External influences (P1) Flashcards

Paper 1

1
Q

Exchange rate

A

the value of a foreign currency measured against another currency

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2
Q

When the pound is strong what happens to imports

A

Imports are cheap

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3
Q

When the pound is weak what happens to imports

A

Imports become more expensive

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4
Q

Inflation

A

the persistent rise in general prices overtime

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5
Q

Deflation

A

the persistent fall in general prices overtime

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6
Q

disinflation

A

prices are rising but at a slower rate.

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7
Q

How is inflation measured

A

CPI- measures the change in price of a basket of 650 goods

RPI- takes into account of mortgage repayment

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8
Q

Pestle

A
Political
Economic
Social
Technological
Legal 
Environmental
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9
Q

What does pestle measure

A

external environment

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10
Q

Factors affecting PED

A

availability of substitutes
price of competitor goods
Branding

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11
Q

purchasing power parity

A

The exchange rate that equalizes the purchasing power in two economies

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12
Q

GDP per capita

A

national income divided by the population

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13
Q

push factors in a market

A
  1. saturated markets (lots of seller and few buyers)
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14
Q

pull factors into a market

A
  1. economies of scale
  2. risk spreading
  3. low costs of factors of production
  4. government incentives
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15
Q

reasons for globalisation

A
  1. containerisation
  2. internet making it easier to target global markets
  3. free trade agreements
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16
Q

offshoring

A

internal growth which involves moving parts of the business overseas

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17
Q

outsourcing

A

when an external firm is used to complete business functions

18
Q

porters five forces definition

A

it can help inform a business whether the market they are going to enter is likely to be profitable

19
Q

what are porters five forces

A
  1. buyer power
  2. supplier power
  3. threat of entrants
  4. threat of substitutes
  5. competitive rivalry.
20
Q

what is supplier power

A

the influence providers have over the price that consumers have to pay for raw materials.

if there is a limited number of suppliers they may have greater power and may be able to change higher prices as a result

21
Q

globalisation

A

is the increasing flows of goods/ services, capital and labour across international boarders

22
Q

factors contributing to globalisation

A
  1. reduced cost of transport (as a result of containerisation)
  2. more free trade agreements
  3. growth of e-commerce
23
Q

what theory goes against a business being ethical

A

the shareholder concept

24
Q

what does the shareholder concept suggest

A

the one responsibility that a business has it to maximise profit within the legal framework.
Suggesting ethics are irrelevant

25
Q

factors making an country a better production location

A
  1. cheaper labour
  2. more skilled labour
  3. government incentives
  4. natural resources.
26
Q

benefits to countries by having an MNC operate in the area

A
  1. increased employment-increased incomes-better standard of living
  2. helps develop skills of the labour force
  3. can access larger tax revenues
27
Q

drawbacks to countries by having an MNC operate in the area

A
  1. local competition may collapse
  2. profits earned may be remitted back to the host country
  3. may act unethically and ignore local cultures to maximise profit
28
Q

offshoring

A

work is done within the business overseas

29
Q

outsourcing

A

the work is done by an external firm

30
Q

factors causing cost competitiveness to fall

A
  1. an depreciation of the exchange rate may make the cost of raw imported materials more expensive
  2. an unproductive workforce may mean cost of labour per unit increases
31
Q

push factors from a country

A
  1. high protectionist measures
  2. high competition
  3. lack of skilled labour
32
Q

pull factors into a country

A
  1. high market demand
  2. low labour costs
  3. government incentives.
33
Q

joint venture

A

when two businesses come together to form a separate entity

34
Q

2 benefits for a business to specialise

A
  1. employees may become more productive overtime

2. purchasing economies of scale

35
Q

negatives for a business to specialise

A
  1. may be over reliant on an individual market/ material which may increase the risk of failure
36
Q

what is a trade bloc

A

an areas of free trade

EU, ASEAN, NAFTA

37
Q

benefits to a business by operating in a trade bloc

A
  1. lower cost of imported goods from local countries

2. can target a larger market at low cost

38
Q

Negatives to a business by operating in a trade bloc

A
  1. if a common external tariff is placed imports may be more expensive from countries such as Africa or America (if in the EU)
  2. increased competition from trading partners
39
Q

what is the impact of a skills shortage on international competitiveness

A

it is likely to make it less competitive as wage rates are likely to rise to attract workers into work. meaning firms may have less profit to finance r and d and the product may be less developed as a result

40
Q

advantages of comparative advantage

A
  1. specialisation

2. ???

41
Q

how have MNCs increased globalisation

A

1.when MNCs move goods from one country to another they can avoid the cost of tariffs.