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Business Theme 4 > 4.1 Growing Economies > Flashcards

4.1 Growing Economies Flashcards

1
Q

Impact of globalisation on countries

A

Can specialise in what they are naturally good at
Can benefit from Foreign Direct Investment
Domestic industries may be harmed

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2
Q

Impact of globalisation on governments

A

Can collect taxes from the increased growth
Can appear to have higher gdp growth

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3
Q

Impact of globalisation on Consumers

A

Receive more choice and cheaper goods

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4
Q

Impact of globalisation on Workers

A

Low skilled workers get low cost work brought to them

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5
Q

Reasons why globalisation is important

A

An expansion of trade in goods and services between countries
An increase in transfers of financial capital across national boundaries
Development of global brands
Shifts in production and consumption
Increased levels of labour migration
Shifts in economic and political strength

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6
Q

Factors affecting globalisation: Improved communication

A

Better communication, development of satellite TV - provide worldwide marketing avenues
BUT not all countries have good communication

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7
Q

Factors affecting globalisation: Improved Transport

A

Development of containers and bulk shipping by air has allowed mass movement of goods
BUT there’s pollution and environmental issues

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8
Q

Factors affecting globalisation: Free Trade Agreements

A

Free trade as a way of increasing the countries wealth and influence
BUT there’s a bias to rich countries

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9
Q

Factors affecting globalisation: Global banking

A

Modern tech allowing vast amounts of capital to flow between countries and instantly
BUT chance of financial crisis and can create too much confidence

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10
Q

Factors affecting globalisation: Growth of Multinationals

A

Rapid growth of multinationals causes globalisation as there’s lots of investment from goods selling around the world
BUT There’s much legislation, taxation and people may choose to buy local instead

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11
Q

Factors affecting globalisation: Labour costs and skills

A

Labour intensive industries such as clothing can take advantage of cheaper labour costs and reduced regulations in lesser economically developed countries
BUT there’s likely to be an increase in the avg wages in those countries due to the economic growth

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12
Q

Why do countries want FDI?

A

New technology
Improved trade and infrastructure
Provides jobs/ better employment rate
Improved skills of workers through training
Taxes increase and gov can use them to help country
Can export more goods to other countries

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13
Q

Problems with FDI

A

Unethical/ unfair practices
Initially very expensive
Lost resources domestically
Time to develop the worker skills
Importing goods/ services/ materials from abroad and so capital leaves the country
Takes away from the domestic sales- possible monopolisation

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14
Q

Types of FDI: Greenfield

A

A company will build its own, brand new facilities from the ground up

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15
Q

Analysis of Greenfield FDI

A

Greater control of the business
New facilities will be more efficient
Entry process may take years
Competition will be difficult to overcome

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16
Q

Types of FDI: Brownfield

A

When a company purchases or leases an existing business

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17
Q

Analysis of Brownfield FDI

A

Instantly acquire companies tech, staff and knowledge
Gain access to an established market
One less competitor to deal with
Start up costs are reduced

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18
Q

Ways to enter international markets: Exporting

A

Selling products in other countries/ markets from domestic production
Low risk to test the market
Allows business to use spare capacity or increase profit margins

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19
Q

Ways to enter international markets: Franchising

A

Selling rights to sell their products in another country under their name with support from the franchise
Reduced costs of expansion
Pay initial set up fee then royalties

20
Q

Ways to enter international markets: Licensing

A

One firm producing and marketing another’s product in a particular country
Similar to franchising but is also concerned with the production process, rather than retailing

21
Q

Ways to enter international markets: Joint venture

A

Businesses work together as two separate identities to complete the same objective
Often foreign firm will work with a domestic producer

22
Q

Ways to enter international markets: Merger/ Takeover

A

Joining another company in another country to sell their products and create a new joint organisation

23
Q

Ways to enter international markets: Direct Investment

A

Setting up production facilities abroad
Can result in a merger or takeover
Used by multinationals
Can take adv of lower wages, raw materials and lower regulations
BUT higher costs and high risk strategy

24
Q

Globalisation

A

The process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange

25
Q

Economic Globalisation

A

Widespread international movement of goods, capital, services, technology and information

26
Q

Social globalisation

A

Refers to the sharing of ideas and information between and through different countries

27
Q

Political Globalisation

A

Refers to the amount of political co-operation that exists between different countries

28
Q

Causes of globalisation

A

Expansion of trade between countries
Increase in transfers of financial capital across national boundaries
Development of global brands
Labour migration
Structural change
Shift in economic and political strength

29
Q

Cause of Globalisation: Trans-national companies

A

Multinationals, investment in factories and operations in other countries
Creation of jobs and transfer of skills
Global brands

30
Q

Protectionism

A

Involves Supporting domestic industries against foreign competition. Governments use policies such as quotas, tariffs and other barriers that increase prices of imported goods or make it more difficult for foreign companies

31
Q

4 Protectionist Methods

A

Tariffs
Quotas
Gov Legislation
Domestic Subsidies

32
Q

Tariff

A

Tax placed on an import to increase its price and decrease its demand
Imposed by gov to raise revenue and restrict imports
Increase in the final price
Consumers SHOULD switch to domestic goods

33
Q

Import Quotas

A

Physical limit on the quantity of good imported or exported
Imposing a limit on the quantity of goods will increase the market share available for the domestic products

34
Q

Subsidies

A

Subsidy is a way of a
government protecting
their domestic markets
Money is given to local
producers to make their
goods cheaper on the
domestic market
Reduces the final price

35
Q

Government Action

A

Legislation on product quality requirements
Preferential state procurement policies- favouring a local/ domestic produces
Exchange controls- Limiting the foreign exchange that can move between countries

36
Q

Free Trade

A

When government put in place policies to allow producers from overseas producers freely selling goods in our country

37
Q

Arguments For Protectionism

A

Domestic Produced goods do not incur the tariff so are cheaper
Better job security
Increase tax revenue for gov
Protect infant businesses

38
Q

Disadvantages of protectionism

A

Less choice for consumers
Lack of cheaper alternatives
Closure of businesses
Less competitive globally
Can raise tax for gov
reduces imports

39
Q

Trading Bloc

A

Type of intergovernmental agreement to reduce regional trade barriers

40
Q

Trade Liberalisation

A

Removal or reduction of restrictions of barriers on the free exchange of goods between nations
Aim is to incentivise that trade, making the economy more open to trade and investment

41
Q

Arguments against trade blocs

A

Businesses will face increased competition from other firms inside the bloc
Firms will find it difficult to expand in areas outside
the bloc
Firms may need to act quickly before other firms
enter the markets
Trade between blocs may reduce as firms just focus on selling goods within countries in their bloc

42
Q

Advantages of Trading Blocs

A

Encourages trade between member countries.
Provides a much larger market to sell goods to and make larger profits.
Firms can increase production and reduce costs through economies of scale
With free movement of people there is a much larger workforce for industries so people can live and work in different member countries as they choose.
More opportunities to sell in growing markets

43
Q

BRIC countries

A

Russia Brazil India China

44
Q

MINT

A

Mexico Indonisia Nigeria Turkey

45
Q
A

Business Theme 4 (4 decks)

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