Globalisation 4.1 Flashcards
What is globalisation?
The increasing integration of economies around the world.
What are some factors that have contributed to globalisation?
-Technological change
-Decreased cost of international shipping
-Migration (movement of people)
-Improved infrastructure and transport
How does technological change contribute to globalisation?
Reduced the cost and time of transmitting communication and information allowing integration of economies.
How does increased migration of people contribute to globalisation?
Individuals who are well educated can use their skills to fill jobs that are not filled in other countries.
What are the key characteristics of globalisation?
-Greater trade across countries
-An increased transfer of capital
-Development of global brands
-Greater use of offshoring and outsourcing
What are some strengths of globalisation?
-Gains from sharing knowledge across countries
-Enhanced growth has led to higher capita per incomes, reducing poverty
-Pressure from globalisation may lead to increased governance
What are some drawbacks of globalisation?
-Increased inequalities in income
-Inflation due to increased demand
-Vulnerability to external shocks as economies are deeply connected
What is protectionism?
Giving preference to domestic industries by making it harder for overseas competitors to export to your country
How do countries protect their domestic industries?
-Tariffs
-Import quotas
-Domestic subsidies
What is a tariff?
An added fee onto imports into a country
What are some arguments for Tariffs?
-Help inefficient industries survive, benefiting the workers and suppliers
-Public can benefit as the government collect more revenue which may be used to fund public services
What are import quotas?
An annual limit on the quantity of goods that can come into the country
What are the drawbacks of quotas?
-They reduce consumer choice and make products more expensive due to limited supply.
What are government subsidies?
A sum of money given by the government to the producers of a particular product.
How would a subsidy benefit an exporter?
They have increased profit for each unit sold and allows them to charge a lower price without any loss of profit margin.
What are the draw backs of government subsidies?
May lead to an increased taxation for the public and businesses operating.
What is a trading bloc?
An agreement between countries to have reduced regional trade barriers
What are two benefits to business within a country in a trading bloc?
-Firms can increase production and decrease costs through economies of scale
-More opportunities to sell in growing markets
What are three examples of trading blocs?
-EU
-NAFTA
-ASEAN
what is trade liberalisation?
The removal or reduction of barriers on the free exchange of goods between nations.
What are some problems with trading blocs?
-Businesses may face increased competition from other firms inside the bloc
-trade between blocs may reduce as firms may only focus selling within the bloc
What is foreign direct investment?
A company sets up a new business abroad or a company merges with another business overseas.
Why may a firm choose to use FDI?
If their domestic market has become saturated, growth is much harder so they may choose to sell overseas to an unsaturated market.
What are some problems with exporting overseas?
-Increased transport costs
-Potential protectionism barriers
-Limited control of how your product is marketed overseas
What are some benefits of FDI to an economy?
-Capitial investments create higher output and jobs
-Country can benefit from the increased knowledge of a foreign company
What are some problems with FDI to an economy?
-Gives foreign multinationals controlling rights within a country
-Multinationals take high profits and pay little tax
What is Greenfield FDI?
A company will build its own business overseas from scratch
What is brownfield FDI?
A business purchases or leases an existing business
What are two benefits of Greenfield FDI?
-Has greater control of the business
-New facilities are going to be more efficient
What are two drawbacks of Greenfield FDI?
-Entry process may take years
-Competition will be difficult to overcome
What are two benefits of Brownfield FDI?
-Start-up costs are reduced
-Instantly requires a businesses staff and expertise
What are three ways to enter a foreign market?
-Exporting
-Franchising
-Joint venture/merger
What are the four indicators of growth?
-GDP
-HDI
-Literacy
-Health
What are two positive impacts of economic growth on a business?
-Increased spending by consumers leading to increased sales
-Increased opportunities to expand
What are two negative impacts of economic growth on a business?
-Increased competition due to increased imports
-Shortage of labour leading to increased wages
What are the BRIC economies?
Brazil
Russia
India
China
What are the MINT countries?
Mexico
Indonesia
Nigeria
Turkey
What is economic growth?
When a country produces more goods and services than it did one year ago
What is GDP?
Gross domestic product
The value of all goods and services produced in a country in a year
What is HDI?
Human development index
combines income per capita, life expectancy and educational standards
What do BRIC economies have in common?
-Large population
-Increasing global importance
-Rapidly growing economies
-Emerging economies
What is an emerging economy?
An economy that can’t yet be classified as developed
Why would a business want to move into an emerging economy?
-rapid growth of consumers disposable income
-Higher economic growth compared to developed markets
Why are emerging economies sometimes risky?
-Political instability
-Increased competition as there are established domestic businesses and overseas businesses entering the market
