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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
emerging economies and the UK: there may be too much competition in the UK for that business
if there’s too much competition in the UK, the business might look to trade elsewhere → could increase sales
26
emerging economies and the UK: expanding into other countries could allow a business to increase output
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
27
emerging economies and the UK: the business could spread its risk
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
28
disadvantages of expanding into emerging economies:
-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
29
disadvantages of expanding into EE: competition in the emerging economy
-there could already be competition in that emerging economy (domestic or global) -the business will need to invest substantial funds into growing brand awareness
30
disadvantages of expanding into EE: lower average incomes than a developed economy
-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
31
disadvantages of expanding into EE: the business may need to adapt the product to the local market
-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
32
disadvantages of expanding into EE: the business may fail if they aren’t culturally sensitive
-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
33
what are indicators of growth?
measures that are used to evaluate the economic growth of emerging economies
34
what are indicators of growth used for other than assessment of economic growth?
businesses may consider these indicators when deciding which markets to invest in for future expansion
35
what are the 4 indicators of growth?
-GDP per capita -health -literacy -human development index (HDI)
36
how to calculate GDP per capita?
all the goods and services produced in a country / population number
37
what does GDP per capita estimate?
the average economic output per person in a country
38
what does GDP per capita tell us?
it’s a good indicator of standard living within a country higher GDP per capita = higher standard of living
39
what can GDP per capita be used for?
it can be a useful indicator to compare the growth in two countries
40
advantages of GDP per capita as an indictator:
-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
disadvantages of GDP per capita as an indictator:
-GDP can be hard to compare across nations with different currencies
42
important to remember about GDP!
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
what is literacy?
refers to the percentage of adults within an economy who can read and write
44
what do literacy rates tell us?
the quality of education and the skills of the workforce in a country
45
literacy rates & workers
-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
literacy rates & customers
-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
what does the OECD say about literacy?
the differences in average skill levels among OECD countries explain 55% of the differences in economic growth
48
ways to measure the health of an economy:
-life expectancy -infant mortality rates -access to clean water -access to doctors
49
what is the health of an economy an indicator of?
-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
what is standard of living?
how much people can buy with their incomes
51
what is HDI?
it combines life expectancy, mean years of schooling and GNI to determine the quality of development of citizens within a country
52
what is GNI?
gross national income per capita
53
how is the score of HDI measured?
from 0 (limited or no economic development) to 1 (good level of economic development)
54
advantages of HDI:
-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
disadvantages of HDI:
-it doesn’t account for inequalities within a country -there’s a lack of reliable data in some countries
56
what are imports?
goods and services bought from a foreign market
57
what are exports?
goods and services sold to foreign markets
58
what is international trade?
the exchange of goods, and services across international borders and territories
59
what do exports do?
generate extra revenue for businesses selling their goods abroad
60
what do imports do?
result in money leaving the country → generates extra revenue for foreign businesses
61
how does international trade usually occur?
-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
what is specialisation?
when a country/business decides to focus on producing a particular good/service
63
how imports and exports link to specialisation?
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
examples of specialisation:
-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
65
what does specialisation mean for a country’s products?
-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
66
benefits of specialisation:
**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 competitive advantage ↳ the business / country understands processes more and more over time & can understand customer needs
67
what is comparative advantage?
an economy's ability to produce a particular good or service at a lower opportunity cost than others
68
what is comparative advantage the basis for?
the basis for many businesses to move into international markets to buy and sell products
69
how is competitive advantage gained?
by adding value where others cannot
70
what is competitive advantage?
when a business increases the value added on their goods/services, this helps them to gain an edge over their competitors
71
examples of country specific competitive advantages:
-local resources -the knowledge / skills of production techniques which give companies a competitive advantage in international markets
72
what is FDI (foreign direct investment)?
investment made by a company in one country into another country
73
what does FDI lead to?
-a business becomes a multinational corporation (MNC) -more than 10% share of ownership of domestic firms
74
what are the usual methods of FDI?
-setting up a production facility -a joint-venture with a local firm -buying assets in a foreign country -mergers -takeovers -partnerships
75
what is a joint venture?
a combination of two or more businesses that join together to form a single enterprise with shared risks and rewards
76
benefits of FDI for the international investor:
-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
77
benefits of FDI for the invested in:
-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
78
drawbacks of FDI:
-it is far riskier than exporting or importing
79
what is inward FDI?
when a foreign business invests in the local economy
80
what is outward FDI?
when a domestic business expands its operations to a foreign country

A LEVEL BUSINESS - ALL (12 decks)

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