Globalisation Flashcards
What is globalisation?
The process that enables product, financial and investment markets to operate across the globe
What are the characteristics of globalisation?
-Greater trade in goods and services between nations and within regions
-An increase in transfers of capital between countries
-Higher levels of labour migration within and between countries
What are the causes of globalisation?
-Deregulation of markets
-Political changes
-Removal of barriers of trade
-Lowering transportation costs
What are the benefits of globalisation?
-Consumers have greater choice and cheaper goods
-Developing countries increase wealth by producing goods for export
-Businesses can trade internationally
What are the cons of globalisation?
-Unskilled workers in western countries have fallen wages
-Overcompeted businesses
-Workers in developing countries have been exploited
-Environmental damage
What are the benefits of multinationals?
-Providing employment
-Investment leads to infrastructure development
-New technology
-Increased growth in UK economy
What are the cons of multinationals?
-Lead to other businesses going out of business and causing unemployment
-Destroying local culture
-Negative environmental impacts
What is ecnonomic growth?
Occurs when a country produces more goods and services in one year than it did the year before
Measured by:
-GDP
-GDP per capita
Why are businesses intrested in the economic growth of a country?
-High GDP means high incomes so people are more likely to spend more
-High investment rates if sales revenue is higher
-High economic growth means higher ouput so firms employ more people, increasing the employment rate
What are the benefits of economic growth?
-Increased spending by consumers leading to increased sales for a business
-Increased opportunities to expand
-Increased profits and investment in businesses
What are the cons of economic growth?
-Increase in competition from expanding businesses and improved goods
-Increase in prices leading to inflation
-Shortage of labour due to increased wages and costs
What are the BRIC countries?
Brazil, Russia, India, China
-Classed as emerging superpowers because they share either: large populations, key resources or economic power
What are the MINT countries?
Mexico, Indonesia, Nigeria, Turkey
-All have very favourable demographics and have the potential to become superpowers in the future
What does GDP say about a country?
The strength of a countries economy which helps to determine the efficent capital deployment
What is the effect of GDP growth on a business?
-Negative growth = may need to reduce employment and offer redundancies and must evaluate their business opportunities
-Positive growth = increases confidence, hire new employees, expand, buy new equipment
What are the indicators of growth?
-Income levels
-Education
-Health
What is HDI?
Human Development Index
-Health
-Education
-Living standards
What are the benefits of HDI?
-Can compare countries
-Education and health give information about the countries infrastructure and opportunies
-Can measure progress over time
-Can allocate resources more efficently to those who need it most
What are the cons of HDI?
-Misses many important factors
-Doesn’t consider politics
-Doesn’t consider the environment
-Doesn’t consider distribution of income, may be unequal
What is specialisation?
The process by which individuals, businesses and economies concentrate on creating and selling those goods and services that they produce most efficently and cost effectively
What are the benefits of specialisation?
-Creates specialised staff
-Improved quality of product
-Improved efficiency
-Using the same materials, means buying in bulk which generates economies of scale
What are the cons of specialisation?
-Can’t target niche markets
-Over reliant
-Hard to compete as other companies may become cheaper
-Causes diseconomies of scale if a business is too big
What is FDI?
Forgein Direct Investment
-investment in a forgein country by a business to obtain control of another business
What are the benefits of FDI?
-Creates jobs
-Higher wages and improved working conditions
-Can export more goods
What are the cons of FDI?
-Possible exploitation
-Businesses take profits and pay little tax
-Competition with existing buisnesses
What is greenfield?
A type of FDI where a company will build its own, brand new facilities from the ground up, involves organic growth
-competition is difficult to overcome
-entry process takes years
-new facilities are more efficent
-have a greater control of the business
What is brownfield?
A type of FDI when a company purchases or leases an existing business in the forgein country, involving inorganic growth
-reduces start up costs
-gain access to an established market
-one less competitor to deal with
-aquire a companys technology, staff and knowledge
What are the ways to enter international markets?
-Exporting = manufacturing products at home to be sold abroad
-Franchising = selling a license to use a firms name, products or services in return for an intial payment and royalities
-Licensing = one firm producing and marketing another’s products in a particular country
-Joint venture = 2 companies combining resources to operate in a particular country, shares risks and costs
-Merger/takeover = when two seperate entities combine forces to create a new joint organisation
-Direct investment = setting up production facilities abroad, costly and risky, lower wage costs, availability of raw materials
What is protectionism?
Supporting domestic industries against forgein competition by the government using policies such as: quotas, tarffis or barriers that increase the prices of imported goods
What are the protectionism methods?
-Tariff = a tax placed on an import to increase its price and reduce demand
-Quotas = a limit on the quantity of a good imported or exported
-Subsidy = money given to local producers to make their goods cheaper on the domestic market
What are the benefits of protectionism?
-Protect key strategic industries
-Raise money for government
-Protect domestic jobs
-Reduce the trade defict
-Protect new infant industries
What are the cons of protectionism?
-High import prices may not reduce demand
-Tariffs can raise consumer prices
-Domestic firms may not become more competitive
-Quotas require monitoring
What is a trading bloc?
A type of intergovernmental agreement to reduce regional trade barriers
What are the types of trading blocs?
-Free trade agreements = elimination or reduction of import tariffs and quotas on trade between member countries
-Customs unions = removing trade barriers and establishing a common external tariff on imports and non-member countries
-Common markets = remove trade barriers and allow free movement of factors of production e.g labour
-Monetary Unions = common currency shared by member countries
What is the EU?
-27 member states
-Started in 1951
-Combined market of 550 million customers
-Free circulation of goods, people and money in the EU
-19 memebers make up the eurozone
What is NAFTA?
Canada, Mexico, United States
-Free trade zone
-Covers environmental and labour issues as well as trade and investment
What is the ASEAN?
Association of Southeast Asian Nations
-10 member international body
-More than 500 million people living in the reigon
-Set up in 1967
-Free trade agreement among member states with eased travel in the region
What is trade liberalisation?
Removal or reduction of restrictions or barriers on the free exchange of goods between nations
-aims to make an economy more open to trade and investment
What are the benefits of trading blocs?
-Higher quality of goods and services
-Cheaper goods and services
-Promotes co operative relationships between countries
-Promotes a higher standard of living
-Encourages trade which boosts economic growth
-Larger markets
What are the cons of trading blocs?
-Politicians use it as negotion power
-Large companies have greater power
-Complex and expensive
-Increased competition inside the bloc
-Difficult to expand to areas outside the bloc
