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
