4.1 - Global Business Flashcards
Globalisation
Increasing interconnectedness of economies, businesses and cultures worldwide, leading to greater trade and investment between countries
Key features of globalisation
- Increased international trade
- Greater Foreign Direct Investment
- Expansion of Multinational Corporations
- Advancements in technology and communication
- Labour migration
Factors contributing to globalisation
- Trade liberalisation
- Containerisation
- Growth of Multinational Corporations
- Advancements in technology
Advantages of globalisation
- Access to larger markets
- Lower production costs
- Greater consumer choice
- Job creation
- Transfer of knowledge and technology
Disadvantages of globalisation
- Small firms may struggle to compete with large Multinational Corporations
- Job losses in developed countries
- Exploitation of workers
- Environmental damage
- Economic dependence
Emerging economy
Country experiencing rapid industrialisation, economic growth and increasing global trade
Examples of emerging economies
- Brazil
- Russia
- India
- China
- South Africa
Advantages of operating in an emerging economy
- Lower labour costs
- Expanding consumer markets
- Great potential for joint ventures and acquisitions
Disadvantages of operating in an emerging economy
- Political and economic instability
- Cultural differences
- Weak infrastructure
Human Development Index
Measure to assess a country’s overall development based on health measured by life expectancy at birth, education measured by average years of schooling and standard of living measured by Gross National Income per capita
Advantages of the Human Development Index
- Holistic measure
- Easy to compare
- Focus on human welfare
Disadvantages of the Human Development Index
- Ignores inequality
- Doesn’t include environmental factors
- Doesn’t take into account income distribution
Advantages of international trade
- Increased competition
- Economies of scale
- Can create jobs reducing poverty
Disadvantages of international trade
- Environmental impact
- Overdependence on foreign markets
- Structural unemployment as patterns of trade change
Exports
Goods and services produced in one country and sold to buyers in another country
Imports
Goods and services bought from foreign countries for domestic consumption
Specialisation
When individuals, business or countries focus on producing a limited range of goods or services that they are most efficient at producing
Advantages of specialisation
- Increased efficiency
- Economies of scale
- Increased innovation and higher quality products
Disadvantages of specialisation
- Overdependence on one industry
- Job losses in some sectors
- Supply chain disruptions
Foreign Direct Investment
When a business or individual from one country invests in a business or assets in another country
Advantages of Foreign Direct Investment
- Boosts economic growth
- Technology transfer
- Improves infrastructure
Disadvantages of Foreign Direct Investment
- Loss of domestic control
- Profit repatriation
- Risk of exploitation
Free trade
Exchange of goods and services between countries without tariffs, quotas, or other trade barriers. It allows businesses to import and export products without government restrictions
Advantages of free trade
- Greater consumer choice
- Encourages competition and innovation
- Encourages specialisation
Disadvantages of free trade
- Domestic firms may struggle
- Job losses in some industries
- Environmental concerns
World Trade Organisation
International organization that regulates and promotes global trade by ensuring that trade flows smoothly, predictably, and freely
Protectionism
Government policies that restrict international trade to protect domestic industries from foreign competition
Methods of protectionism
- Tariffs
- Import quotas
- Subsidies
Tariff
Tax or duty placed on imported goods, making imported goods more expensive in order to reduce foreign competition and protect domestic industries
Import quota
Government-imposed limit on the quantity or value of a specific good that can be imported into a country over a set period
Subsidies
Financial support provided by the government to businesses, industries, or individuals to encourage production, reduce costs, or make goods and services more affordable
Advantages of protectionism
- Protects domestic jobs
- Infant industry protection
- Protection against import dumping
Disadvantages of protectionism
- Higher prices for consumers
- Retaliation from other countries
- Extra costs for exporters
Trade bloc
Group of countries that agree to reduce or eliminate trade barriers between them, such as tariffs, quotas, and import restrictions. This helps to increase trade and economic cooperation among member nations
Advantages of trade blocs
- Increased trade
- Foreign Direct Investment
- Greater competition means lower prices for consumers
Disadvantages of trade blocs
- Exclusion of non-members
- Trade diversion
- Loss of sovereignty
European Union
Political and economic union of 27 European countries that work together to promote economic growth, trade, and political cooperation
Four freedoms of the European Union
- Free trade in goods
- Mobility of labour
- Free movement of capital
- Free trade in services
Main export partners for the UK economy
- United States (16.1)
- Germany (8.8%)
- Netherlands (7.7%)
Main import partners for the UK economy
- Germany (12.5%)
- United States (10%)
- China (9.8%)
