4.1.1 Growing Economies Flashcards
What is economic growth?
How is it usually measured? 
An increase in the country productive capacity 
Usually measured using GDP
What is GDP?
A measure of the countries economic activity include product and services produced in a year
what are emerging economies?
Economies that are in the process of rapid growth and industrialisation
What are the BRIC economies ? Why is it significant?
Brazil
Russia
India
China
South Africa
Because of scale and growth rate 📈
What is the largest BRIC economy?
China 🇨🇳
what has Brazil entered?
A prolonged recession
why did BRIC grow rapidly?
Very Large populations
Access to large amount of natural resources
large landmasses
what are the Mint economies ? 
Mexico 🇲🇽
Indonesia 🇮🇩
Nigeria 🇳🇬
Turkey 🇹🇷
What do MINT economies have 
Very Favourable demographics
Why would MINT economies grow rapidly
Expanding population
Young population to large working age population
Cheap labour force
Significant geopolitical positions
What are the implications of economic growth towards a business? (5)
What are customers more likely to have?
Potential to increase profits Business enters new markets- gain more customers
Customers are more likely to have income elastic demand in increasing sales
Reduce cost of production benefit from lower labour costs
Increased trade opportunities
increased FDI and investment
What are The impacts of individuals of economic growth?
Reduced Unemployment
Increase in average income
Access to quality public services
what are the four key indicators of growth?
GDP- total economical output of the country
Literacy - take in account the number of adults that can move right
health - looks like being such as infant mortality rate and access to healthcare
HDI - human development index - combines factor of life expectancy education and income to determine the quality of life
What are the three issues with the development indicators? (3)
doesn’t take into account social issues
Data Collection methods can vary from country to country
manipulation of data- countries may lie for Aid
What is PPP?
Measurement of price for specific goods in different countries used to compare the absolute purchasing power of countries currencies
Purchasing powers parity
What is the positives of specialisation?
Increase productivity increase output
increased sales production - EOS - can lead to increased GDP growth
resources are devoted to an industry
Competitive Advantage
What are the disadvantages of specialisation?
Over reliance on one industry
over reliance on one industry they become other countries may become too cheap
May become too big - diseconomies of scale
What is protectionism?
The Governments approach to protect domestic products
What is a Tariff ?
Tax put on the imported goods to make them more expensive
What are the pros and cons of tariffs?
Cons
Increase cost of imported materials - raw material more expensive for businesses
Reduced Competition - domestic firms - may become inefficient
Reduce choice for consumers more expensive consumers may be unable to afford goods
Pros
Protect smaller industries so that they can eventually become competitive globally
An increase in government tax revenue
Reduction in dumping of foreign businesses so they cannot sell below market price
What is the import quota?
Physical limit of imports that are allowed in the country
What Are positives and negatives of import quotas?
To meet extra demand they may need to employee new workers reduces unemployment and benefits wider economy
The higher price of the product may encourage new businesses to start up in the industry
Countries can can easily change quotas as conditions changed in the market
One countries can be quotas as less confrontational as tariffs
Negatives
Quoters limited supply of product the price product rises
cause tension between trading partners
Efficiency of domestic firms may decrease due to quotas reducing levels of competition
What is globalisation?
Describes Growing interdependence of the worlds economies, culture, economy, and population
What has globalisation led businesses to be?
to be more integrated and independent
Dynamic
What is globalisation not?
it’s not an inevitable.
It can be slowed due to economical crisis
What are the factors that cause globalisation? Eg? How do they increase globalisation ?
Trade liberalisation - the process at which trade is made easier due to the rules that govern it being relaxed
Made it easier for businesses to trade globally - less regulatory hurdles increase the opportunity for businesses to make more diverse products for consumers-
countries have become more dependent on products produced and will demand for the variety
What is FDI?
Foreign direct investment investing by setting up operations in another country
Why do businesses want to use FDI?
Managers want to keep a tight control over operations and need to be close to consumers
What are the six things protectionism protects?
Jobs - allows domestic businesses to keep on producing needs for employment
Infant industries - to grow and be established to exploit economies of scale - gov hard time identifying
Prevent dumping - when foreign goods are inputted into the country below domestic market prices
Preventing entry of harmful goods
improving balance of payments - prevents payments deficit 💸-when the costs of imports exceed the income on exports
- helps government keep control
What are the two other things that help with protectionism?
Government legislation - administrative barriers can be faced
Subsidies- financial support given to domestic producers to help compete with overseas firms -
help lower prices for consumers
- reduces the costs of production have a competitive advantage against expensive foreign businesses
What are trading blocs?
When group of countries form an agreement to reduce or eliminate protectionist measures between each other
What are the four main large trading blocs?
What are a few countries are in it?
The EU - Austria 🇦🇹 , Belgium 🇧🇪 , Denmark 🇩🇰
ASEAN - Southeast Asia
NAFTA - Canada 🇨🇦 , Mexico 🇲🇽 USA 🇺🇸
the CPTPP - , Austria, 🇦🇹 Mexico, 🇲🇽 New Zealand 🇳🇿
What are the six forms of trade blocs?
Preferential trading areas -
allow certain types of products with a reduced tariff rate - PTA - may become a free trading area overtime
Free trade areas - FTA -when all members remove trade barriers such as imports and quota -to protect them may use - rule of origin - help find the amount of goods being brought in - NAFTA
Custom unions - agree on a common set of barriers towards non-members
Common market - tariffs are removed and non-barriers are eliminated integrated together to work on economic political issues (ASEAN)
Single market-get rid of is common law to make movements of goods within a country easier
Economic union - involves custom union and common market
How was The expansion of trading blocks triggered?
Cultural ties of familiarity with nearby markets reinforced regional trade and preferences-
led to the regional trade agreements (RTA)which have grown and created trading blocs
What are the rules of the EU?
What did they have?
Countries within the union have no trade restrictions between themselves
Countries within the union have common external barriers (e.g. tariffs) to countries outside of the union
What are the rules of NAFTA?
What happened in 2018?
The aim was to promote free trade between these countries
In 2018, the terms of the agreement were renegotiated and it was renamed.
What did the US do within NAFTA?
Who benefited?
What could happen to products then?
Many USA businesses relocated their manufacturing to Mexico as goods could be produced there much more -
cost effectively due to the lower wages paid to Mexican workers 🇲🇽
The products could then be imported back into the USA without and tariffs being incurred
Mexico benefitted from this agreement as it helped to create many new industries and jobs within the country
However, most of the benefits occurred in the north of the country close to the USA border
What were the rules of ASEAN?
What did this do for Southeast Asian countries?
A free trade area aims to achieve free flow of goods in the region (eliminating trade barriers) - less integrated free trade than the EU
Free trade areas lower business costs, increase market size and help businesses to generate economies of scale
What were the rules of the CPTPP?
All countries are committed to reducing the tariffs of imported goods from each country
What is the impact of three blocs dependent on?
whether the business trades in or out of the trading bloc
What business is outside of trading blocs face?
What will this decrease 📉?
higher costs from protectionist measures
eg. tariffs and trying to meet legal requirements inside the trading bloc
This will make them less competitive when trying to sell goods to member countries within the bloc - more expensive
Being outside the bloc is likely to decrease their sales volume to countries within the bloc
What are the four benefits of belonging to a trade bloc?
Access to market - business can sell more to customers with the free movement of goods
External tariff walls - been in a custom trading block protects you from competition from the outside - imported goods by a group of countries that have formed a trade agreement
Infrastructural support - gain additional support from the government -to enable them to maintain their competitiveness against businesses in countries inside the trading bloc
Free movement of labour - allowing businesses to source workers from a wider pool 🏊
high supply of labour may push labour cost slower - competition ⬆️
What are the four drawbacks from being within a trade bloc?
Increased competition
- for businesses within the trade bloc an issue for small businesses as they have fewer resources available with which to compete
Businesses with monopoly power can increase their monopoly - eliminating competitors in other countries within the bloc
Common rules and regulations-
in order to operate as one market - common rules and regulations have to be put in place
Retaliation -
due to tariffs external businesses having to put on them it may lead to tariffs being put onto trade blocks
Inefficiency -
less competition from businesses in countries outside of the bloc
- reduce the incentive of businesses to be more efficient
What can trading blocs lead to?
trade diversion -
trade is taken away from efficient producers who operate outside of the trade bloc and replaced by trade within the bloc
What is a subsidy?
Financial support given as grants for domestic producers
What are the four factors when considering to join a trade bloc?
Where they produce - have better access to suppliers cheaper less protectionism
where to sell -closer to consumers
how to enter the market
- new investments merges or trade book
business strategy -
negotiate trade barrier away
What are the positives and negatives of trade liberalisation? (4)
Positives
Increased international trade
- increase their market size
- This leads to increased output and countries can benefit from economies of scale
reduce costs as imported raw materials - components can be sourced more cheaply
Negatives
Infant industries cannot compete against international firms
dumping as businesses abroad may sell excess products at unfairly low prices
What are the six factors that contribute to an increase in globalisation?
Political change
reduction in costs for transport + communication
Increase significance of transactional companies
Increase in investment flows
Migration between economies
growth in global labour force
Structural change
How has political change led to an increase in globalisation?
Changes in the government of a country can influence the country’s attitude to trade
What is a transactional company?
A business that operates more than one country
What will transactional companies do?
How has this improved globalisation?
They will have their headquarters in one country but have other branches in other countries
How has a reduction in costs and transportation led to an increase in globalisation?
Economies of scale due to innovation in containerisation on large ships has reduced business costs
Technological advancements due to the internet/mobile technology have improved made it easier for buyers and sellers to connect with one another
What does an increasing number of transaction companies operating do to globalisation?
Put pressure on countries to operate using free trade
Why is the increase of FDI for important for globalisation?
What does it allow a business to do?
job and wealth creation within an economy
It allows businesses to establish themselves in countries where they may face trade barriers
What is migration?
How has this lead increase in globalisation?
Movement of one person going another location and another
transportation and deregulation have allowed workers to have more flexibility when looking for work
How has an increase in the global labour force globalisation?
What do people have more of and what is falling?
What has his lead to an increase of?
People have more jobs meaning they have more income to buy more products in increasing the global demand for goods
Increase in labour force for reduces wages reducing cost of businesses
Like to increase an entrepreneurship
What is structural change? How does it increase Globalisation?
When a country changes the sector of industry they operating in
Offshoring - is common practice and speeds up the process of globalisation
What are the five factors considering where we choose a location of a market?
- Level of growth and disposable income
- Ease of doing business
- Infrastructure
- Political stability
- Exchange rate
How does the level of growth and disposable income consider whether the location of our market?
We can indicate through GDP national minimum wage and employment wage product purchasing piracy inflation
If you have high levels of disposable income more inclined to buy more.
How does the ease of doing business affect the factors considering the location of the market?
See how easy it is within the Location to buy
opening business
day to day
How easy it is buying property
If this is low - lead delays of generating sales
How does the infrastructure affect the factors considering where to locate for a market?
Infrastructure is when you have a good access and access to utilities transportation links electricity
Easier to if you’ve got good communication to supplies
Will reduce costs and increase sales
Why is political stability a factor considering when we’re gonna locate within a market?
What does it minimise?
Political events will have significant impacts on your country - may receive economical sanctions
ethical
reputational impacts as well
Minimise this uncertainty
Why do we need to exchange rates to choosing a location for the market?
Because there is more demand for a currency - to minimise the risks we can diversify agree on a fixed currency
Strong economy- can import raw materials cheaper
What are the two factors that prompt trade?
Push and pull factors
What are push factors?
factors that push a business to expand outside of their domestic country
Why may push factors prompt trade?
Maybe bad conditions in domestic market
What are the three push factors?
Saturated market -
Demand for goods and services have reached its peak - hard for businesses to expand and grow
Props business to explore outside domestic market
intense competition- exporting goods into other external markets allows them to have additional revenue streams - increase market velocity
Increasing costs -
increase production costs
lead to increase price
Decrease in demand
reducing sales volume
What are pull factors?
Encouraging businesses to operate in markets abroad - due to new growth opportunities
What are the two pull factors?
Economies of scale - occurs when businesses expand overseas
Can raw purchase these with lower cost
risk spreading- businesses can diversify their customer base and reduce their exposure to risks associated with operating in a single market
economic, political and other types of risks that could impact their operations and profitability
New market - come gain a gap in the market new opportunity - gain first movers advantage
technical knowledge - good to innovate and developing new good leads to external
economies of scale- low unit cost more
cost will be spread out leading to higher profit margins
What is offshoring?
When you move part of your production process or all of it to another country
What are the benefits of offshoring
Low labour costs
raw materials
access to better material
What are the three positives and negative of offshoring?
Lower labour-
help businesses keep costs down and increase profitability
Access to specialised suppliers- quality service, raw materials or components
Economies of scale
Negatives
employee relations may suffer due to relocation as domestic workers lose jobs
Increased costs in short term, such as relocation costs, acquiring new premises and training new staff
Possibly poor customer service due to language and cultural differences between the
What is outsourcing?
when a business hires an external organisation to complete certain tasks or business functions
Why do businesses use outsourcing?
Allows business to focus on core competencies
Easier to comply with rules and regulations in other countries as they are often less demanding
What is the main differences between offshoring outsourcing?
Offshoreing is done by the business outsourcing is done by external organisation
What are the three positives of outsourcing?
Businesses can take advantage of specialist skills - more efficiently
Cost effectiveness
higher labour productivity in other countries
What are the negatives of outsourcing?
Negative reputation
Poor communication can lead to inefficiency
How else can we extend the product life cycle?
Sell a multiple markets- lengthens product life cycle
What are the nine factors needed to assess the country as a production location?
Cost of production
skills available for labour force
Infrastructure
location for a trading bloc
Return for investment
Natural resources
Political stability
Ease of doing business 👩💼
Government incentives
Why is cost of production important for a business to consider while setting up productions in another country?
Businesses want to keep costs as low as possible
Good to increase profit margins allow them
So at low price to gain a competitive advantage
Why is skills and availability of labourforce
important for a business to consider while setting up productions in another country?
What may they need to consider?
What may businesses be trying to get?
impact the quality of the goods and services
Need to consider literacy rates -right skills needed for the business?
Low labour production in a market where the labour costs are lower
Why do businesses need to consider infrastructure when locating production?
such as roads as this will affect the production process.
- efficiency
access to transportation electricity suppliers.
Why maybe the location of a trade bloc be important when locating production?
able to access many advantages such as - reduced protectionist measures
Why is it important to look at return on investment when locating production?
What can we used to tell the potential return for investment?
reduce the risk of the initial investment not being paid for
Investment appraisal techniques (payback method, average rate of return and discounted cash flow) - tell a business what their potential return on investment could be.
Why do businesses look at natural resources when looking for the location for production?
What is there a better access to?
Can it help reduce?
Better access to raw materials
Help reduce transportation costs + delays
What may business is not risk if political stability is unstable when locating for production?
What is less risky?
return on their investment in a country with political instability
a stable economy and government - a less risky investment for a business
What does a business want when looking at the ease of doing business under finding location for production?
What to they want limited?
Limited bureaucracy - so process of establishing production does not delay
Why may government incentives be important when finding a place for production?
Good as businesses can incentives
What is inward FDI?
When a foreign business invest in a local economy
What is outward, FDI?
When a local economy invests and expands operations in a foreign country
