Economic Change 3.7.5 Flashcards
benefits of globalisation for businesses
Trade enhances division of labour as businesses and countries specialise in areas of comparative advantage
Expand a businesses market and number of consumers, increasing sales and making it easier for businesses to grow
Gains from the sharing of ideas / skills / technologies across national borders
reduces costs, lower transport costs benefit from lower labour costs in different countries
reasons for globalisation
technological change (communications, transport)
growth strategies of businesses
increased income
why is it beneficial for businesses to go into emerging economies
lower fixed cost and start up costs in emerging economies
Get into the market early with little or no competition
establish a business so that when incomes are higher with increased economic growth you have advantages over competitors and are able to get a higher market share
What is the impact of GDP on functional decisions
High GDP means economy is strong, people have more disposable income ( links to income elasticity), this will change you pricing strategy, good opportunity to expand (HR=recruit), (Operations= boost capacity), create new products to aim at a higher income market.
Low GDP would ,mean you would want to decrease costs as much as possible to lower your BE point allowing you to survive at lower levels of sales
What is the impact of exchange rates on functional decisions - SPICED/WPIDEC
a strong pound would mean that exports are dearer for consumers and imports are cheaper for you. if you import goods or resources your costs will be much lower, this will create opportunities to expand and increase production due to higher profit margins, higher skilled workers can be recruited to help produce better quality service from your business
exports become more expensive with a strong pound, this could lead to a reduction in sales due to your products being more expensive to customers, this could lead to redundancies and a decrease in pricing of products so that you can stay competitive but will have to deal with lower profit margins. a reduction in production would be beneficial so that money isn’t held up in stock due to the loss of sales
What is the impact of inflation on functional decisions
people will have less disposable income and so you will want to reduce cost and make operations as efficient as possible, this could also lead to redundancies in certain areas of the business.
your costs are likely to be rising
What is the impact of interest rates on functional decisions
high interest rates would ,mean you will want a low gearing and more money in the bank
effect on consumers income as mortgage payments will go up AND consumers less willing to buy on credit
