business theme 4

Question 1

what are the 3 measurements of HDI

Answer 1

life expectancy

mean years of schooling

gross national income

Question 2

what is foreign direct investment (HDI)

Answer 2

direct investment into a country leading to a business becoming a multi national corporation.

Question 3

What are reasons for FDI

Answer 3

investment in expanding industries and fast growing profitable businesses

access to local resources e.g copper

access to local knowledge and skills

Question 4

methods of FDI

Answer 4

setting up a production facility

a joint venture with a local firm

buying assets in a foreign country e.g land, building or a factory

Question 5

causes and features of globalisation

Answer 5

developments in transport and communication

migration

supply chain intergration

reduction in the level of trade barriers

transnational companies/FDI

politics

labour force increases size

economic interdependency between countries

Question 6

methods of protectionism / trade barriers

Answer 6

tarrifs (tax on imports)

soft loans: loans offered to exporting businesses to help them compete in foreign markets

subsidies - gov grants to support businesses(lowers production cost to make them more competitive) encourages them to lower their coses, prices or make a product

quotas - limits set on imports/goods sold

state procuremnet: favouring domestic businesses as suppliers over foreign competitors

Question 7

risks of protectionism

Answer 7

forces businesses to use expensive domestic suppliers which decreases competitiveness

encourages businesses to move abroad into the protected country to avoid trading barriers

Question 8

what are trading blocks and examples

Answer 8

agreements between nations to allow free trade and collaboration

e.g NAFTA and ASEAN

Question 9

What are the 3 indicators of growth

Answer 9

Gross domestic product
Literacy rate
HDI

Question 10

What is protectionism?

Answer 10

Protecting domestic businesses against foreign competition and limiting imports into the country

Question 11

What are the benefits of free trade?

Answer 11

Provides growth opportunities for both markets

People can access goods and services from other countries for cheaper

Businesses can access raw materials for cheaper than before

Question 12

What are the benefits of trading blocks?

Answer 12

Easier to source labour if free movement is permitted

Businesses can benefit from comparative advantage as products are cheaper and better quality

Provides opportunities to expand into new markets

Question 13

What are the drawbacks of trading blocks?

Answer 13

Small businesses are vulnerable to large international competitors

Tensions with regions outside of the trading blocks

Question 14

conditions that prompt trade: push factors

Answer 14

market saturation - look for markets w high growth potential

competition - domestic competition can make competing at home unprofitable

shareholder pressure to get their dividens quickly

Question 15

Conditions that prompt trade: pull factors

Answer 15

acquiring brands and intellectual property - easier to buy foreign businesses intangible assets than develop them

economies of scale - risk bearing economies of scale by operating in different int. markets

cost savings - in developing countries e.g labour and tax

Question 16

what is off -shoring ?

Answer 16

moving manufacturing to a part of the world with lower production costs

Question 17

what is outsourcing?

Answer 17

moving a business function to a specialist external provider in another country

Question 18

what are 3 benefits of offshoring?

Answer 18

lower wages

access to a skilled workforce

access to raw materials

Question 19

what are the drawbacks of offshoring?

Answer 19

damage to business reputation in home country e.g primark

as economics develop production costs also rise

cultural and language barriers

Question 20

what are 3 benefits of outsourcing?

Answer 20

allows the business to upgrade

takes advantage of a countrys comparative advantage

access to specialist facilities and knowledge without having to directly invest

Question 21

what are 3 drawbacks of outsourcing?

Answer 21

reliance on third parties - limited control

cultural and language barriers

businesses are less flexible if tied into a contract with a specialist provider

Question 22

what is comparative advantage?

Answer 22

a company’s ability to specialise in producing goods that they can produce more efficiently or at a lower opportunity cost than other countries

Question 23

explain how growth affects the product life cycle

Answer 23

moving into international markets can extend the life cycle for products that have reached the maturity phase

this might involve:
a) exporting the product to the new country

b) using innovation to ensure product meets the cultural needs and standards

Question 24

why might businesses want to assess a potential market before investing in FDI?

Answer 24

to reduce the risk and ensure its easy to do business in that country because usually trading abroad can result in high costs and complications that they want to avoid.

Question 25

5 points in the country trading market checklist?

Answer 25

1. growth in disposable incomes - will there be demand from customers? 2. ease of of doing business- time and cost of setting it up and running it + trade barriers 3. political stability 4. stable exchange rate 5. corporation tax rate

Question 26

factors contributing to a countrys infrastructure?

Answer 26

ports rail roads quality of hospital airports broadband quality of schools and universities

Question 27

assessment of a country as a production location checklist

Answer 27

costs of production (including labour) skills and availability of labour location in a trading bloc government incentives developed infrastructure natural resources

Question 28

what is a merger?

Answer 28

two companies join together to create one organisation (usually one company survives and the other dissapears)

Question 29

what is a joint venture?

Answer 29

two separate businesses collaborating to achieve a shared goal e.g creating a 3rd business

Question 30

barriers to entry when trying to access an international market?

Answer 30

low brand awareness cultural/ language differences knowledge of the market additional costs incurred through exporting

Question 31

reasons for global mergers and joint ventures ?

Answer 31

spreading risk global competitiveness entering new markets aquiring national and international brands access to intellectual property

Question 32

what is intellectual property?

Answer 32

intangible property that is the result of creativity such as patents and brands

Question 33

the significance of exchange rate fluctuations on a company depends on what 3 things?

Answer 33

elasticity of demand - some products are less responsive to a change in price the relative economic growth in international markets the use of fixed contracts (pre agreed exchange rate) mitigates the impact of fluctuations

Question 34

what is the polycentric approach

Answer 34

differentiating a brand and product to ensure it fits a specific niche in an international market

Question 35

one positive and one drawback of the polycentic (international) approach

Answer 35

p: products are better targeted to meet the needs of specific countries and cultures d: this method is expensive and it may be difficult to launch new versions to compete with established local brands

Question 36

what is the ethnocentric (domestic) approach

Answer 36

little or no attempt to adapt to the international market

Question 37

advantages and disadvantages of ethnocentric (domestic) approach

Answer 37

adv: standardisation and economies of scale neg: may not take into account cultural differences across nations

Question 38

what is the geocentric (mixed) approach

Answer 38

slight adaptations and tweaks to suit each international market also referred to as a glocal approach

Question 39

pros and cons of geocentric approach

Answer 39

products may be tailored to the local market with lower development costs

Question 40

what are features of a global niche market

Answer 40

a clear understanding of the needs and wants of customers an emphasis on quality expertise in the product area

Question 41

what is a global niche market

Answer 41

businesses that operate in global markets but target niches instead of mass global markets

Question 42

factors contributing to international desirability

Answer 42

the internet and ecommerce social media ease of travel music film and tv

Question 43

cultural and social factors in successful marketing

Answer 43

cultural differences unintended meanings/ bad branding language differences different tastes

Question 44

how does MNCs create jobs

Answer 44

opportunities for development of skills and growth in pop as people relocate to work there a new factory can create hundreds of jobs

Question 45

how does a MNC influence wages and working conditions

Answer 45

high demand for labour in a local area is likely to create more competition for skilled workers if unemployment is low(employment is high ) if supply doesn't increase to meet this demand wages will rise

Question 46

how do MNCs affect the community and environment

Answer 46

they can cause conjestion and pollution in the local area to counteract this the MNC might build parks or improve transport links and invest in facilities like schools, rail links and other infrastructure

Question 48

how does MNCs affect social enterprise

Answer 48

large MNCs may set up charities and social enterprises to support the local community. may do this to fulfil their social responsibility or develop a positive image

Question 49

what is foreign direct investment (FDi) and why is it a good thing?

Answer 49

when an overseas business locates a facility is a foreign country and invests a huge amount of capital into that country. the investment could lead to spending in the economy which creates jobs and lowers unemployment

Question 50

what may FDI lead to

Answer 50

reduction in national debt increased employment increased incomes increased tax revenue

Question 51

what factors are influencing the actions of MNCs

Answer 51

political influences social media pressure groups taxation policies legal controls

Question 52

name 4 international stakeholder conflicts

Answer 52

shareholder customers governments and NGO's communities

Question 53

what are global ethics that businesses must consider?

Answer 53

environmental considerations pay and working conditions marketing considerations supply chain considerations

Question 54

The Impact of a Currency Depreciation on Global Competitiveness

Answer 54

If businesses export goods/services abroad, they become more competitive because their products are cheaper to purchase In the domestic market, there may be less competition from foreign firms as imports are now more expensive for domestic consumers to purchase If a business imports raw materials or components from abroad, they are now more expensive This leads to an increase in the costs for a business, which could then be passed onto consumers in the form of higher prices

Question 55

what are the limitations of FDI

Answer 55

Economic dependence: host country can become too dependent on foreign investors, making its economy vulnerable if host country leaves labour exploitation of low wages and weaker labour laws exploitation of resources :overuse natural resources without concern for sustainability, leading to environmental damage. loss of domestic businesses: Local businesses may struggle to compete with well-funded foreign companies, leading to bankruptcies and job losses profit repatriation: profits made by foreign companies are often sent back to their home country instead of being reinvested locally, limiting the economic benefit for the host nation.