4.1 - Globalisastion

Question 1

What is globalisation?

Answer 1

Globalisation is the increase in how interconnected the world is.

Glosbalisation has resulted in businesses operating in lots of countries across the world. They can be based anywehere, and can buy from and sell to any country.

Globalisation allows businesses to make streategic decisions about where to get raw materials from, as well as where to manufacture products.

Question 2

What is global trade?

Answer 2

Global trade means that firms and consumers in one country can affect the economies of other countries.

This leads to the growth of some less economically developed countries.

Question 3

What is GDP?

Answer 3

GDP (gross domestic product) is the total market value of goods and values produced within a nation over a period of time.

It is used to measure the economic performance of a country, an area, or the whole world.

Question 4

What is GDP per capita?

Answer 4

GDP per capita means the GDP is divided by the number of people in the country.

This can lead to fairer comparisons of the conomic performance of different countries.

Question 5

What does calculating the percentage difference in GDP allow?

Answer 5

Calculating the percentage difference in GDP or GDP per capita of a country from one year to the next lets you see how quickly the economy is growing.

Question 6

What are the main indicators of economic growth?

Answer 6

• GDP - the total market value of goods and values produced within a nation over a period of time.
• Literacy rate - the percentage of the population ages 15 and aboce who can read and write. An increasing literacy rate indicates economic growth.
• Health - the world health organisation (WHO) considers a number of indicators when assessing the level of a country’s health. An increasing level of health suggests that an economy is growing (gov spending more on healthcare)
• The human development index - (HDI) is a stastic that measures how developed people in a country are, based on life expectancy, years of schooling, average income. The higher a country’s HDI score, the higher its development level.

Question 7

Why is economic growth important for individuals and businesses?

Answer 7

When an economy is growing it means that there is increasing demand in the economy, and increasing output to meet the demand.

• A greater level of output leads to increased employment opportunities
• As people start earning more money, the demand for products increases, leading to increased sales

Question 8

What is an emerging economy?

Answer 8

An emerging economy is one that is fast growing, but is not yet fully developed.

Question 9

What are the most significant emerging economies?

Answer 9

BRICS: Brazil, Russia, India, China, South Africa

MINT: Mexico, Indonesia, Nigeria, Turkey

Question 10

What is international trade?

Answer 10

international trade is importing and exporting.

Question 11

What are imports?

Answer 11

Imports are products bought from overseas.

Imports increase the variety of goods and services available to firms and consumers in a particular country.

Imported products can often be cheaper than domestically produced ones.

Question 12

What are exports?

Answer 12

Exports are products sold overseas.

Businesses use exporting as a way to expand - benefiting from an increased market share.

Exporting can be the simplet and least risky way to access overseas markets.

Question 13

What is a competitive advantage?

Answer 13

A competitve advantage is something that allows a business to generate more sales or be more profitable than its rivals.

Question 14

What is specialisation?

Answer 14

Specialisation is when a firm focuses on producing just one product (or a very narrow range of products).

A business can gain a competitive advantage through specialisation.

Question 15

What are the advantages of specialisation?

Answer 15

• Specialisation improves the efficiancy of a business, since workers become highly skilled at making a particular product.
• Increasing efficency reduces the cost per unit, which allows the price to be reduced which can increase the profit margin.

Question 16

What are the disadvantages of specialisation?

Answer 16

• Specialised businesses will risk losing sales if theres a decrease in the demand for their product, and won’t have backup sources of revenue
• Specialisation can also increase the cost of training staff since new staff will need training

Question 17

What is Foreign Direct investment (FDI)

Answer 17

FDI is when a firm in one country invests in business in another country.

This can be by merging with or taking over an existing foreign business, opening an office or branch overseas, or starting up a new enterprise in another country.

Question 18

Is FDI horizontal or vertical growth?

Answer 18

Most FDI is horizontal - where a firm invests in a foreign business that is at the same stage of the production stage as the business in their home country.

FDI can also be vertical - where a firm invests in a foreign business that is in a different place in the supply chain to its original business.

Question 19

How can FDI help business to grow and increase sales?

Answer 19

• FDI gives a firm access to new markets which can increase sales as there are more people to sell to.
• FDI can allow a business to take advantage of skilled local labour in the foreign country which can increase productivity.
• Operating in a foreign country will allow a firm to gain first hand knowledge about a nations legal system, consumer tastes, and markets.
• Investing in a foreign business can help a business to overcome international trade barriers, such as tariffs.

Question 20

What are international trade barriers?

Answer 20

International trade can be restricted by international trade barriers, which are things that make trade between different countries more difficult or expensive.

This includes complicated procedures and regulations, tarrifs, and quotas.

Question 21

What are the main causes of increased globalisation?

Answer 21

1. Trade liberalisation
2. Political change making countries more open to trade
3. Economic development leads to structural change
4. More people in the world are able to work
5. People are more likely to migrate
6. Firms are investing more in foreign countries
7. There has been an increase in global companies
8. Transport and communication have become cheaper

Question 22

What is trade liberalisation?

Answer 22

Trade liveralisation is the reduction and removal of international trade barriers and restrictions.

Increased trade liveraliastion has led to an increase in international trade and globalisation.

Question 23

What are the advantages of trade liberlisation?

Answer 23

• Any raw materials that a firm imports will become cheaper, lowering a firms costs.
• Exporting goods becomes easier and cheaper, so there are more markets for firms to expand into.
• Consumer choice is increased to include products from all over the world.
• Increased competition between firms in different countries will mean that products are cheaper for consumers as firms compete for sales.

Question 24

What are the disadvantages of trade liberlisation?

Answer 24

• Removal of trade barriers will reduce the cost of imports, meaning domestic businesses can be forced out by the increased imports if they are not competitive, which can cause unemployment.
• Some feel that trade liberlisation is leading to a removal of national cultures.

Question 25

What impact does political change have on globalisation?

Answer 25

Political change can make countries more open to trade.

This leads to more trade with countries, and so increases globalisation.

Question 26

What is protectionism?

Answer 26

Protectionism is when a government protects domestic businesses and jobs from foreign competition.

Question 26

What are the different industries contained in the structure of a country’s economy?

Answer 26

Primary industries - concerned with obtaining raw materials, such as agriculture and mining

Secondary industries - manufacture goods from those raw materials

Tertiary industries - services such as financial and health services

Quarternary industries - knowledge based services such as IT and scientific research

Question 27

What are the different ways of protectionism?

Answer 27

1. Tarrifs and quotas - a tarriff is a tax that has to be paid when certain products are imported into a country, a quota puts a limit on the volume of particular products that can be imported into a country in a time period.
2. Government legislation - trade sanctions restrict trade within a certain country.
3. Domestic subsidies - susm of money provided by the government to domestic firms in a certain industry.

Question 28

What are trade blocs?

Answer 28

Trade blocs are associations between different governments to promote and manage trade for a particular region.

Question 29

What are the main trade blocs?

Answer 29

• NAFTA (north american free trade agreement): Canada, mexico, USA
• ASEAN (association of southeast asian nations: made up of 10 countries including thailand, malaysia, indonesia
• EU (european union): made up of 27 european countries

Question 30

What are the advantages for a business of operating inside a trading bloc?

Answer 30

• The removal of trade barriers might mean that a business within that country becomes the cheapest supplier for other countries in the bloc, leading to demand and sales.
• Fewer regulations between members of trading blocs can mean it’s easier for businesses within the bloc to obtain materials, labour and capital
• As a trading bloc expands, firms have an expanding market for their products
• Greater competition from within the bloc can result in firms being more efficient

Question 31

What are the disadvantages for a business of operating inside a trading bloc?

Answer 31

• When a country becomes part of a trading bloc, it can become more expensive to import products from countries not in the bloc
• Small firms in a country that have just joined a trading bloc may be forced out of busiensss because of competiton from larger firms elsewhere in the bloc
• A business may find that it needs to adjust some of its operations in order to comply with regulations within the bloc