Globalisation Flashcards
What is globalisation ?
Process where world is increasingly interconnected due to trade and cultural exchange
What does the nature of globalisation revolve around ?
Multi national companies
What are emerging economies ?
Economy progressing towards becoming more advanced through rapid growth and industrialisation
What are developing markets ?
Markets that businesses believe there’s potential to sell products or services at profit
What are BRIC economies ?
Brazil, Russia, India and China who are at similar stage of economic development
What is purchasing power parity ?
Allows for differences in cost of living in other countries
What does purchasing power parity allow for ?
More realistic comparisons of GDP
What are 10 factors that contribute to globalisation ?
- Reduction of international trade barriers
- Political change
- Reduced transportation and communication costs
- Mobile technology and internet
- Increased significance of transnational corporations
- Increased investment flows
- Migration within and between economies
- Growth of global labour force
- Structural changes
- Consumer tastes
What is trade liberalisation ?
Removal or reduction of barriers on the free exchange of goods between countries
What is a transnational corporation ?
Businesses registered and operating in more than one country but selling same products
What are 4 strategies used to achieve global growth ?
- Global branding
- Foreign direct investment
- Inward FDI
- Outward FDI
What are the 4 effects of globalisation on Wales and the UK ?
- Emerging markets able to operate in price penetration strategies
- Traditional industries undercut on price by cheaper imports
- Cheaper costs passed on to customers
4.UK domestic businesses had to be more efficient and offer USP
What is global branding ?
Creating brands that are recognised throughout the world
What are 3 advantages of global branding ?
- EOS
- Reduced risks
- See similar product at reduced unit costs
What are 2 disadvantages of global branding ?
- Expensive
- Local market may not accept product that’s not tailored to needs
What is foreign direct investment ?
Company in one country takes controlling interest or ownership in company based in another country
What is inward FDI ?
Foreign business invests in the local economy
What is outward FDI ?
Local business expands operations to foreign country ?
What are 2 advantages of FDI ?
- Lower production costs
- More competitive pricing
What are 4 disadvantages of FDI ?
- High set up costs initially
- Product has to be orientated to local needs
- Local government rules
- Risk of failure or no growth in short term
How can a business quickly enter a market that’s not saturated ?
Merge, takeover or work in partnership
What is an advantage of a merge or partnership ?
Transfer of specialist knowledge and skills from local market
What is a disadvantage of a merge or partnership ?
Cultures in each business may be too different to work together effectively
What is an advantage of a takeover ?
Result in large and instantaneous growth = already established customer base
What is a disadvantage of a takeover ?
Culture clash and cost to integrate may be high
What are 4 advantages of operating in a global market ?
- Higher profits in new markets
- Gives extension strategy
- Can buy cheap materials = emerging economies rich in natural resources
- Foreign countries willing to offer incentives to bring multinationals
What are 4 disadvantages of operating in a global market ?
- Difficult and costly to enter
- May be insufficient workers available
- May need significant re-designs
- If take advantage of conditions in local market = unethical
What is glocalisation ?
Adapting products and marketing activities to reflect local needs
What 3 factors does glocalisation include ?
- Brand identity or packaging
- Compatibility with local rules
- Manufacturing meets social requirements
What is global marketing ?
Finding a fit between a business’s objectives and unique market position
What are 3 advantages of global branding ?
- EOS and mass production = high sales
- Promotional tools = cost effective
- Stronger negotiating power with retailers
What are 3 advantages of glocalised branding ?
- Boosts market share
- Local buyers associate more with product
- May involve local production = cost savings and environmentally friendly brand image
What is a disadvantage to glocalised branding ?
Difficult to apply marketing mix
What is the marketing mix ?
The way business controls product, price, place, and promotion to its suitable for customers
What 4 things does a business need to do to meet local needs ?
- Market research
- Acknowledge cultural preferences
- Consider price
- Ensure efficient customer support
What are 4 advantages of globalisation ?
- Encourages to benefit from division of labour & EOS
- Competitive markets reduce monopoly profits
- Gain more skilled workers
- Technology and knowledge shared
What are 2 disadvantages of globalisation ?
- May stifle competition
- Local businesses may be driven out
What are 5 advantages of globalisation on stakeholders ?
- Lower unemployment
- Job creation by MNCs
- Higher average income
- Improved public services
- Increased investment
What are 4 disadvantages of globalisation on stakeholders ?
- Inequality
- Negative effects on local businesses
- Vulnerability to external economic shocks
- Race to the bottom
What is a multi national company ?
Business that has operations across a number of countries
What are 3 reasons why MNCs exist ?
- Reduces costs = producing goods closer to target market
- Savings in cost production
- Can avoid protectionist measures
What are 5 advantages of becoming an NMC ?
- Increasing market share
- Securing cheaper premises & labour
- Avoiding tax or trade barriers
- Gain government grants & political influence
- Tax avoidance & reduction
What are 4 disadvantages of becoming an NMC ?
- Tighter legal requirements
- Threats to intellectual property rights
- DEOS
- Targeted by pressure groups & media
What is a positive and negative impact of NMCs on local workforce ?
NMC training = higher productivity
May attract skilled workforce = deny local businesses talented staff
What is a positive and negative impact of NMCs on wages ?
Pay higher wages than local rates
Workers with lower pay = resentful
What is a positive and negative impact of NMCs on working conditions ?
Ensure conditions meet expectations
Above average conditions may still be poor
What is a positive and negative impact of NMCs on job creation ?
Significant impact on employment
NMCs have efficient cost structures = local businesses may no longer be competitive and lose jobs
What is a positive impact of NMCs on technology ?
More innovative and educated workforce
What is a positive impact of NMCs on partnerships ?
Usually formed = less risk for local business with access to skills and efficient production methods
What is a positive impact of NMCs on business culture ?
Uplift of quality in emerging countries
What is a positive and negative impact of NMCs on consumers ?
Introduced to different cost products with higher quality
Bad publicity due to consumer perceptions = reducing local jobs
What is a positive and negative impact of NMCs on local communities and environment ?
Under close scrutiny
Many NMCs who make mistakes and have negative impacts
What is a positive and negative impact of NMCs on FDI ?
Taxes = improved public facilities
FDI flow may be positive in short term but negative in long term
What is a positive impact of NMCs on balance of payments ?
Tells us how money is being spent
What is a balance of payments ?
Records all financial transactions between country importing goods and other countries
What is a positive impact of NMCs on tax revenues ?
Can improve economies
What is transfer pricing ?
Two companies part of same multinational group use internal pricing to artificially transfer profits from high to low tax countries
