4.1.1 Growing Economies Flashcards
Globalisation
Process of making the world economy more interdependent
globalisation and rise of emerging economies help businesses as can access new markets via trade
Emerging economy
Used to describe an economy in process of rapid growth and industrialisation
high rates of economic growth and low incomes per head
volatile, more immature and transitioning to developed economy
BRICS COUNTRIES
Brazil
Russia
India (10/30 fastest growing areas in India )
INDIA: economic growth link to young demographic its tertiary sector( service) one of fastest in world
GDP growth rate10.26%2010,8.15 2015,7.11 2016,6.62 2017
China (without china = little political clout, china economy bigger than all of b.r.i.s together)
South Africa(added to group in 2010)
CHINA: significant economic growth since economy transitioned to free market, specialised in secondary sector (manufacutre) economic growth is export led
GDP growth rate10.26% 2010, 6.9 2015,6.7 2016,6.9 2017
1/2 population, 1/4 land mass, 1/5 GDP
South Africa
MINT COUNTRIES
Mexico (doorstep of largest economy av age 28, security issues, largest economy of MINT middle income country)
Indonesia (largest MINT av age 29, policy banning raw exports)
Nigeria (booming population av age 18, opening to greater foreign investors, issue with corruption)
Turkey (smallest, young pop av age 29, strategic location, political instability)
-new powerhouse
-young population and prime location
GDP
gross domestic product
- measure of size and health of country’s economy over period of time (usually 1 quarter or 1 year)
- used to compare size of different economies at 1 time
- one way to calculate is by adding up total vale of good and services ‘output’ produced in a country
-emerging economies achieved significantly higher economic growth rates in recent years more than developing
UK growth rate
from 1993-2007 UK reported average annual rate of growth of 3.3% since recession in 2008-2009 growth = sluggish and in last 3 years to 2015 average 0.9%
opportunities posed by emerging markets for UK businesses?
- growing no of educated middle class consumers = growing consumer spending
- cultural shifts e.g. high demand personal products, private education and health care
- demand for infrastructure and other products/services from developed economies
- source of high skilled and low cost labour (outscoring and offshoring
- great potential for joint ventures and acquisitions
threats posed by emerging markers for UK businesses
UK businesses moving to EM:
- increasingly large pool of skilled, low cost labour (quality)
- inadequate protection of brand and other intellectual property (copy right)
- political instability, cultural difference and sensitivities
- variable approaches to financial and legal dealing e.g. contractual law
UK business to domestic markets:
- state subsidy of industries to make them more competitive globally
- variable approaches to financial and legal dealing e.g. contractual law
why will emerging economies be likely to continue to enjoy high growth rates:
- urbanisation process continues
- industrialisation especially in E Asia and S Africa
- population growth
- per capita income growth, rise of middle class/consumer society
- workforce continue to improve skills and be more productive
- technological innovation in many emerging markets (especially in Korea, China, India)
economic growth
gives trade opportunities for businesses which creates a positive multiplier effect for employment
employment patterns
- growing economies see changes in employment patterns (working women, migration, rise of multi job, home working)
- as labour/other resources more from agriculture to modern economic activities productivity& incomes rises
- economies see structural change in employment from primary sector to secondary/tertiary
- rise of tertiary sector as income rises
benefits and problems of operating in emerging markets
benefits:
- access to large markets
- first mover advantage
- increased demand for western products
- growth rates
- brand/corporate image
problems:
- investment needed
- cultural differences
- limited protection
- establishing a brand
- local competitors
- political issues
key indicators/measurements of growth
- GDP: measure of size of economy, sum of everything a country produces (measurement of output produced by entire economy) (agriculture, industry and services)
- GDP per capita: GDP(in a year) divided by population (common indicator of material standards of living
- Literacy levels: adult literacy rate % above or equal to able to read and write, av 84.1% of country’s citizens are literate vs Afghanistan at 28.1%
- Health
- HDI
health as a measurement of growth
- life expectancy at birth = key indicator of growth
- W.H.O map compares health against av life expectancy of 71yrs
- UK ranked 27th best in world in health/wellness in international league (obesity is an issue, 1/4 of pop = obese 111/133 countries on specific measure)
Human development index (HDI)
- measure of economic growth/development (published since 1990 by United Nations)
- combines: life expectancy(heath), education (literacy rates) and income of population(GDP per capita)
- HDI tracks progress made by countries to improve these 3 basic development outcomes
2014Top 5 Norway, Australia, Switzerland,Netherlands, US
Bottom: Sierra Leone, Chad, Central African Republic, DR Congo, Niger
limitations of HDI
- standard HDI measure doesn’t account qualitative factors e.g cultural identity,political freedoms (human security, gender opportunities, human rights)
- GDP per capita = HDI takes no account of income distribution
- purchasing power parity values used to adjust GDP data changes quickly and can be inaccurate/misleading
Purchasing power parity
is a measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries’ currencies
implications of economic growth
increase in employment opportunities
decrease in unemployment
increase standard of living and decrease levels of income inequality
adult literacy rates definition
% of those aged 15 and above who are able to read and write
gross domestic product definition
measurement of output produced by an entire economy
GDP per capita defintion
commonest indicator of material standard of living calculated by measuring GDP in a year and dividing it by the population
human development index definition
means of measuring economic development in 3 broad areas (per capita income, health and education
-broader measure includes social and economic factors
benefits of entering an emerging economy
- access to larger market
- first mover advantage
- increased demand for western products
- establishing a brand
- growth rate
- brand/corporate image
problems of entering an emerging economy
- investment needed
- cultural differences
- time lags
- limited protection
- local competitors
- political issues
time lag
time it takes for a business to gain a return on investment
3 fastest growing economies
- Ghana
- Ethiopia
- India
