bus Flashcards
1
Q
Advantages of foreign direct investment (FDI)
A
- The ability to access new overseas markets or better serve existing markets
- To take advantage of lower manufacturing and wage costs
- To access new technology and skills - particularly in R&D
- To locate a business function near clusters of similar or related companies
2
Q
What is foreign direct investmet (FDI)
A
Occurs when overseas companies set-up or purchase operations in another country e.g new projects, expansions of existing projects, or mergers and acquisitions activity.
3
Q
Disadvantages of foreign direct investment (FDI)
A
- If the firms bought were previously struggling to maintain custom and reputation
- It may take a long time to build up confidence again, especially if the business is seen operating as the same organisation but under a different name
- It is costly to rebrand and update signage and equipment
- Investing directly in a country to set up a new operation will take a lot of time
- New staff need to be hired and trained and new sites need to be sourced and premises built
4
Q
Two methods of foreign direct investment (FDI)
A
- Creating new facilities in the host country - this method takes time, effort and finance, e.g. building, hiring, training. An advantage is that it can effectively replicate corporate culture.
- Building over an existing company in the host country - this is a quick way to expand into new markets. The advantages are that an overseas company can gain knowledge and experience of local markets and can often buy loss making companies and turn them around
5
Q
Advantages of home country
A
- Creation of additional high quality technical and managerial jobs at the MNC’s HQ - enhance spending power in the UK as the nationals employed to these new positions are financially rewarded according to the amount of responsibility they are given
- People seeking further and higher education due to less demand for unskilled labour - as unskilled work moves abroad UK citizens will retrain, benefitting themselves as well as the taxation received by government
- Company profits are returned to home country which boosts balance of payments - a UK business may own a business overseas and send back some of the operating profits to the UK
- Demand for home country exports can increase if foreign subsidiary creates a demand for them
- Other firms in the home country may gain opportunities from any expertise gained which will in turn create wealth for the country in the form of increased taxation collected
6
Q
Disadvantages of host country
A
- Employment opportunities may be reduced as MNCs wind down operations leading to less tax revenue for government and increased spending on unemployment benefits
- Increased burden on government to provide college and university places
- Balance of payments suffer in the short run from the outflow of money to the foreign country as profits are reinvested in the host country to provide additional capital investment on buildings, machinery, etc.
- Increased burden on government to provide training and skills development to help workers find suitable jobs
- Competition from foreign-based subsidiaries may lead to greater need for home-based companies to become more efficient or result in losing customers and profit.
7
Q
What are business ethics
A
They are moral principles underpinning decision making.
8
Q
Why might a business introduce an ethical code of practice
A
- To help define what is acceptable behaviour;
- To promote the highest standards of behaviour;
- To have a benchmark against which employees/owners can compare themselves to
- It provide a means of establishing an individual identity
9
Q
What is meant by ethics
A
Ethics are moral principles, not guided by law but by the conscience of consumer and corporate behaviour. The art of doing good for others
10
Q
What is corporate social responsibility
A
It refers to a more holistic approach that an organisation takes to meet or exceed both internal and external stakeholders’ expectations beyond those of simply making profits and meeting legal obligations
11
Q
What are things corporate social responsibility cover
A
- Community involvement - CSR requires organisations to treat their local community with respect and to engage in some kind of community investment. This can be through: by offering your staffs’ time and skills in developing and maintaining local projects
- CSR employers treat their staff fairly, equally and value diversity. This is done through: being fair in the recruitment and promotion processes
- CSR means doing more than complying with the law in treating the environment with respect by:
reducing energy consumption and minimising waste - CSR means you have an obligation to best serve the interests of stakeholders, e.g. customers, shareholders, government, wider society, by:
meeting conflicting stakeholder demands, e.g. maximising ROI for investors while providing high quality and low cost for customers
12
Q
Costs of pursuing a policy of CSR
A
- Increased business costs lead to a reduction in dividends for shareholders
- Turning down a lucrative contract because you disagree with the prospective client’s business philosophy
- Raw ingredients in food production are more expensive, e.g. when using organic ingredients
13
Q
Benefits of pursuing a policy of CSR
A
- It will improve the business’s public image and strengthen the brand
- It can attract good quality staff and improve employee retention and productivity
- Due to the increase of ethical investors the business can access new sources of capital for expansion
- You may be less likely to face litigation and fines
14
Q
What are the various forms of eccomerce
A
- B2C - Business to Consumer - consumers order direct from the business and the goods are delivered to their homes
- B2B - Business to Business - companies order direct from their suppliers, receive invoices and make payments.
- B2G - Business to Government - government orders direct from the business
15
Q
Advantages of e-commerce
A
- Can find out if products are in or out of stock
- Can increase global market share
- Customer data can be used for marketing
- Improved relationship with suppliers
- Often reduces lead time
- Saves costs and improves efficiency
