4.1 globalisation Flashcards
HDI
human development index - is an attempt to provide a single measure of economic developments encompassing income, education and health.
shows the well rounded picture of a countries economic developments and a good tool for businesses to use for assessing a country
indicators of growth
GDP per capita
Literacy
Health
HDI
GDP per capita
is a measure of the total output of a countries economy.
implications of economic growth for businesses
new export opportunities
offshoring production
increased domestic competition
Why is trade necessary?
as countries trade in products they specialise in, and trade for products that those countries do not produce domestically. The global economy is more productive as a whole.
Imports definition (advantages)
are products/services produced abroad and consumed domestically
reduced costs and offering more choice to consumers
Exports
Are products and services that are produced domestically and consumed overseas
offers businesses the chance to increase sales, to achieve major growth enabling them to enjoy economies of scale. It also can spread risk
Foreign direct investment
FDI - Occurs when a business purchases non-current assets in another country. FDI can flow inward and outward
Outward FDI benefits
Avoiding problems involved in exporting Avoiding transport costs Avoiding trade barriers Access to natural resources Lower operating costs
comparative advantage
countries that specialise in producing products that they are good at and gain advantages and investments for it - UK wool
business specialisation
choosing to produce only one product or in only one market - links with porters differentiation or cost leadership strategies
how can business specialisation boost efficiency and competitive advantages?
For a business choosing to produce one product, fewer machines will be needed. Costs with training and funding multiple machines will be lower. This means that unit costs are also lower and you can gain advantages with competitive pricing.
Globalisation
Is the trend towards closer ties between economic and businesses within the global economy.
what is trade liberalisation?
Involves the removal of trade barriers between agreement of two countries
what are trade barriers
Tariffs - tax imposed on imports
Quotas - businesses limit on the quantity they are allowed to sell in foreign countries
Regulations - rules can be used to make it harder for imports to enter a country.
FACTORS CONTRIBUTING TO INCREASED GLOBALISATION
political change - new leaders = new laws
Reduced cost of transport/communication - encouraging more imports
Increased significance of transnational corporations - businesses starting up in other economies
Increased investment - banks
Migration - seeking new jobs
Growth of the global labour force - businesses using offshore production
Structure change - exports boosting host countries economies (china)
Opportunities of trade liberalisation
lower costs, allowing them to reduce prices and compete with cheaper import rival.
Can lead to increased export opportunities with removal of barriers.
Threats of trade liberalisation
allowing imports into domestic markets increases competition.
Trading blocs definition
is a group of countries that sign up to free trade between them, protected by a tariff wall against imports from outside.
Attraction of trading blocs
- harmonisation of laws allows one product to be made that meets legal requirements of all countries in bloc.
- Countries working together in a bloc have more power over non member countries than they would if they were single.
BRICS
brazil / russia / india / china / south africa
MINT
Mexico / Indonesia / Nigeria / Turkey
NAFTA
USA/Canada/Mexico - Mexico has the ability to attract companies with its low cost manufacturing base which they can import freely to the world’s largest domestic market - USA.
positives and negative of trading blocs
It can be either beneficial or not depending on the business
Positive
Free movement of goods between members
As trade grows between neighbours, it becomes necessary for governments to provide infrastructure support
Negatives
Competition increases due to freer trade
To create a single market, new rules may be agreed, including minimum wage rates
