4.1 Globalisation Flashcards
What are the features of emerging economies?
- Rapid industrialisation
- have potential to become developed countries
- faster long term economic growth
- many still in poverty with economic growth taking many out.
- businesses struggle to access global markets.
What are the perceived business threats from emerging countries?
- Large pool of labour and cheap labour = comp prices
- undervalued protection of brand and other intellectual property (fake goods)
- state subsidy of industry to make them more competitive globally
What are business opportunities in emerging economies?
- Growing number of educated middle class consumers = increase spending
- cultural shifts - higher demand for personal products, private and healthcare
- demand for infrastructure and other products and services from developed economies
- source of high skilled labour but low cost
- great potential for joint venturer.
What is a joint venture?
2 businesses came together to share resources
What is an acquisition?
Takeover more than 50% of the business
What is economic growth?
Increase in a countries productive capacity, usually measured using GDP
What are the BRICS countries?
Brazil, Russia, India, China, South Africa
What are the MINT countries?
Mexico, Indonesia, Nigeria, Turkey
What are the main effects of globalisation?
- Expansion of trade between countries
- increase in transfers of financial capital across national boundaries
- global brand
- production and consumption shifts
- labour migration
- shifts in economic and political strength
Why are emerging economies likely to continue having high rates of growth?
- Urbanisation process continues to develop quicker
- industrialisation - especially in east Asia and south Africa
- population growth = large pool of labour
- per capita income growth rise of middle classes and consumer society
- workforce continually improves skills and be more productive
- technological innovation in many emerging countires
What are employment patterns?
- changes in migration, working women, multi-jobs, home working
- moving away from agriculture
- structural change in employment from primary to tertiary sectors
- increase service sector as incomes rise
What are the 6 indicators of economic growth?
- GDP
- GDP per capita
- PPP
- health
- literacy
- HDI
What is international trade?
Exchange of capital goods and services across international borders or territories
What factors need to be considered when trading internationally?
- exchange rates
- tariffs
- stage of the econ cycle abroad and here
- transport of goods
- external shocks
- international competitiveness
- time zones
- cost
- freight shipping in bulk
- customs
- legislation
What is an import?
Goods that are made in specific countries and bought in another country
What is an export?
Goods that are manufactured in a country and sold abroad
What is specialisation?
Comes from the division of labour - workers specialise in specific / particular productive activity
What is a comparative advantage?
The ability of a country to produce goods and services at a lower opportunity costs than other firms or individuals can be found through specialisation
What is a competitive advantage?
Advantage over competitors through differentiation/cost advantage. Allows businesses it achieve a higher position in the market
Benefits of specialisation?
- increased productivity and output
- reduced average costs
- economies of scale
- comparative advantage over next best country
- GDP growth
- economic growth
- increasing sales
Drawbacks of specialisation?
- over reliant on one industry
- harder to compete (other countries become cheaper)
- DEOS
- lack of communication
- coordination
What is FDI (foreign direct investment)?
The purchase of a foreign company or setting up production in another country. It is the movement of cash from one country to another via a business venture
How can FDI occur?
- through a new factory una another country
- through acquisition or a merger with a foreign country
- through investment in an existing foreign country
What is greenfield/vertical FDI?
Build a completely new business in another country
Eg a MacBooks processor is built in LA and the main body in Taiwan
What is brownfield/horizontal FDI?
Same production activity in multiple countries
Benefits of FDI to nations?
- brings jobs and employment
- employees have disposable income
- boost to the economy known as the multiplier
- new tech and new markets
- increases exports
What is trade liberalisation?
Removing barriers to trade. Process by which trade is made easier through a relaxation of rules which govern it
What are the benefits of trade liberalisation to businesses?
- Diversified risk and channels resources to where returns on investment are the highest
- cheaper raw materials
- larger market
- competition, investment and increased productivity
What are the features of globalisation?
- Goods and services being traded
- People can live and work in any country of choice
- high level of interdependence
- capital flows freely between countries
What is the reduction of international trade barriers?
Trade liberalisation = process by which international trade is made easier, reduction in tariffs and quotas
Benefits of trade liberalisation?
- Consumes can access cheaper products
- reduces cost of raw materials
- larger range of goods
- Broader quality
- diversifies risk
- opens up competition
- increase investment
- Increase productivity
- promote innovation
- lower prices (possibly)
Drawbacks of trade liberalisation?
- Squeezed profit margins
- Employment created but is mostly temporary
- pollution - carbon emissions
- over cultivation
- competition may increase
- developing nations can become economically dependent on developed economies
What are the factors contributing to increasing globalisation?
- trade liberalisation
- political change
- reduced cost of transport communication
- Increased significance of transnational company’s
- increased FDI
- migration
- growth of Labour force
- structural change
How does the cost of transport and communication affect globalisation?
- Developments in transport
- makes countries closer (shrinks the world)
- reduced cost of comms
How does FDI contribute to globalisation?
- movement of money
- creates jobs
- lower costs of production
- free movement of goods
- gives a country income generation
- GDP growth
- skills transfer
How does migration contribute to increasing globalisation?
- TNCs move to less developed countries moving jobs to the migrants rather then the other way round
- provides low income workers for host nation as well as skilled workers
How does a growing labour force contribute to globalisation?
- Migration
- increases demand
- higher employment = increased output
- increased spending
- rising supply of labor drives wages down
- keeps costs down
- boosts number of global businesses
How does structural change contribute to globalisation?
- An economic condition occurring when an industry changes the way it operates
- moving away from the primary sector to manufacturing
- develops knowledge
- rise of new economic powers driven by LEDC
- generates subs
What is protectionism?
Giving preference to home producers by making it hard and more expensive for overseas companies to export to your country
What are the advantages of tariffs?
- domestic produced goods are cheaper
- domestic businesses gain a competitive advantage due to being cheaper than imported goods
- ensures better job security
- protects up and coming businesses
- aids econ growth by improving gdp
- raises important tax revenue
- improves balance of trade
What are the disadvantages of tariffs?
- high price won’t put many off
- unfair competition
- tariff just increases consumer price
- restricts volume of trade
- other countries may respond by imposing tariffs
what is a quota?
limit on the quantity that can be imported
Why are quotas imposed?
- protects jobs
- bargaining chip
- less risky
- protect strategic industries
What are the advantages of quotas?
- boosts local investment
- protects domestic business
- job opportunity
- goods become less expensive
What are the disadvantages of quotas?
- may last too long (used for infant businesses)
- difficult to measure degree of protection
- complex for the country using them
- may cause a competition reaction which will limit both economies
what are other trade barriers?
- subsidies/tax breaks
- govt legislation
- product quality requirements
- technical barriers to trade
what are technical barriers to trade?
standards that set out specific characteristics such as size, shape , design, function and performance
what do subsidies do?
- increases competitiveness for firm
- makes local goods cheaper on the domestic market
- artificially raises the price of foreign goods
- protects domestic businesses
what is a trade bloc?
type of intergovernmental agreement to reduce regional trade barriers
What is the EU?
a single market trade bloc with 27 members, 20 of which make up the eurozone
what is a common/single market?
guarantee of free movement of good, services, capital and labor
What is ASEAN?
Association of south east Asian nations - it has 10 members, over 600 million people living in the region
What is NAFTA?
3 members - Canada, Mexico, US
North America free trade agreement
Over 500 million residents
Advantages of trading blocs?
- freedom to trade
- Enlarged market
- protectionism from international competition outside the bloc
- freedom of movement of people
What are the disadvantages of a trading bloc?
- retaliation
- protectionist
- competition increase
- common factor that together becomes a common problem
