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A LEVEL BUSINESS - ALL > 4.1a growing economies (globalisation) > Flashcards

4.1a growing economies (globalisation) Flashcards

1
Q

how is the growth rate of a country is measured?

A

the annual change in its GDP

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2
Q

what is GDP?

A

gross domestic product:
the total value of goods produced and services provided in a country in a year

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3
Q

what are emerging economies?

A

economies that have rapidly increasing growth rates

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4
Q

mnemonics for emerging economies:

A

BRICS
MINT

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5
Q

BRICS

A

brazil, russia, india, china, south africa

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6
Q

MINT

A

mexico, indonesia, nigeria, turkey

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7
Q

UK growth vs emerging economies:

A

UK growth tends to be lower than emerging economies

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8
Q

why does UK growth tend to be lower than emerging economies?

A

a key factor has been the growth of the manufacturing sector:
-the UK economy has seen a decline in the manufacturing sector, businesses choose to manufacture in emerging economies due to lower labour costs and access to raw materials
-china is the world’s largest manufacturing economy and exporter of goods

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9
Q

how can the UK exploit the rapid growth of emerging economies?

A

-by offshoring production emerging econs
-by exporting to emerging econs

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10
Q

what is globalisation?

A

the economic integration of different countries due to increasing freedoms in movement of people, goods/services, technology & finance

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11
Q

classes of emerging economies:

A

they have a growing middle class with increasing incomes which allows their citizens to spend more on goods (domestic & imported)

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12
Q

how does economic growth benefit the individuals of the country?

A

-reduces unemployment
-increased average incomes
-access to quality public services
-development of new industries and markets
-MNCs emerge that pose significant competition to established global market leaders

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13
Q

impact of economic growth on individuals: decreased unemployment

A

there is more demand which requires more labour to increase output

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14
Q

impact of economic growth on individuals:
increased average incomes

A

individuals now have rising incomes (more disposable income) due to employment which increases the standard of living

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15
Q

impact of economic growth on individuals:
access to quality public services

A

as more tax revenue is generated from rising incomes, the government can improve the quantity and quality of public services

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16
Q

impact of economic growth on individuals:
development of new industries and markets within these countries

A

development of infrastructure (rapid industrialisation), improved education quality and workforce skills

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17
Q

what is industrialisation?

A

the process by which an economy is transformed from a primarily agricultural one to one based on the manufacturing of goods

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18
Q

how does economic growth in emerging economies benefit businesses in developed nations?

A

-potential for increased profits & sales
-reduced costs of production

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19
Q

businesses exploiting emerging nations: potential for increased profits

A

-businesses enter new markets and gain more customers
-customers are likely to have income elastic demand leading to increased sales and revenues/profits

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20
Q

businesses exploiting emerging nations: reduced costs of production

A

businesses can benefit from lower labour costs and cheaper raw materials in emerging economies

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21
Q

how does economic growth in emerging economies benefit domestic businesses?

A

increased trade opportunities
↳ demand for goods and services increases

increase in investment

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22
Q

why is there an increase in investment for domestic businesses when economic growth occurs?

A

-as the economy grows, businesses want to expand so they are more likely to invest
-there may also be an increase in foreign direct investment (FDI) as businesses want to benefit from growing economies

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23
Q

how does economic growth in emerging economies benefit the UK?

A

-the UK market is saturated
-there may be too much competition in the UK for that business
-expanding into other countries could allow a business to increase output
-the business could spread its risk

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24
Q

emerging economies and the UK: the market is saturated

A

if the UK market is saturated for that product (everyone owns it) having another market to expand into may allow the business to increase sales

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25
Q

emerging economies and the UK: there may be too much competition in the
UK for that business

A

if there’s too much competition in the UK, the business might look to trade elsewhere → could increase sales

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26
Q

emerging economies and the UK: expanding into other countries could allow a business to increase output

A

higher outputs could generate economies of scale, which could lower unit costs, this could allow a business to lower its product/service prices and this could increase demand if price is elastic

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27
Q

emerging economies and the UK: the business could spread its risk

A

if economic conditions are risky in the UK (eg: recession) then it could be beneficial to expand into an emerging economy which could have better economic conditions, this would allow the business to still make a profit

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28
Q

disadvantages of expanding into emerging economies:

A

-competition in the EE
-lower average incomes than a developed economy
-may need to adapt product to local market
-the business may fail if they aren’t culturally sensitive
-these markets can often be uncertain and also present greater risk than countries with an established economy

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29
Q

disadvantages of expanding into EE: competition in the emerging economy

A

-there could already be competition in that emerging economy (domestic or global)
-the business will need to invest substantial funds into growing brand awareness

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30
Q

disadvantages of expanding into EE:
lower average incomes than a developed economy

A

-the developing economy may have lower average incomes compared to a developed economy
-this means there’s less purchasing power from those consumers so it might be important to reduce costs

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31
Q

disadvantages of expanding into EE:
the business may need to adapt the product to the local market

A

-this means that they should adopt a poly centric approach (the company treats each country as a unique market and develops a customised marketing mix for each market)
↳ increased costs

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32
Q

disadvantages of expanding into EE:
the business may fail if they aren’t culturally sensitive

A

-the business is expanding to another region, this means that there are different cultures, different tastes and different languages
-using an ethnocentric approach, though cost-effective, could lead to cultural insensitivity and may not resonate with customers in other countries & could further ruin the businesses reputation

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33
Q

what are indicators of growth?

A

measures that are used to evaluate the economic growth of emerging economies

34
Q

what are indicators of growth used for other than assessment of economic growth?

A

businesses may consider these indicators when deciding which markets to invest in for future expansion

35
Q

what are the 4 indicators of growth?

A

-GDP per capita
-health
-literacy
-human development index (HDI)

36
Q

how to calculate GDP per capita?

A

all the goods and services produced in a country / population number

37
Q

what does GDP per capita estimate?

A

the average economic output per person in a country

38
Q

what does GDP per capita tell us?

A

it’s a good indicator of standard living within a country

higher GDP per capita = higher standard of living

39
Q

what can GDP per capita be used for?

A

it can be a useful indicator to compare the growth in two countries

40
Q

advantages of GDP per capita as an indictator:

A

-could be an indicator of the market size that could be on offer in that country
-is a way to judge the purchasing power of the individuals that live in that country
(buying your product / should you export into that country)

41
Q

disadvantages of GDP per capita as an indictator:

A

-GDP can be hard to compare across nations with different currencies

42
Q

important to remember about GDP!

A

It is important to look at the GDP per capita over a period of time to see whether there has been an improvement in GDP

43
Q

what is literacy?

A

refers to the percentage of adults within an economy who can read and write

44
Q

what do literacy rates tell us?

A

the quality of education and the skills of the workforce in a country

45
Q

literacy rates & workers

A

-higher literacy rates lead to a better quality workforce
-for a business that wants to offshore, a higher literacy rate would mean there’s a higher skilled workforce who are better able to learn complex processes

46
Q

literacy rates & customers

A

-as literacy rates improve, so will the nature of the products and services bought and sold in that country
-eg: countries with high literacy rates purchase more luxury goods

47
Q

what does the OECD say about literacy?

A

the differences in average skill levels among OECD countries explain 55% of the differences in economic growth

48
Q

ways to measure the health of an economy:

A

-life expectancy
-infant mortality rates
-access to clean water
-access to doctors

49
Q

what is the health of an economy an indicator of?

A

-it’s important to businesses who want to invest in emerging economies as this will have an impact on the quality of the workforce
-the standard of living

50
Q

what is standard of living?

A

how much people can buy with their incomes

51
Q

what is HDI?

A

it combines life expectancy, mean years of schooling and GNI to determine the quality of development of citizens within a country

52
Q

what is GNI?

A

gross national income per capita

53
Q

how is the score of HDI measured?

A

from
0 (limited or no economic development)
to
1 (good level of economic development)

54
Q

advantages of HDI:

A

-focuses on a country’s people rather than simply the economic context
-a business looking to expand into international markets might use the data to analyse the potential demand, income and skills within a country

55
Q

disadvantages of HDI:

A

-it doesn’t account for inequalities within a country
-there’s a lack of reliable data in some countries

56
Q

what are imports?

A

goods and services bought from a foreign market

57
Q

what are exports?

A

goods and services sold to foreign markets

58
Q

what is international trade?

A

the exchange of goods, and services across international borders and territories

59
Q

what do exports do?

A

generate extra revenue for businesses selling their goods abroad

60
Q

what do imports do?

A

result in money leaving the country → generates extra revenue for foreign businesses

61
Q

how does international trade usually occur?

A

-the easiest and safest way to trade internationally is through a local agent
-this agent will have expertise in the local market, deal with administration and in some cases negotiations with local businesses

62
Q

what is specialisation?

A

when a country/business decides to focus on producing a particular good/service

63
Q

how imports and exports link to specialisation?

A

countries / businesses focus on producing and exporting goods and services that they have a comparative advantage in

they import goods and services that other countries or other businesses can produce more efficiently

64
Q

when do businesses specialise?

A

when they focus on a specific goods/services

65
Q

examples of specialisation:

A

-apple focuses on the production of technological products and services

countries can also specialise on a narrow range of goods and services e.g. Ghana specialises in cocoa and gold

66
Q

what does specialisation mean for a country’s products?

A

-a country can focus on the goods and services that they’re skilled at & can produce them more efficiently compared to rivals
-the quantity and quality of goods and services is high

67
Q

benefits of specialisation:

A

lower unit costs due to economies of scale
↳ lower unit costs allow the business to lower prices for consumers leading to more sales

-if businesses do not lower their selling price, then due to the lower costs they are able to to increase their profit margins

-any excess output can be sold abroad as exports

-improved innovation due to compet advan
↳ the business / country understands processes more and more over time & can understand customer needs

68
Q

what is comparative advantage?

A

an economy’s ability to produce a particular good or service at a lower opportunity cost than others

69
Q

what is comparative advantage the basis for?

A

the basis for many businesses to move into international markets to buy and sell products

70
Q

how is competitive advantage gained?

A

by adding value where others cannot

71
Q

what is competitive advantage?

A

when a business increases the value added on their goods/services, this helps them to gain an edge over their competitors

72
Q

examples of country specific competitive advantages:

A

-local resources
-the knowledge / skills of production techniques which give companies a competitive advantage in international markets

73
Q

what is FDI (foreign direct investment)?

A

investment made by a company in one country into another country

74
Q

what does FDI lead to?

A

-a business becomes a multinational corporation (MNC)
-more than 10% share of ownership of domestic firms

75
Q

what are the usual methods of FDI?

A

-setting up a production facility
-a joint-venture with a local firm
-buying assets in a foreign country
-mergers
-takeovers
-partnerships

76
Q

what is a joint venture?

A

a combination of two or more businesses that join together to form a single enterprise with shared risks and rewards

77
Q

benefits of FDI for the international investor:

A

-access to new markets (new customers, more sales)
-access to new resources (additional skilled labor, more raw materials, more natural resources)
-access to local knowledge and skills
-investment in expanding industry and fast growing, profitable businesses

78
Q

benefits of FDI for the invested in:

A

-increased economic growth as there is an inflow of money into the country
-increased job opportunities as businesses expand operations
-access to knowledge and expertise from foreign investors

79
Q

drawbacks of FDI:

A

-it is far riskier than exporting or importing

80
Q

what is inward FDI?

A

when a foreign business invests in the local economy

81
Q

what is outward FDI?

A

when a domestic business expands its operations to a foreign country

A LEVEL BUSINESS - ALL (8 decks)

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