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Business Paper 1 > 4.1 Globalisation > Flashcards

4.1 Globalisation Flashcards

1
Q

What are the implications of economic growth for businesses?

A

New export opportunities
Offshoring production
Increased domestic competition

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2
Q

How does economic growth foster new export opportunities?

A

Markets for luxuries grow as countries now have a ‘middle-class’, offering export opportunities to UK businesses as many specialise in luxury goods.

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3
Q

How does economic growth foster offshoring production?

A

Infrastructure and skill levels of populations improve through more investment in education.
Developing economies become favourable locations for production due to low cost (land and wages).

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4
Q

How does economic growth foster increased domestic competition?

A

Countries beginning to export to UK lead to greater competition at home for UK businesses.

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5
Q

What are the implications of economic growth for individuals?

A

Rural to urban migration
Increased need for managers, expanding the middle-class
Increasing skill levels

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6
Q

What are the four main indicators of growth?

A

GDP per capita
Literacy
Health
HDI

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7
Q

How does Gross Domestic Product per capita indicate economic growth?

A

If earnings increase, consumption is likely to increase, driving business activity and growth to create a virtuous circle.

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8
Q

How does literacy indicate economic growth?

A

As education is more widely available, literacy rates should improve. This helps to create a more productive workforce.

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9
Q

How does health indicate economic growth?

A

Increasing life expectancy indicate economic development and helps to ensure a healthier workforce, capable of working productively for more years.

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10
Q

How does Human Development Index indicate economic growth?

A

Health, education and economic measures give a good overview of development. Higher score shows greater development.

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11
Q

What are the main exports to the UK?

A

Foreign brands that add choice.
Goods and services no longer mass produced in the UK.
Materials and components used by UK businesses produced cheaper and better quality abroad.
Services such as tourism import services from foreign hotels.

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12
Q

How does business specialisation foster competitive advantage?

A

Helps chances of using Porter’s differentiation or cost leadership strats.
Less machinery needed
Less training required (multi-skilling)
Repetition leads to greater productivity

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13
Q

How does outward FDI foster business growth?

A

A UK business buys assets abroad in the form of:
Production facilities
Retail outlets
Takeovers

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14
Q

What are the benefits of outward FDI?

A

Avoids problems involved in exporting.
Avoids transport costs.
Avoids trade barriers.
Gives access to natural resources.
Lower operating costs.

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15
Q

What are the eight main factors that contribute to increased business globalisation?

A

Trade liberalisation.
Political change.
Reduced cost of transport and communication.
Increased significance of TNCs.
Increased investment flows (FDI).
Migration.
Growth of global labour force.
Structural change.

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16
Q

What opportunities arise from trade liberalisation?

A

Companies reliant on imported materials and components will enjoy lower costs, allowing them to drop their prices and be more competitive.
Bilateral nature of trade agreements, liberalisation can lead to increased export opportunities with removal of barriers in other direction.

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17
Q

What threats arise from trade liberalisation?

A

Imports into a domestic market increases competition for domestic firms. The most efficient survive.

18
Q

How can political change lead to increased globalisation?

A

A major political change that led to the rise of globalisation was the Chinese govt’s decision to open their economy to foreign investment.
Donald Trump’s policy statements and Brexit suggest some political decisions may slow globalisation.

19
Q

How can reduced cost of transport and communication lead to increased globalisation?

A

Stable or falling oil prices.
Technological developments make engines more fuel-efficient.
Technological developments cause economies of scale as transport can happen on a larger scale.
Internet and fibre-optic cables criss-crossing the world revolutionise worldwide communication.

20
Q

How has the increased significance of TNCs contributed to increased globalisation?

A

TNCs more likely to be able to select the best country to operate in while reaching wide numbers of target markets.

21
Q

How has increased investment contributed to increased globalisation?

A

Communication flows makes cross-border financial transactions easier.
More investment capital flowing into a wider range of countries.

22
Q

How has migration contributed to increased globalisation?

A

Transport has become cheaper, making migration more feasible, stimulate economic growth.
Migrants tend to be proactive, determined, hard-working and relatively well-educated.

23
Q

How has the growth of the global labour force contributed to increased globalisation?

A

Sometimes businesses move to where they can find the right staff so UK businesses offshore functions, especially manufacturing as labour costs are lower.
UK businesses have recognised the benefits of recruiting staff from abroad to work in the UK.

24
Q

How has structural change contributed to increased globalisation?

A

As economies develop, their industrial structure changes, moving from agriculture towards manufacturing and then services.

25
Q

What are the three main factors involved with protectionism?

A

Tariffs
Import quotas
Government legislation
Domestic subsidies

26
Q

How do tariffs increase protectionism?

A

Tariffs drive up the price of imports, making them seem more expensive thus less attractive to customers, so consumers buy from domestic producers instead of importers.

27
Q

What are the benefits of tariffs?

A

Help businesses survive
Raise tax revenues

28
Q

What are the drawbacks of tariffs?

A

Pushes up prices, reducing consumers’ ability to buy, reducing standards of living.
Help inefficient firms survive, potentially harming competitiveness. Far greater incentive to improve without tariffs to fall back on.

29
Q

How do import quotas increase protectionism?

A

Scarce supply raises the price of imports through the price mechanism, making consumers buy from domestic producers.

30
Q

What are the benefits of quotas?

A

Domestic firms face less competition, improving their competitiveness, improving profit and job security.

31
Q

What are the drawbacks of quotas?

A

No extra tax revenue.
Pushes up prices domestically for consumers.

32
Q

How does government legislation increase protectionism?

A

Changes in laws relating to safety or environmental impacts can act as a barrier to imports which may now fall foul of the new laws, preventing their sale.

33
Q

How does domestic subsidies increase protectionism?

A

Actively support domestic firms’ competitiveness with foreign rivals, by reducing the cost of producing domestically

34
Q

What are the benefits of paying subsidies?

A

Stimulate demand, perhaps allowing struggling businesses to boost order books, allowing investment in more efficient production.
Positive effect on the balance of payments by reducing imports and boosting exports.

35
Q

What are the drawbacks of paying subsidies?

A

Artificially inflating profit margins of inefficient businesses can prevent them pushing for efficiency gains that would allow them to compete without the subsidies.
Subsidies must be funded meaning the government must increase taxation, punishing firms in industries where no subsidies are provided.

36
Q

What are the three main trading blocs?

A

EU
ASEAN
NAFTA

37
Q

What is the EU?

A

The European Union and the single market.
Total population over half a billion relatively affluent consumers.

38
Q

What is ASEAN?

A

Association of Southeast Asian Nations
Ten smaller Asian countries whose success has come through feeding the manufacturing of local giants China, Japan and S Korea

39
Q

What is NAFTA?

A

The North American Free Trade Agreement
Canada, Mexico and the USA.
Troubled future as the USA seeks to prevent low-cost Mexico ‘taking American jobs’.

40
Q

What are the advantages of trading blocs to businesses?

A

Free movement of goods between members gives potential to create a large ‘single market’.
External tariff walls insulate the members from competition.
As trade grows between neighbours encourages govts to provide infrastructure.
Advantages multiply with free movement of goods AND labour.

41
Q

What are the disadvantages of trading blocs to businesses?

A

Competition increases because of freer trade.
New rules and regulations may be agreed to create a single market, including minimum wage rates, increasing bureaucracy.
Within geographically proximate blocs common factors may become common problems.
Availability of easily accessed neighbouring markets may reduce enterprise in relation to distant but dynamic ones such as China.

Business Paper 1 (8 decks)

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