Business Paper 4 Vocab Flashcards
Disposable Income
The amount of money a household has available to spend and save after paying taxes
Economic Growth
An increase in a country’s productive capacity
Emerging Economies
Refers to the developing economies which are experiencing rapid economic growth due to processes such as industrialisation.
Human Development Index (HDI)
(HDI) a collection of statistics that are combined into an index, ranking countries according to their human development
Income Elastic
The percentage change in demand for a product is proportionately greater than the percentage change in income
Literacy Rate
Rate the percentage of adults (over 15) who can read and write
Primary Sector
An area of production that is based around the extraction of raw materials from the Earth.
Tertiary Sector
The production of services in the economy.
Division of Labour
Different workers specialising in different productive activities
Exports
Goods or services that a firm produces in its home market but sells in a foreign market
Foreign Direct Investment (FDI)
Investing by setting up operations or buying assets in businesses in another country
International Trade
Exporting (selling abroad) and importing (buying from abroad)
Invisible Trade
Trade in services rather than physical products
Specialisation
A production strategy where a business or country focuses on a limited number of products or services. This results in greater efficiency.
Tariffs
Taxes that are imposed on imports
Visible Trade
Trade in physical goods
Brain Drain
When highly educated and talented people find jobs overseas
Free Trade
Trade between nations without restrictions from barriers
Globalisation
The growing integration of the world’s economies
Multinational Companies
Companies that own or control production or service facilities outside the country in which they are based
Remittances
The money sent back to their country of origin by overseas workers
Trade Liberalisation
the removal of rules and regulations that restrict free trade.
World Trade Organisation (WTO)
An international organisation that promotes free trade by persuading countries to abolish tariffs and other barriers. It polices free trade agreements, settles trade disputes between governments and organises trade negotiations.
Administrative Barriers
Rules and regulations that make it difficult for importers to enter an overseas market.
Dumping
Where an overseas firm sells large quantities of a product below cost in the domestic market.
Import Quota
A physical limit on the quantity of imports allowed into a country.
Protectionism
An approach used by a government to protect domestic producers.
Subsidy
Financial support given to a domestic producer to help compete with overseas firms.
Trade War
Where two or more countries try to damage each other’s international trade by imposing trade barriers.
Common Market
A market where goods, labour and capital can move freely across the member states.
Economic Union
A type of trading bloc involving both a customs union and a common market
Free Trade Areas (FTA)
A region where member states remove all trade barriers between themselves, while setting trade barriers against non-members states.
Trading Bloc
A group of countries that has signed a regional trade agreement to reduce or eliminate tariffs, quotas and other protectionist barriers between themselves
Single Market
A market where most trade barriers between members have been removed and common laws aim to make the movement of goods and services, labour and capital between countries as easy as the movement within a country
Outsourcing
Giving work to a sub-contractor, that was originally done in-house.
Offshoring
Moving jobs to other countries.
Pull factors
Factors that entice firms into new markets and the opportunities that businesses can take advantage of when selling into overseas markets.
Push factors
Factors in the existing market that encourage an organisation to seek international opportunities.
Risk
The probability of a bad event happening multiplied by its negative impact.
Saturation
The point where most of the customers who want to buy a product already have it.
Open Economy
Where a country allows the free movement of goods, services, capital and labour into and out of an economy.
Brand Recognition
How people identify a brand by its features and attributes.
Copyright
A legal right that grants the creator of an original work the sole right to determine whether its work may be used by others.
Franchise
A business model in which a business allows another operator to trade under their name.
Global Mergers
Where two or more businesses from different countries join together and operate as one.
Intellectual Property
A product that is the creation of the mind that the law protected from unauthorised use by others. E.g. patents, copyrights and trademarks.
Joint Venture
Where two or more businesses co-operate to share the costs and profits from a business venture.
Appreciation
A rise in the value of a country’s currency.
Competitive Advantage
The advantage that one firm has over its competitor’s in providing a certain product.
Depreciation
The loss in value of a country’s currency
Devaluation
The adjustment of the value of a currency in relation to other currencies to make it weaker
Economic Risk
The risk that future cash flows will change due to unexpected exchange rate changes.
Skills Shortages
Where potential employees do not have the skills demanded by employers.
Revaluation
The adjustment of the value of a currency in relation to other currencies to make it stronger.
Ethnocentric Approach
An approach to global marketing where a business makes little or no attempt to change or modify the product when selling into new foreign markets.
Geocentric Approach
An approach to global marketing where a business uses a combination of the ethnocentric and polycentric marketing approaches when marketing a product in new foreign markets.
Global Marketing Strategy
The process of adjusting a company’s marketing strategies to reflect conditions, consumer tastes and demand in other countries.
Glocalisation
It involves the development and sale of products to customers around the world which reflect specific local customs, tastes and traditions.
Localisation
Strategies that adjust products to fit with target customers.
Polycentric Approach
An approach to global marketing where a business adapts the product to meet the slightly different needs of customers in new foreign markets.
Global Niche Market
A market made up of customers who live in more than one country and have particular needs that are not met fully by the global mass market.
Premium Pricing
Where a business is able to charge a higher price than normal because the product is perceived to be of a higher quality.
Subculture
A cultural group within a larger culture, often having slightly different product needs to those of the larger culture.
Ethnocentricism
The way some people view their own cultures, ethics and norms as superior to those from different cultures.
Global Marketing
Involves the planning, producing, placing and promoting of a business’s products in a worldwide market.
Horizontal Transfer
The transfer of knowledge across the same industry.
Repatriated Profit
The return of the profit made by an MNC to a country where the MNC is based.
Transfer Pricing
It is an attempt to avoid relatively high tax rates through the proces which one subsidiary charges to another for components and finished goods.
Vertical Transfer
The transfer of knowledge, backwards or forwards, along the chain of producition in the same industry.
Code of Conduct
A set of rules outlining the proper practices of an organisation that contribute to the welfare of key stakeholders and reflect the rights of all affected by its operations.
Embezzlement
The theft of money or other belongings from a business by an employee who has control over such resources.
Green Credentials
Commitment to practices that do not damage the environment.
Tax Evasion
Using illegal means to avoid paying taxes that are owed.
Tax Avoidance
Using legal methods to reduce the amount of tax that a company pays
What are key indicators for growth?
GDP per capita, HDI, Mean Years of Schooling, Employment Patterns
Gross Domestic Product (GDP) per capita
The total economic output divided by the population, indicating the average income and economic activity.
What elements is HDI made of?
Life expectancy, education, income.
Key Benefits of International Trade
Access to new markets, diversification, economies of scale
Benefits of Country Specialisation
Countries can produce goods and services at lower costs, which increases efficiency and quality + increased global trade.
Challenges of Specialisation
Increases competition within industries, which may lead to lower profit margins, the need for constant innovation and the risk of price wars.
Benefits of Business Specialisation
Encouraged R&D + Optimises Operations
Pros of FDI
Allows businesses to establish a presence in international markets, gaining direct access to customers + reduce impact of trade barriers.
Types of FDI
Joint Ventures, Strategic Alliances, Mergers + Acquistions
Factors Contributing to Increased Globalisation
Political Change, Reduced Cost of Transport + Communication, Increased Significance of MNCs, Increased FDI, Migration.
Pros of Trade Liberalisation
Economic Growth, Increased Consumer Choice, Enhanced Global Cooperation, Specialisation and Efficiency.
Impact of ICT on Globalisation
Has allowed businesses to expand their customer base, coordinate supply chains, and improve efficiency.
Impact of Transport on Globalisation
Makes it easier + cheaper to source materials from distant countries + reach new markets.
Non-Tariff Barriers
Rules + regulations other that tariffs that restrict trade. E.g. health and safety standrds, packaging requirements, local contents laws.
Impact of Trade Policies on Domestic Businesses:
Protectionist policies can benefit local industries by reducing competition, but they can also harm consumers with higher prices.
Impact of Trade on Global Businesses:
Companies seeking international markets may face challenges due to trade restrictions, making it harder to expand globally.
Types of Trade Blocs
FTA (NAFTA), Common Market (ASEAN), Economic Union (EU)
Opportunities of Trade Blocs
Firms can benefit from economies of scale, lower costs + improved competition + protect against global competition and offer better global market deals.
Drawbacks of Trade Blocs
May harm trade by blocking more efficient producers from non-member countries; less efficient producers within blocs may be protected from competition.
Examples of Push Factors
Saturated Markets, High Competition
Examples of Pull Factors
New or Larger Markets, Access to Lower-cost or Secure Resources, Economies of Scale, Risk Spreading
Benefits of Offshoring
Reduces costs, hire skilled workers
Drawbacks of Offshoring
Damaging the firm’s reputation if jobs are lost domestically; language + cultural differences; potential loss of intellectual property
Benefits of Outsourcing
Cost reduction, specialisation,improved speed, or quality.
Drawbacks of Outsourcing
Loss of Expertise, Misaligned Interests, Poor Communication Leading To Inefficiencies.
Factors Influencing Labour Productivity
Worker skills + qualifications, working conditions, technological support, rules + regulations
Product Life Cycle
A model that describes the stages a product goes through from development to decline. E.g. development, introducton, growth, maturity, decline.
Examples of Extension Strategies
Move production to lower-cost markets to increase margins; explore selling the product in international markets; modify the product to consumers’ tastes and preferences.
Factors to Assess A Country As A Market
Growth of Disposable Income; Ease of Doing Business; Infrastructure; Political Stability; Exchange Rates.
Factors To Assess A Country As a Production Location
Costs of Production; Skills + Availability of Labour; Infrastructure; Location in a Trade Bloc; Ease of Doing Business; Natural Resources
What does ‘Ease of Doing Business’ refer to?
Ease of starting and closing a business; efficiency of contract enforcement, availability of trade credit, tax collection efficiency.
How to measure the likely return on investment?
SWOT Analysis, PESTLE Analysis + quantitative methods like payback period, average rate of return (ARR) and discounted cash flow.
Reasons for Global Mergers, Takeovers + Joint Ventures
Spreading Risk, Entering New Markets, Brand Recognition, Sharing Costs
What is the effect of appreciation on a nation?
Benefits exporters because their goods become cheaper for foreign buyers, increasing demand + importers face higher costs as foreign goods become more expensive.
What is the effect of depreciation on a nation?
Benefits importers, as foreign goods become cheaper + exporters may see a decrease in demand for their products, as they become more expensive for foreign customers.
Significance of Exchange Rate Changes
Elasticity of Demand + Delays in Impact
Impact of Skills Shortages
Lower Quality; Lower Productivity; Loss of Business
