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Business Paper 3 > Globalisation > Flashcards

Globalisation Flashcards

1
Q

What is globalisation ?

A

Process where world is increasingly interconnected due to trade and cultural exchange

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2
Q

What does the nature of globalisation revolve around ?

A

Multi national companies

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3
Q

What are emerging economies ?

A

Economy progressing towards becoming more advanced through rapid growth and industrialisation

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4
Q

What are developing markets ?

A

Markets that businesses believe there’s potential to sell products or services at profit

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5
Q

What are BRIC economies ?

A

Brazil, Russia, India and China who are at similar stage of economic development

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6
Q

What is purchasing power parity ?

A

Allows for differences in cost of living in other countries

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8
Q

What does purchasing power parity allow for ?

A

More realistic comparisons of GDP

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9
Q

What are 10 factors that contribute to globalisation ?

A
  1. Reduction of international trade barriers
  2. Political change
  3. Reduced transportation and communication costs
  4. Mobile technology and internet
  5. Increased significance of transnational corporations
  6. Increased investment flows
  7. Migration within and between economies
  8. Growth of global labour force
  9. Structural changes
  10. Consumer tastes
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10
Q

What is trade liberalisation ?

A

Removal or reduction of barriers on the free exchange of goods between countries

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11
Q

What is a transnational corporation ?

A

Businesses registered and operating in more than one country but selling same products

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12
Q

What are 4 strategies used to achieve global growth ?

A
  1. Global branding
  2. Foreign direct investment
  3. Inward FDI
  4. Outward FDI
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13
Q

What are the 4 effects of globalisation on Wales and the UK ?

A
  1. Emerging markets able to operate in price penetration strategies
  2. Traditional industries undercut on price by cheaper imports
  3. Cheaper costs passed on to customers
    4.UK domestic businesses had to be more efficient and offer USP
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13
Q

What is global branding ?

A

Creating brands that are recognised throughout the world

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14
Q

What are 3 advantages of global branding ?

A
  1. EOS
  2. Reduced risks
  3. See similar product at reduced unit costs
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15
Q

What are 2 disadvantages of global branding ?

A
  1. Expensive
  2. Local market may not accept product that’s not tailored to needs
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16
Q

What is foreign direct investment ?

A

Company in one country takes controlling interest or ownership in company based in another country

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17
Q

What is inward FDI ?

A

Foreign business invests in the local economy

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18
Q

What is outward FDI ?

A

Local business expands operations to foreign country ?

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19
Q

What are 2 advantages of FDI ?

A
  1. Lower production costs
  2. More competitive pricing
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20
Q

What are 4 disadvantages of FDI ?

A
  1. High set up costs initially
  2. Product has to be orientated to local needs
  3. Local government rules
  4. Risk of failure or no growth in short term
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21
Q

How can a business quickly enter a market that’s not saturated ?

A

Merge, takeover or work in partnership

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22
Q

What is an advantage of a merge or partnership ?

A

Transfer of specialist knowledge and skills from local market

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23
Q

What is a disadvantage of a merge or partnership ?

A

Cultures in each business may be too different to work together effectively

24
Q

What is an advantage of a takeover ?

A

Result in large and instantaneous growth = already established customer base

25
What is a disadvantage of a takeover ?
Culture clash and cost to integrate may be high
26
What are 4 advantages of operating in a global market ?
1. Higher profits in new markets 2. Gives extension strategy 3. Can buy cheap materials = emerging economies rich in natural resources 4. Foreign countries willing to offer incentives to bring multinationals
27
What are 4 disadvantages of operating in a global market ?
1. Difficult and costly to enter 2. May be insufficient workers available 3. May need significant re-designs 4. If take advantage of conditions in local market = unethical
28
What is glocalisation ?
Adapting products and marketing activities to reflect local needs
29
What 3 factors does glocalisation include ?
1. Brand identity or packaging 2. Compatibility with local rules 3. Manufacturing meets social requirements
30
What is global marketing ?
Finding a fit between a business's objectives and unique market position
31
What are 3 advantages of global branding ?
1. EOS and mass production = high sales 2. Promotional tools = cost effective 3. Stronger negotiating power with retailers
32
What are 3 advantages of glocalised branding ?
1. Boosts market share 2. Local buyers associate more with product 3. May involve local production = cost savings and environmentally friendly brand image
33
What is a disadvantage to glocalised branding ?
Difficult to apply marketing mix
34
What is the marketing mix ?
The way business controls product, price, place, and promotion to its suitable for customers
35
What 4 things does a business need to do to meet local needs ?
1. Market research 2. Acknowledge cultural preferences 3. Consider price 4. Ensure efficient customer support
36
What are 4 advantages of globalisation ?
1. Encourages to benefit from division of labour & EOS 2. Competitive markets reduce monopoly profits 3. Gain more skilled workers 4. Technology and knowledge shared
37
What are 2 disadvantages of globalisation ?
1. May stifle competition 2. Local businesses may be driven out
38
What are 5 advantages of globalisation on stakeholders ?
1. Lower unemployment 2. Job creation by MNCs 3. Higher average income 4. Improved public services 5. Increased investment
39
What are 4 disadvantages of globalisation on stakeholders ?
1. Inequality 2. Negative effects on local businesses 3. Vulnerability to external economic shocks 4. Race to the bottom
40
What is a multi national company ?
Business that has operations across a number of countries
41
What are 3 reasons why MNCs exist ?
1. Reduces costs = producing goods closer to target market 2. Savings in cost production 3. Can avoid protectionist measures
42
What are 5 advantages of becoming an NMC ?
1. Increasing market share 2. Securing cheaper premises & labour 3. Avoiding tax or trade barriers 4. Gain government grants & political influence 5. Tax avoidance & reduction
43
What are 4 disadvantages of becoming an NMC ?
1. Tighter legal requirements 2. Threats to intellectual property rights 3. DEOS 4. Targeted by pressure groups & media
44
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
45
What is a positive and negative impact of NMCs on wages ?
Pay higher wages than local rates Workers with lower pay = resentful
46
What is a positive and negative impact of NMCs on working conditions ?
Ensure conditions meet expectations Above average conditions may still be poor
47
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
48
What is a positive impact of NMCs on technology ?
More innovative and educated workforce
49
What is a positive impact of NMCs on partnerships ?
Usually formed = less risk for local business with access to skills and efficient production methods
50
What is a positive impact of NMCs on business culture ?
Uplift of quality in emerging countries
51
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
52
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
53
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
54
What is a positive impact of NMCs on balance of payments ?
Tells us how money is being spent
55
What is a balance of payments ?
Records all financial transactions between country importing goods and other countries
56
What is a positive impact of NMCs on tax revenues ?
Can improve economies
57
What is transfer pricing ?
Two companies part of same multinational group use internal pricing to artificially transfer profits from high to low tax countries

Business Paper 3 (12 decks)

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