imports
Importd are goods and services bought by people and businesses in one country from another
Exports are goods and services sold by domestic businesses to people or businesses in other countries
The Link Between Business Specialisation and Competitive Advantage
-Specialisation
Is when a country/business decides to focus on producing a particular good/service
-Specialisation allows businesses to:
>Increase efficiency and reduce costs
>Develop expertise and strong brand reputation
> Innovate more quickly in their area of focus
So = competitive adv
When businesses specialise, it can also help them to gain a competitive advantage
If they can increase the value added on their goods/services, this can help to gain an edge over their competitors
Foreign direct investment(FDI)and link to business growth
Foreign Direct Investment is when a business invests directly in facilities, operations, or assets in another country.
ADV OF FDI
-Access new customer markets
-Gain access to local resources, labour, or raw materials
-Increased economics growth
-Increased job opportunities
-Access to knowledge and expertise
Define globalisation
Globalisation is the increased integration of the world local,regional and national markets into a single international market
Factors contributing to increased globalisation
-Reduction of international trade barriers/trade liberalisation
-Political change eg deregulation
-Reduced cost of transport and communication
-Increased significance of global (transnational) companies
-Increased investment flows (FDI)
-Migration (within and between economies)
-Growth of the global labour force
-Structural change eg agriculture to manufacturing
What is migration
Migration- temporary or permanent movement of people around the globe
What is trade liberisation and what does it cause
- Reduction in trade barriers= exploit adv of other countries= decreased prices of goods = increased output as some may be better at producing than others. Also allows firms to access components,raw materials and finished goods cheaper
What is protectionism
Protectionism is protecting domestic businesses and home industries against foreign competition and limiting the number of imports into the country
Methods of protectionism
- Tariffs- tax on imports= increases gov revenue
- Quotas- limit on the quantity of a certain good that can be imported into a country.
> Business Impact:
-Ensures domestic firms maintain market share.
-Can lead to supply shortages or higher prices.
-Reduces consumer choice. - Domestic subsidies
- Government legislation- laws or regulations that make it difficult for foreign firms to operate in a country eg product standards or labelling laws
What is a trading bloc and examples
trading bloc is a group of countries that have agreed to reduce or remove trade barriers between them leading to trade liberisation
Examples
- NAFTA= northatlantic free trade agreement (north america)
- ASEAN= association of Southeast Asian Nations
- EU= european union
Adv of trading blocs
- Larger markets: Increased customer base = more sales potential.
- Opportunity to expand into new markets
- Benefit from comparative advantage= cheaper and better quality products
- Makes it easier to source labour if free movement is allowed
Dis of trading blocs
- Countries and businesses outside bloc may have better comparative adv which people inside bloc cannot access
- Infant industries are vulnerable to MNC’s- competition
- Inefficient producers may be protected = poor quality and increased prices
