4.1 + 4.2 Flashcards
Globalisation definition
The process that enables markets to operate internationally. It requires the free movement of products, resources and finance so that businesses can produce and sell in a world market.
PESTLE
P-political (government supporting innovation)
E-economic (investment overseas)
S-social (lifestyle,fashion + outlet)
T-technological (improvement in resources)
L-legal (regulations + standards)
E-environmental/ethical (global warming)
BRICS + MINT (are ……)
Emerging countries
Brazil
Russia
India
China
South Africa
Mexico
Indonesia
Nigeria
Turkey
Emerging economy definition
Economies of developing countries where there is rapid growth but low income per head and operating risks
Features of emerging economies (4)
-Rapid industrialisation
-Faster long-term economic growth
-Many inhabitants are still in poverty (low income per head)
-Businesses struggle to access global market
Business threats of emerging economies (3)
-Large pools of skilled but low cost labour
-Undervalued currencies making exports cheaper
-Inadequate protection of brand
Business opportunities of emerging economies (3)
-Growing numbers of educated consumers = increase in consumer spending
-culture shifts
-potential for joint ventures
GDP meaning
gross domestic product= a measure of the size of an economy
expansion meaning
the process of increasing the size/target market of the business in order to increase revenue
what are the 6 main indicators of growth
-GDP
-GDP per capita
-PPP (purchasing power parity)
-literacy rate
-health (life expectancy + mortality)
-HDI (human development index)
GDP per capita definition
a broad measurement of average living standards or economic well-being
PPP definition
purchasing power parity = an economic theory of exchange rate determination, measuring prices at different locations
literacy rate definition
the proportion of the adult population that has the ability to speak read and write
health meaning
the state of being free from illness or injury
life expectancy meaning
the average period a person may expect to live
mortality definition
the state of being subject to death
HDI meaning
human development index, a country’s summary of achievements in social and economical dimensions
-health
-knowledge
-standard of living
implications of economic growth - globalisation (6)
-expansion in trade of goods/services between countries
-increase in transfers of financial capital across nations
-development of global brands
-shifts in production + consumption
-increased labour migration
-shifts in economic + political strength
implications of economic growth - result of emerging economies (6)
-urbanisation process continues to develop quicker
-industrialisation
-population growth
-per capita income growth (middle/working class)
-improve in workforce productivity
-technological innovation
implications of economic growth - employment patterns (3)
-rise in number of people seeking jobs
-productivity rises and income expands
-structural change in employment from primary, to secondary + tertiary
GDP per capita formula
= GDP/population
HDI limitations (1)
-takes no account of income distribution
international trade meaning
= the exchange of goods/services across international borders
import meaning
= goods that are made in one country and brought into another
export meaning
=goods that are made in a domestic country and sold abroad
stakeholder meaning
= an individual, group or organisation that has interest in the activities of a business
specialisation meaning
= when a business/entity focuses on one product or a limited scope of products so as to become more efficient.
competitive advantage meaning
=the ability of a firm to produce goods/services that are unique and have some form of superiority about them
comparative advantage meaning
= the ability of a country to produce goods/services at a lower opportunity cost than other firms
give one example of a specialised country
india
-specialises in IT
benefits to specialisation (2)
-increased productivity + output = reduced average costs + economies of scale
-increased productivity will lead to GDP growth + sale increase will boost economic growth
specialisation drawbacks (3)
- a country may become over reliant on one industry
- other countries may become cheaper in the same industry
-may suffer from diseconomies of scale due to lack of coordination/communication
diseconomies of scale meaning
when a company or business grows so large that the costs per unit increase
FDI meaning
foreign direct investment = an investment a firm or business makes to another in a different country
why do businesses prefer FDI over exporting ? (5)
-managers want to keep control over countries operations
-to protect intellectual property
-to be close to its customers
-reduce transportation costs
-trade barriers/political opposition
inward FDI meaning
=receiving investment from overseas
outward FDI meaning
=investing overseas
horizontal FDI
=producing the same product or services as is done in the home country
vertical FDI
=where a firm seeking to acquire materials or support for its own products of services
different forms of FDI (3)
-joint ventures
-strategic alliances
-mergers + acquisitions
how does vertical FDI allow businesses to grow ? (2)
-builds a new business in another country
-new jobs
how does horizontal FDI allow businesses to grow ? (1)
-buying an existing business + facilities
how does FDI benefit the host country ? (3)
-brings high paying new jobs
-brings new tech + creates new markets
-increases exports
what is migration ?
the movement of a person or people from one region to another
factors contributing to increased globalisation (8)
-trade liberalisation
-political change
-reduced cost of transportation + communication
-increased investment (FDI)
-migration
-structural change
-growth of labour force
trade liberalisation meaning
=the process by which international trade is made easier through a relaxation of the rules which govern it
benefits of trade liberalisation (6)
-more competitive markets
-creates business opportunities
-lowers prices and broadens range of the quality of goods/services
-diversifies risks + channels resources
-facilitates competition/investment
-increases productivity
political change benefits (3)
-now happens on a global scale
-less protectionist policies
-open trade between nations
benefits of transnational companies (3)
-cheap labour
-mass produce goods for a global market
-productive + high profits
benefits of increased investment (FDI) (1)
-increased GDP
drawbacks of increased investment (FDI) (2)
-can have a damaging effect on competition
-possible loss for domestic rivals
benefits of growth of labour force (2)
-helps drive global demand
-boosts number of businesses globally
joint venture definition
a commercial arrangement between two or more participants who agree to co-operate to achieve a particular objective.
protectionism meaning
involves protecting a country’s domestic industries, companies and jobs from foreign competition.
3 main methods of protectionism
-tariff
-import quota
-government legislation + subsidies
tariff definition
=tax imposed on a product when entering a country
quota meaning
= restriction of the actual quantity of good imported.
domestic subsidy meaning
reduction of costs for domestic firms, making them more internationally competitive
non-tariff barrier meaning
law and other restrictions on the type of goods imported into a country
push factor definition
factors/threats that force a business to expand overseas
pull factor definition
factors/opportunities that encourage a business to expand overseas
push factors (5)
-saturated domestic market
-low growth opportunities
-end of product life cycle at home
-need to diversify
-need to reduce risk
pull factors (6)
-attraction to new overseas markets in emerging industries
-opportunity to gain EOS
-new markets
-exploit competitive advantages
-ways to extend product life cycle
-risk spreading
why do businesses want to target international markets ?(5)
-reduce dependence on domestic market
-access faster growing markets + demand
-achieve economies of scale
-better customers located overseas
-build brand value, particularly global brands
2 main conditions that prompt trade
-push factors
-pull factors
outsourcing definition
=where a business function is contracted out to a third party
outsourcing benefits (5)
-improved focus on core business activities
-increased efficiency
-controlled costs
-increased reach (more access to facilities)
-greater competitive advantage
drawbacks of outsourcing (5)
-possible slower service
-breach of confidentiality
-lack of flexibility
-management difficulties
-instability (over reliance)
offshoring definition
= when a business relocates overseas
offshoring benefits (5)
-business growth
-access to staff
-greater availability
-reduced risk
-control
drawbacks of offshoring (7)
-communication issues
-cultural differences
-social barriers
-time zone differences
-security
-loss of intellectual property
-external factors
what factors do businesses need to consider when making assessment of a country as a market
PILEE
-political stability
-infrastructure
-levels of disposable income + growth
-exchange rates
-ease of doing business
political stability meaning
=how secure a government is and how strong the political framework supports the country
infrastructure meaning
= the physical systems that a country or business require to operate properly
levels of disposable income + growth meaning
= the total income an individual has available to spend after paying taxes/bills
ease of doing business meaning
=how accessible markets are for a business
what factors would a business need to consider when moving production (8)
-skills + availability
-natural resources
-governement incentives
-market conditions
-production costs
-risks
-location is in a trading bloc
-likely return on investment
reasons for mergers/joint ventures (5)
-risk spreading
-entering new markets
-acquiring national/international patents/brand names
-securing resources/supplies
-maintaining/increasing global competitiveness
what does SPICED stand for
strong
pound
imports
cheaper
exports
dear
appreciation meaning
= when the pound is stronger against another currency
depreciation meaning
= when a pound is weaker against another currency
low cost leadership meaning
= producing the same equality products as its competitors at a lower price
how may a business gain low cost leadership ? (3)
-good resource management
-efficient production methods
-waste minimisation
differentiation meaning
= producing unique product or giving a unique service
causes for increase in exchange rates (4)
- increasing demand for exports
-lower demand for imports
-increase in interest rates
-FDI into currency
factors affecting the significance of exchange rates depends on… (4)
- how much the business exports to other economies
-whether domestic businesses face strong competition
-how much a business relies on importing goods
-the PED
who wins from lower exchange rates ? (2)
-businesses exporting into international markets
-businesses earning substantial profits overseas currencies
who loses from lower exchange rates ? (2)
-businesses importing goods + services
-overseas businesses trying to compete in the industry
skill shortages meaning
= when there is a lack of workers with the right qualifications in the industry
what are skill shortages caused by (3)
-imbalance in the global economy
-many skilled jobs being replaced with machinery
-lack of qualification
negative impacts of skilled workers (3)
-higher labour costs
-increased training requirements
-harder to recruit
who is mostly responsible for skilled worker shortages ?
the government
what can be done to overcome skilled shortages - government (4)
-invest in vocational education
-provide firms + industries to offer more/better industries
-encourage inwards migration
-provide tax for firms to invest in training education
what can be done to overcome skilled shortages - businesses (4)
-raise wages + renumeration
-offer better training
-collaborate with other firms
-offshore activities with skill shortages
-outsource to specialist providers
benefits of internationalisation
- can give businesses access to larger market of customers, which can increase sales rev. + profit
-can reduce business risk incase demand in home market declines rapidly following a change in tastes + fashions
