4.2 Global Markets And Business Expansion 💥 Flashcards
What does an exchange rate become more valuable? Less?
When there was a greater demand
less valuable when there’s a demand for it
What is appreciation? What does this mean?
Arising a pound against other currencies
The pound can buy more in a foreign currency - high value
What’s the depreciation?
Fall in the value of the pound by less that a foreign currency
What is appreciation good and bad for?
Bad for exporters
good for importers
What is depreciation good for?
Exporters
What is depreciation bad for?
Importers
What are the two impacts on a business due to exchange rates?
Can maintain the price and change profit margin - absorb the disadvantages - lower if bad
Or you can change price
What are the four things that the effect of the exchange rate depends on?
Inflation -depreciation can lead to an increase in inflation - lead uncertainty for the business
recession - if you have a weak pound - good for exports due to lower prices
but if there will be less disposable income demand will be low
Price elasticity of demand - if inelastic a weak pound will not affect your demand
raw materials - if there is an appreciation more expensive competitive disadvantage for businesses
What is global competitiveness?
Ability for business to compete perform better than rivals across different countries
What can influence global competitiveness?
Fluctuation in exchange rates
What is currency appreciation?
A currency has increased against an of a currency
What are the positives and negatives of an appreciation?
import raw materials from abroad ? i cheaper - increase profit margin
What is the disadvantages of appreciation?
Export? - expensive
fall in sales
Demand shift to domestic products
What is currency depreciation?
Value of one currency has decreased against another currency
What are the advantages of depreciation?
if a business exports , they become more competitive because it becomes cheaper to purchase
Less Competition in domestic markets as imports are expensive
What are the disadvantages of depreciation?
If you import raw materials from abroad, they become more expensive
What kind of global operation bring?
Bigger economies of scale
What are the three significant changes in the exchange rate on businesses?
Elasticity of demand -inelastic full price would only have a small increase in demand
economic growth of countries - if a country is in a recession demands for their economic exports are weak
significance of the cause of fluctuation in exchange rates- if the pound increases because there’s been an improvement in efficiency and productivity - more demand
If not - other weakness of other businesses business will be uncompetitive due to the increase in the pound
What made business is used to counteract fluctuations in exchange rates?
Fixed contacts - temperature changes - to the exchange rate will have small impact onto the business lessens uncertainty
What is economic risk?
Risk that future cash flows will change - due to unexpected exchange rate fluctuations
What are the two factors that provide competitive advantages?
Porters generic strategies
Cost leadership and differentiation
What is cost leadership?
How can this be utilised?
What a business reduces the cost of their production
Can become cost leader if they reduce their prices or keep it the same to increase profit matches
How many may cost leadership be achieved?
Increase the productivity of the workforce
using machinery or technology efficiently
outsourcing
offshoring
capacity utilisation
What is differentiation under
Porters strategies?
When a business adds value to products
developing a strong brand
superior quality
better customer service
What are the main impact of skill shortages? what made this effect and lead to ?
If they are unable to find a labour with required skills - affect their ability to gain a competitive advantage - may not be as productive increasing costs due to waste
What is less likely to occur if there’s a skill shortage?
Product differentiation - unable to highly different shape products
How may a business overcome skill shortages?
outsource or offshore to access skills needed
What are the five ways to control MNCs?
Political influence
Legal control
Taxation policy
Pressure groups
social media
What are political influences?
Political institutions enforce laws and regulations which businesses need to adhere to
What should MNCs do under political institutions?
work within the institutional framework of that country
What can MNCs do to local governments under political influences?
exert pressure on national governments through lobbying - create favourable conditions for their business
What are the positive negatives about using political influences to control MNCs?
Positives
can create manage and end businesses
Help elected officials to challenge the power private businesses
Negatives
facilitate corruption
Can lead misallocation of capital
What is legal control?
Governments can enforce legislation and regulation to control the operations of MNCs
what does legal control to prevent?
Anti-Competitive or unfair practices
Why do governments want MNC through legal control?
Allows them to boost their economy
creating legal control in areas relating to taxes and employment ensures stability for the MNC
What are pressure groups?
An origination operate to influence company and public policy
What are the three ways pressure groups can take action?
Naming and shaming -
Businesses ethics are promoted through publicity and naming a shaming - unethical businesses- threatening reputation
direct action- demonstrations protests can sabotage business operations
lobbying - taking issues directly to the government
How does social media control MNCs?
Allows stakeholders to share information about the unethical behaviour of MNCs -forced to address the issues raised on social media - high level of public exposure and information can spread rapidly
How many MNCs use social media to their advantage?
spread awareness and promote their business on a global scale
What may MNC’s influence on social media be and why?
limited in some countries as they have regulations in place to manage social media power
What are the four benefits of using pressure groups to control MNCs?
Enlists committed people, including volunteers
Social media involved - enlist very quickly- gather + engage
Raises issues that may not become public knowledge
Alert politicians when it becomes concern to the public
What are the three drawbacks of using social media pressure groups to control MNCs?
Campaign can become ill informed or misguided
Direct action can lead to violence or miscarriages of justice
Information goes viral, impossible to control
How many taxation policies control MNCs?
Countries can maintain low corporate taxation to attract for a direct investment
