(4.1) Globalisation

Question 1

What is an emerging market?

Answer 1

An economy with low to middle per person income

A nation of a nation whose economy mimics that of a developed nation but does not fully meets the requirements to be a classified as one

Tries to transition from a closed market to an open market

Question 2

Which countries are emerging markets? (Hint: The BRICS economy/ The MIST economy)

Answer 2

Brazil, Russia, India, China, South Africa

Mexico, Indonesia, South Korea, Turkey

Question 3

What are the advantages of merging markets?

Answer 3

• Investors like merging markets
• Better potential for returns
• First mover advantage
• They hope to invest early so that they benefit from rapid growth
• Related to increasing incomes and an expanding middle class

Question 4

What are the 2 implications of economic growth for individuals and businesses?

Answer 4

Trade opportunities for businesses - consumption may be growing and is likely that consumers have more disposable income.

Employment patterns - unemployment rates, labour cost and productivity are good indicators for businesses. High unemployment rates in a country may not be worth exporting products to, however, they may be good for factory work.

Question 5

What are employment patterns for growing economies?

Answer 5

Unemployment rates tend to fall

Employment patterns - unemployment rates, labour cost and productivity are good indicators for businesses. High unemployment rates in a country may not be worth exporting products to, however, they may be good for factory work.

Question 6

What is Trade Opportunities for businesses?

Answer 6

Consumption may be growing and is likely that consumers have more disposable income.

Question 7

What are the indicators of growth?

Answer 7

Gross Domestic per person (GDP) - A measure of economic activity
Literacy - educated employees
Health -
Human Develop Index (HDI) - eg life expectancy

Question 8

What is economic growth?

Answer 8

An increase in a country’s productive capacity

Question 9

What does a literate labour force offer?

Answer 9

They can work in white collar jobs and professions
They will make better Human Resources - can do more complex jobs and increased efficiency
They are successful and earn more - contributes more to the national income

Question 10

What is the equation for Net export?

Answer 10

Exports - Imports

Question 11

What is imports with examples?

Answer 11

Binging good and services from another country to the home county

Eg Foods: apples

Question 12

What is exports with examples?

Answer 12

Selling goods and services from the home country to other countries

Eg tourism: London

Question 13

What is the advantages and disadvantages of imports?

Answer 13

+fulfils the demand of goods and services that are lacking or not available in the home country
+increased competitiveness

• Excessive import can have a negative impact on the home country
• Businesses may use a country a a dumping ground for saturated products

Question 14

What is the advantages and disadvantages of exports?**

Answer 14

+creates more foreign income from the selling of home country products and increases the global presence of home country products and services
+benefits the home country since it increases the foreign income to the home country

Question 15

Why do we need to export and import?

Answer 15

• Countries have specific natural recourses and lack others
• Countries need foreign currency in order to grow
• Countries access wealth from customers in other countries
• Firms can get cheaper costs by importing raw materials
• Increases sales potential (first mover advantage)

Question 16

What is specialisation?

Answer 16

When a business or country concentrates on a product or task but produces them at a higher quality and cost

Question 17

What is the Foreign Direct Investment?

Answer 17

When an investment is made by a company or individual from one country to another

Eg a person buying a company in another country

Question 18

What is the advantages and disadvantages of Foreign Direct Investment?**

Answer 18

+Creates jobs resulting in higher household incomes
+Higher government tax revenue to provide more subsidies and grants for businesses
+Businesses can invest in infrastructure to lower transport costs
+Businesses bring technology and innovation to the country to encourage research and development

• High initial costs of moving and setting up
• Businesses may bring their own workers or capital intensive systems so new jobs wont be created
• Tax revenue may be lower due to MNCs having too much power

Question 19

What is globalisation?

Answer 19

The growing integration of the worlds economies (Goods and services are being traded around the world)

Question 20

What is Tariffs?

Answer 20

Tax imposed on imported goods

Question 21

What is Import Quotas?

Answer 21

Limits on quantity of goods that can be imported and exported

Question 22

What is the advantages of trade barriers?

Answer 22

Protect Jobs - Strong competition can cause unemployment
Protect infant Industries - Help domestic businesses gain EOS however governments have a poor record for identifying new industries with potential
Prevent dumping - Foreign producers sell products below cost
Raise Revenue - can be spent on improving living
Prevent the entry of harmful or undesirable goods - keep civilians safe
Improve the balance of payments - the gov may want to reduce their imports (country’s outflow) and increase there exports (country’s inflow)

Question 23

What is the disadvantages of trade barriers?

Answer 23

Retaliation from the opposing country ‘Tit for tat’

Question 24

What is protectionism?

Answer 24

When a country restricts trade to try and protect its domestic industries

May offer help to exporters

Question 25

What are the 8 factors contributing to increased globalisation?

Answer 25

Reduction of international trade barriers - the removal or reduction of restriction on the free exchange of goods between nations

Political Change - changes on the movement of goods and services/ level of protectionist measures used. However tensions with other countries may also affect trade

Reduced Cost of Transport and Communication -

Increased Significance of global companies -

Increased Investment Flows (FDI) - when a business makes an investment in foreign country which could lead to increased employment. Allows business access to global markets and reduction of reliance on one revenue stream

Migration - supply of low cost labour and high skilled labour which can lead to cost competitiveness and improved productivity

Growth of the Global Labour Force - Trading blocs are reduced or removed among the member states

Technology advancements- improved communications at a lower cost

Structural Change -

Question 26

What is domestic subsidies as trade barriers?

Answer 26

Giving financial support to domestic exporters or producers who have strong competition from imports.
This will allows domestic producers to provide lower prices
This allows domestic exporters to expand into foreign country’s

Question 27

What is government legislation for trade barriers?

Answer 27

Making sure that imported good meet strict requirements. Eg toys may have to meet strict safety requirements to be imported

Question 28

What is trading blocks?

Answer 28

A group of countries that have signed a regional trade agreement to reduce or eliminate tariffs, quotas and other protectionist barriers

Question 29

What are the advantages of trading blocs?

Answer 29

• Opportunities to expand into new markets
• Allows businesses to benefit from comparative advantage - cheaper and better quality products
• Free movement of goods…Enables firms to be cost competitive internationally…able to reduce prices without reducing profit margins
• Aligns international legislation making markets more efficient
• Access to larger market…benefiting from economies of scale…lower cost per unit

Question 30

What are the disadvantages of trading blocs for a business?

Answer 30

• Increased size of market means more competition : Constantly have to innovate and
invest to maintain competitiveness : Financial strain and potentially lower profits
• Less resilient to economic shocks (e.g. EU recession) : Will have a knock on effect to all
businesses/branches of business within the trading bloc : Significant fall in profits and
sales
• Firms may not get an agreement that suits them : Competitive disadvantage to other
multinational corporations (e.g. Higher costs with regulations or taxes) : Loss of global
market share

Question 31

What are the different types of trading agreements?

Answer 31

Customs Unions - Free trade between members but an agreed set of tariffs against non members
Common Markets - free trade and free movement of labour and capital
Preferential Trade Areas - Certain products from certain countries receive reduced tariff rates
Free Trade Areas - No trade barriers between countries
Single Markets - Free trade and common laws are adopted to harmonise standards and tax
Economic Unions -