4.1 Globalisation Flashcards
Name 3 implications of economic growth for businesses
-new export opportunities -> as developing countries see incomes ^ -> UK businesses may find new markets to export to
-offshoring production -> many UK manufacturers -> closed uk factories -> re-opened in developing countries -> lowers costs ->
-^ domestic competition -> as countries develop -> ^ capital -> able to export to UK -> ^ competition for UK businesses
Definition of offshoring
moving business function -> another country
-lowers costs
Implication of economic growth for individuals
-rural -> urban migration -> agricultural move to manufacturing jobs
-> ^ skill levels within economy
What is GDP per capita
measure of total output of a countrys economy
What is purchasing power parity
factors in differences in cost of living
What is the human development index
determines quality of development through life expectancy, education, income
Name 4 indicators of growth
-gdp per capita -> ^ levels of income pp -> clear indicator of development -> earning ^ -> spending ^
-literacy -> ecnomic development -> ^ literacy rates -> ^ producitivity -> ^ quality of products -> betters economic development
-health -> as economy ^ -> health ^ -> better treatment for diseases
-human development index -> education, income, life expectancy ^ -> allows for ^ growth
What is an emerging economy
where country is becoming a developed nation driven by ^ economic growth & rapid expansion of trade, investment
Give 3 examples of emerging economies
-india
-china
-brazil
Explain 3 ways as to how emerging economies provide opportunities for businesses
->enjoy ^ rates of economic growth
-have rising disposable incomes -> stimulates demand for products
-suitable locations for international operations -> eiether as location for production
Name 2 ways emerging economies are a threat for businesses
competitive pressure -> Emerging economies -> lower labor and production costs, can offer lower prices than developed economies. -> intense competition -> can erode market share and profitability for businesses not able to adapt and remain competitive.
Market growth potential: Emerging economies have ^ pop growth, ^ middle class segments, ^ purchasing power -> attractive for ^ sales oppo -> but differing business practices, cultures -> lost market share -> competitors
What is globalisation
growth of international trade that has made an increasing number of markets global rather than national
What is an emerging economy
an economy in the process of rapid growth and industrialisation
Why will India end up having the highest growth rate not China
-> increases in productive capabilities
-> allowed country to diversify exports into more complex products -> vehicles, electronics
-> gains in economic complexity -> ^ incomes
Name 2 ways middle income economies have led to significant changes in he wolrd
-utilised natural resources -> develop their economies
-utilised their human resources -> ^ supply of goods, services
Name 3 ooporuntiies does trading provide for businesses
-access to raw materials
-cheaper production
-increasing wealth
How does trade lead to increased profits for businesses
-Expanded customer base: it allows businesses to reach new markets -> expand their customer base -> ^ sales -> ^ profit
-access to resources -> cheaper & wider access to resources -> lower production costs -> ^ competitiveness
Implications of economic growth for individuals
-> ^ standard of living
-> ^ income -> ^ spending on luxuries
-> better quality of life
-> may sub leisure for work -> changes employment patterns
Why is UK growth declining in comparison to emerging economies
-UK manufacturing sector has declined as businesses -> manufacturing in emerging economies -> lower labour costs, access to raw materials
How is Literacy rate defined?
The Percentage of adults (over 15) that can read and write
what happens when an Emerging Market is experiencing an increase in average income?
Likely due to the middle classes expanding
This increase in income allows consumers to spend more on both imports and domestically produced goods and services.
Buying more domestics goods encourages the growth of domestic firms –> increased market power –> compete internationally
Consumers may also buy more imported goods and services –> increasing their profitability and making emerging markets more attractive to new entrants.
What Does the Initialism BRICS stand for?
Brazil
Russia
India
China
South Africa
What does the Initialism MINT stand for?
Mexico
Indonesia
Nigeria
Turkey
How does Economic growth create trade opportunities and what is the implications for both individuals and businesses?
economic growth
-> consumption is also growing
-> ^ disposable income
-> ^ demand
income elastic demand (customers less sensitive to price change as have more money) -> ^ profit
goods/ services can be produced domestically or imported from abroad, creating many opportunities for trade.
Name the 4 positive impcats economic growth has on businesses
- ^ profits
- customers have more income elastic demand
-^ trade
-lower costs
Name the 3 positive impacts economic growth has on individuals
- decreased unemployment
-^ income
-^ standard of living
How does Economic growth alter existing employment patterns and what is the implications for both individuals and businesses ?
economic growth -> ^ employment -> ^ income -> ^ disposable income -> ^ demand -> ^ sales
What are 4 indicators of growth?
GDP per Capita
literacy
Health
Human Development Index
How is GDP per capita used as an indicator of a countries growth
look at it over a period of time to see improvements
-> ^ GDP -> ^ standard of living
How is literacy used as an indicator of a countries growth?
literacy rate = % of adults that can read & write
quality of literacy determines quality of workforce -> how productive they are & customers
How is Health an indicator of a countries growth?
assessment of health includes : life expectancy, access to healthcare & water
- ^ health -> ^ quality workforce
What is the Human Development Index (HDI)?
combines statistics on life expectancy, education and income for a particular country
assess countrys ppl & their skills
What is the gross national income per capita
measures the wealth of the population
How is HDI an useful to a business?
-allows business to investiate potential market/ location for investment
-e.g. luxury businesses -> sell to countries with ^ life expectancy & ^ GNI -> so customers can afford products
What is comparative advantage
theory that a country should specialise in products and services that it can produce more efficiently than other countries.
How is competitive advantage defined?
idea that a business should specialise in any area where it can perform better than its competitors.
How is Exports defined?
goods/ services sold by domestic business -> ppl in other countries
How is Foreign Direct Investment defined?
Investing by setting up operations or buying assets in businesses in another country.
How is Imports defined?
Goods and services that are bought into one country from another.
How is international trade defined?
Exporting (selling abroad) and importing (buying from abroad).
What is specilisation
when business focuses on producing a particular good/ service (limits scope of products) -> ^ efficiency -> lowers cost p.unit
How are Tariffs defined?
Taxes that are imposed on imports.
Give an example of outward fdi and inward fdi
outward -> when british business buys assets abroad
inward -> when foreign company buys british assets (property, building factories)
Name the 5 benefits of FDI
-avoiding problems involved in exporting -> don’t have transport issues if product is made in country its sold
-avoid transport costs
-avoid trade barriers -> if product is made in country its sold - no tariffs/ quotas
-access to natural resources
-lower operating costs -> lower labour & land costs
Name 3 ways speciliasation can boost efficiency
-focus on producing same product
-> fewer machines needed - lowers costs
->lowers training costs -> no need to multi skill staff
-> more productive -> FW Taylor - ‘practice makes perfect’ -> repeating task -> ^ quickness
How can efficiency gains created by specialisation -> competitive advantage
- ^ efficiency -> lower unit costs -> lower selling price -> ^ compeitiveness -> ^ sales
or keep price same -> ^ profit margins
How is Globalisation defined?
The growing integration of the world’s economies.
How is Transnational or multinational companies defined?
Companies that own/ control production/ service facilities outside the country they’re based in
What is isolationism
when a nation puts interests of domestic business first by imposing trade barriers to hamper imports
What are some Factors contributing to Globalisation?
Reduction of international trade barriers/trade liberalisation
political change
Reduced cost of transport and communication
Increased significance of global (transnational) companies
increased investment
Migration
growth of labour force
structural change
How does Reduction of International Trade Barriers/ Trade Liberalisation contribute to Globalisation?
-WTO set up Free Trade Agreements (FTA) -> ^ volume of international trade as businesses can sell in foreign markets without penalties
-trade liberalisation is the removal of trade barriers; tariffs, quotas, regulations to ^ trade
-benefits countries that rely on imported materials -> lower costs -> reduce prices
-can ^ export opportunities
How does Reduced cost of Transport and Communications contribute to Globalisation?
transport costs cheaper -> improvements in international transport networks
Modern technology -> allows ppl to work at home or a location of their choosing
internet allows consumers to buy goods online from businesses form around the world
Containerisation –> ( shipping yard containers) flexible transporting system ( ship, lorries and trains) -> reduced transportation costs
How does Increased Significance of Global (transnational) Companies contribute to Globalisation?
They makes significant contributions to world GDP and represent 2/3 of global exports
-> developing countries get more money to improve and MNC’s will continue to grow and contribute even more to to the world’s GDP
How does Migration contribute to Globalisation?
Migrants import their cultures & therefore goods from their home countries e.g. Polish shop in the UK
they provide low-cost labour -> lower costs -> competitive adv in overseas markets -> ^ sales
large proprtion o money earned -> sent back to birth country, -> spent by families -> generates demand in these countries -> helps TNCs profit ^
Some migrants are highly skilled -> can fill ‘skills gaps’ -> contributing to businesses & national income
How is Dumping defined?
Where an overseas firm sells large quantities of a product below cost in the domestic market.
How does Political changes contribute to Globalisation?
After the death of Chairman Mao in 1976. moved away from communism, private ownserhip of businesses became allowed
then China became a member of the WTO -> access to rich western markets -> allowing China’s economy to boom
How does Increased Investment Flows contribute to Globalisation?
FDI spreads business activity, job creation and wealth all over the globe.
FDI also allows businesses to penetrate markets where trade barriers exist, countries are more likely to welcome foreign business build a factory than one that just wants to sell products
How does the Growth of the Global Labour Force contribute to Globalisation?
companies are now utilising global labour forces rather than local/ national -> cheaper
-offshore production -> decreases costs
-recruit from abroad to fill skill shortages
How does Structural Change contribute to Globalisation?
developed countries have a lot more tertiary sector industry, -> globalisation as more money is available for investment as usually service-based jobs grant a higher return.
What is an embargo
A complete ban on international trade – usually for political reasons.
What is a tariff
taxes on imported goods -> ^ price, aiding sales of domestic goods
What are quotas
physical limits on the quantity of imported goods
-once limit is reached customers have to buy from domestic products
What are regulations
rules, systems put in place to make it harder for imports to enter country
How is Protectionism defined?
An approach used by a government to protect domestic producers by making it harder fr foreign countries to export to ur country
-opposite of free trade
Name the 3 types of trade barrier
-quota
-tariff
-regulations
How do tariffs negatively impact imported products
-place a tax on them -> ^ price -> reducing competitiveness -> harder to compete with domestic firms
Give 2 scenarios when governments use tariffs
-to protect declining industries -> tariffs can slow decline -> giving them more time to deal with issue
-to protect ‘infant’ industries -> if domestic firms are too small to benefit from EconOScal -> tariffs prevent foreign firms killing domestic businesses before they have chance to mature
Give 3 benefits of tariffs
-helps domestic firms survive
-protect businesses that rely on domestic firms for trade (suppliers)
-^ tax revenue -> ^ gov spending
Give a drawback of tariffs
-^ prices -> decreasing customers ability to buy product -> decreasing standard of living
Name 2 benefits of quotas
-decrease compeitition for domestic firms
-prevents unemployment
Name 2 drawbacks of quotas
-^ prices domestically for consumers
-no extra tax revenue is gained by gov
How can legislation act as a form of protectionism
reduce imports by having strict regulations and specifications which products must meet.
may not be allowed in if they dont meet cultural/ environmental standards
Name the 4 aspects of protectionism
-tariffs
-quotas
-regulation, legislation
-domestic subsidies
What is a subsidy
payment made by government to a business producing certain product that gov wishes to support
How are domestic subsidies a form of protectionism
they actively support domestic firms -> can reduce unit costs -> ^ margins -> decreasing sell price
Name a benefit of subsidies
-stimulate demand
Name 1 disadvantages of subsidies
-gov must ^ taxation to fund subsidies
