Globalisation 4.1 Flashcards
What is economic growth?
An increase in a countries productive capacity
Compare the growth rate of a developed country and a developing country
When a developing company grows, consumers may have more income. This means that they may spend more on imports from developed economies
What does BRICS stand for?
Brazil, Russia, India, China, South Africa
Explain the growing economic power in China
China owns 30% of the worlds total manufacturing. This is because of its cheap-labour, efficient suppliers and excellent infrastructure
What are the two implications of economic growth for businesses and individuals?
- Trade opportunities for businesses
- Employment patterns
Explain trade opportunities for businesses
When an economy grows, more people have income and so they may increase the number of goods imported. Firms may also have more revenue and profits and so an increase trade may lead to more exports
Explain employment patterns
When a developing economy grows, more labour may be able to gain jobs if they have more opportunities. This is an indication of growth.
What are the 4 indicators of growth?
- GDP per capita
- Literacy rates
- Health
- HDI
What is GDP per capita?
This is the total number of goods and services produced in a year divided by population in the country.
What is a literacy rate ?
Determines the % of people in the country that can read and write. A highly developed country will have more skilled labour as they have better education and higher paid, more skilled jobs
What 4 factors can be used to determine the health of a country?
- Access to clean water
- Life expectancy at birth
- Pollution exposure
- Infant and maternal mortality
What are the 3 factors that are included in the Human Development Index?
- Life expectancy
- Incomes
- Education (number of years spent in school)
What is a comparative advantage?
When a country can produce the same good as another country at a lower opportunity cost than another
What is a competitive advantage?
A business should be specialising in what it has an advantage in compared to other business. They need to produce products that have added value and low costs
What is specialistion?
When a firm specialises in the production of a specific trade and therefore can focus in the trade of this good
What is FDI?
When a overseas business invests in a company in another country
Identify 3 reasons why a business may want to use FDI?
- Keep tight control of another company abroad
- To be closer to its customers
- To protect its intellectual property
What is horizontal FDI?
FDI into a company that produces the same as its own company
What is Vertical FDI?
This is when a company invests in another part of the supply chain
FDI: what is a joint venture?
collaborative agreement between two parties to invest in a business and share ownership and control.
What is globalisation?
The interdependence and integration of international markets which stimulates trade.
How does reduced international trade barriers contribute to globalisation?
Free trade agreements stimulate trade because it costs firms less to trade with other countries. This may make it easier to obtain goods from abroad than domestic firms
How does political change influence globalisation?
Different world leaders have different ideas on how they want to trade with other countries therefore political changes may cause increase trade between other countries
How does the reduces costs of transport and communication influence globalisation?
- Airlines have allowed lower-cost travel
- The internet has allowed the increase in communication around the world
- Most jobs have become office based now and has allowed them to communicate with the rest of the world
How does an increase in global transnational companies contribute to globalisation?
They have the ability to start-up in countries around the world which allows more trade to take place in the country
How does an increase in FDI contribute to globalisation?
FDI spreads business activity, increases the number of jobs that are available and increases wealth across the globe because more trade can take place
How does an increase in migration contribute to globalisation?
3% of the worlds population lives in a country outside of their birth country which means that there is an increase in migration. This means more culture changes, increased labour, more transfer payments etc
How does an increases in the global labour force contribute to globalisation?
Increases global demand as more goods + services are produced which can be traded abroad. This increases employment further. Some people can obtain skills and set up their own business etx
How does structural change contribute to globalisation?
The movement into different sectors of an industry means that a country can export more because, for example, service sectors are more export-orientated.
What are 4 main reasons that protectionism on imports is used?
- Protect jobs
- Protect infant industries
- Prevent dumping
- Improve the balance of payments
What is dumping?
This is when foreign producers sell goods below cost in a domestic market which is considered to be unfair competition
What are the 4 main types of trade barriers?
Tariffs
Quotas
Government legislation
Subsidies
What is a preferential trade area?
They allow the free trade of certain types of goods. Likely to become a free trade bloc over time.
3 Key facts about the EU
Inclusive of 27 member countries
Is a common market
The monetary union came about in 2002 with 19 members from the eu
3 Key facts about ASEAN
- ASEAN includes: Malaysia, Cambodia and Indonesia.
- Covers a population of 500 million people and is continuing to expand
- Aims to promote growth, social progress and cultural evolution
3 Key facts about NAFTA
Includes Canada, Mexico and the US.
No intent of being integrated and is a free trade area
In 2020, NAFTA was replaced by the united states-Mexico-Canada agreement
3 opportunities to businesses of trading blocs
- Benefits of comparative advantage
- Increases international competitiveness
- Benefit from economies of scale
3 problems for businesses of trading blocs
- Countries outside the trading block that have a C.A will be blocked out of the market
- Political imbalances
- Domestic trade may be prevented
