globalisation Flashcards
what is globalisation
how interconnected the world is
has resulted in businesses operating in lots of countries across the world
they can e based anywhere and can sell and buy to any country
help businesses make strategic decisions about where to get raw materials and where to manufacture there products
what does global trade mean
means that firms and consumers in one country can affect the economies of other countries
what is GDP
gross domestic product
total market value of goods and service produced within a nation over a period of time (usually a year)
used to measure economic performance of a country
how is gdp measured
per capita meaning divided by the number of people in the country
calculating difference of GDP from one country to the next, allows you to see how quickly the economy is growing
dis of GDP
doesn’t show distribution of wealth, levels of disposable income, costs of living
what are some examples of indicators of growth (not including GDP)
literacy rate-adult literacy rate is percentage of amount of people 15 and over who can read and write
health-looks at factors e.g life expectancy, death rates, sickness rates
increase in level of health suggests economy is growing, suggests government is spending more on healthcare, people are fit to work
human development index-measures how developed people are within a country based on life expectancy, average income for people, average number of years schooling
why is economica growth immportant for individuals and businesses
economic growth means increase in demand
increase in output
increase in output means increase in employment opportunities as need more workers
therefore, more people earning money
also, as doing well getting payed more
therefore, more people leaving living in poverty
and into middle class
businesses from foreign countries may start selling their goods in the growing economies or start operating parts of their business in countries with growing economies
can be done to save transportation costs to sell goods there
and from cheaper labour to reduce costs
what is an emerging economy
economy which is fast growing but not yet fully developed
e.g Brits economies e.g china
mint economies e.g indonesia
have cheap labour costs so many businesses locate manufacturing there
what is international trade
importing and exporting
what are imports
products brought from overseas
money coming out of economy and going to foreign country product was brought from
imports cause money to flow out of the economy
imported goods often cheaper then domestically produced ones
what are exports
products sold overseas
business gets money from person or business they sold it to in another country
exports result in money coming into the economy
businesses use as a way to expand, benefitting from increase in market size
can be simplest and least risky to access overseas markets
how can specialisation help a firm to trade internationally
competitive advantage is something that allows business to generate more sales or be more profitable than its rivals
e.g. can gain competitive advantage by having lower costs, specialist staff, higher quality products
helps international markets as often face a lot of competition then frims operrating in domestic market
what is specialisation
where a firm focuses on producing just one product or a narrow range of products
adv of using specialisation
improves efficiency-workers become highly skilled at making a particular product
means speed and quality likely to increase
allows price to be reduced or profit margin increased
dis of specialisation
lose sales if demand for that particular product goes down and wont have other sources of revenue to make up for the loss
can increase cost of training staff-if not experts may need extensive training to gain skills needed to become specialised in making their products
what is foreign direct investment
when a firm in one country invests in business in another country
may be merging or taking over an existing foreign firm
what must be needed to class a business as an FDI
investing firm has to have some managerial control of a business in a foreign country-doesn’t count if firm just buys shares in a foreign business
what does it mean if FDI is horizontal
where firm invests in a foreign business that is at the same stage of the production process as the business in the home country
what does it mean by FDI vertical
where a business invests in a forgein business that is in different stage of production process as home country
adv of FDI
gives a firm access to new markets-can increase sales and there are more people to sell to
may reduce firms costs e.g cheaper labour in foreign country
may make firm more profitable
allow business to take advanatge of skilled local labour which can increase productivity
operating in foregin country allows firm to obtain first hand knowledge about a nations legal system, consumer tastes and markets
can help business overcome international trade barriers e.g tariffs or quotas which can prevent access to a market
what is trade liberalisation
removes restrictions to international trade
international trade can be restricted by trade barriers e.g tariffs and quotas which make trading more difficult
the removal of these restrictions=trade liberalisation
who promotes trade liberalisation
WTO
world trade organisation
adv of trade liberalisation
any raw materials that a firm imports will become cheaper-lower firms costs which could make it more competitive as can reduce its prices
exporting goods becomes easier and cheaper so more markets for firms to expand into
consumer choice increased as products all over world
increased competition will mean products cheaper for consumers
dis of trade liberalisation
reduce the costs of imports
domestic businesses may be forced out of business by increased imports if not competitive enough which can increase unemployment
how can political change make countries more open to change
if political system changes to one that supports trade liberalisation
can lead to more trade
therefore, increases globalisation
has led to growth of trading blocs-these reduce trade barriers between certain countries
more people able to work
world population is increasing
therefore, more people living and working longer
therefore the global wokrforce is rising
with more people working, gives businesses freedom to set up business operations wherever they want
people migrate much more
people move about a lot more then used to
migration increases globalisation because people may create new demand for products in area they move to meaning creates opportunities for firms to sell in new locations
transport and communcation has become cheaper
improvements in tech means businesses can send info to and from more easily and cheaply
so communicating with overseas suppliers, customers have become more convienet and cheaper which has led to increase in international trade
what is protectionism
helps build an economy
when a government protects domestic businesses and jobs from foreign compeititon
what are the 3 ways of protecitonsim (protecting domestic firms)
tarrifs and quotas
government legislation
domestic subsidies
what are tarrifs
a tax paid when certain products are imported into a country
what are quotas
restriction set by government that put limits on the volume of particular products that can be imported unto a country over a time period
what are tarrifs and quotas main motive
to discourage international trade and protect domestic firms by making imports either more expensive then domestic products or limiting how much is brought into the country
adv of tarrifs and quotas
help domestic froms to grow as face less competition from foriegn firms
dis of tariffs and quotas
can restict consumer chouse
consumers may have to pay more for products then they would do otherwise
lack of competition may remove the incentives of deomstic firms to imporve efficiency and quality
government legislation
can restrict international trade
e.g trade sanctions strongly restrict trade
trade embargoes ban trade with countries altogether
can make trade extremely difficult and expensive
can cause retaliation-another country might respond by restricting trade with your country
therefore, resticting counteries development
domestic subsidies
sums of money provided by government
these reduce production costs allowing domestic firms to have lower prices then imports
dis of domestic subsidies
subsidies cost the government money which means people living in that country will face higher taxes to fund the subsidies
trading blocs
encourage trade between countries
associations between different governments to promote and manage trade for particular region
members sign agreements to remove or restirct protectionsm barriers between them
has helped trade liberslaition by removal of trade restictions
example of trading blocs
ASEAN
NAFTA
adv of trading blocs
when country becomes member of trading bloc, removal of trade barriers means that business may become cheapest supplier for other counteires in that bloc
therefore, increase demand for businesses products
greater compeittion can result in firms being more efficient-because they will reduce their prices as much as possible
easier for businesses within bloc to obtain materials, labour and capital
may have more access to skilled workers which can imporve efficeincy and quality of production
dis of trading bloc
can become more expensive ti import products from outside of the bloc
small firms in country that has just joined bloc may be forced out beacuse of competition form larger firms
