Globalisation - 4.1 Flashcards
what are the 5 emerging economies?
Brazil Russia India China South Africa
what are the mint economies and what does mint stand for?
The next wave of emerging economies after the Brics economies. Mexico Indonesia Nigeria Turkey
what is the definition of globalisation?
the process of making the world economy more interdependent
what is the definition of an emerging economy?
an economy in the process of rapid growth and industrialisation
what are emerging economies like? (4)
- economies making a transition
- rapid industrialisation ( development of tertiary and secondary sectors)
- faster long term economic growth than most developed countries
- many inhabitants are still in poverty, though economic growth is taking many out of poverty.
what are 5 opportunities of emerging markets posing for UK businesses?
- Opportunity for market development
- Smaller businesses can grow due to tech innovation
- UK businesses have access to markets as they’re easier to access
- more foreign direct investment in emerging economies - so infrastructure improves
- growing numbers of educated middle class consumers = growing consumer spending.
what are 5 threats of emerging markets posing for UK businesses?
- multinationals can abuse their power in emerging markets (e.g. poor pay, tax avoidance)
- Domestic competition from emerging markets
- loss of employment in the UK as MNCs offshore
- emerging markets becoming major exporters - competitive threat
- inadequate production of brand and other intellectual property - brand names, ideas, written word - patent, copyright, trademark
what is state subsidised?
a government making it cheaper by paying money for a product (with milk in the UK)
what does growing economies mean for employment levels? (3)
- because of FDI, businesses will shift in sectors - global shift (for example from agriculture to secondary/ tertiary)
- expanding middle class - secondary sector moves to other countries
- more women employment - equality laws
What are 4 ways to measure economic growth?
- GDP (total)
- GDP per capita
- Health
- Literacy
what is GDP? (2)
gross domestic product.
- It is a measure of the size of the economy
- A sum of everything a country produces - all goods and services
what is GDP per capita?
used as an average annual income of the countries residents
what are 2 limitations of GDP per capita?
- ignores the distribution of incomes given in a country
- although it gives an indication to average annual income, it doesn’t say how far that income goes (different countries have different price levels)
What does HDI stand for?
human development index
what does HDI combine?
combines life expectancy, education and income of population.
what does HDI measure?
measures economic growth
what are 3 criticisms of HDI? (3)
- standard HDI measure doesn’t take into account qualitative factors such as cultural identity and political freedoms
- The GDP per capita figure and HDI figures takes no account of income distribution
- Purchasing power parity (PPP) values used to adjust GDP data change quickly and can be accurate or misleading
what does health show in terms of it being an indicator of economic growth? (2)
- normally shows government value healthcare and invest in it
- shows democracy or political stability as they’re valuing their citizens
what are the 4 key factors in China, India and Bangladesh which have helped to grow their economies?
- greater willingness to accept inward investment from multinational or other big, wealthy companies
- greater enterprise on the part of the local business population
- more stable government than before (esp in India and Bangladesh)
- easier access for exports to countries such as Britain, America and the rest of Europe (partly from the world trade organisation and globalisation)
what are Indias 3 key weaknesses in its attempts to keep up with China?
- its poor infrastructure
- the narrow education system
- international trade: balance of payments deficit
what is the definition of balance of payments deficit?
imports outweigh exports; if it continues indefinitely, it means ever greater build up of foreign currency debt.
what is the definition of fixed capital formation?
an economists way of saying investment in long term assets such as roads or buildings
what is the definition of invisible export?
the sale of a service to an overseas customer
what are 3 issues of doing business in Africa?
- corruption
- poor infrastructure
- investor concern about stability
what is the definition of free trade?
when countries can export to each other without hurdles such as import taxes (tariffs) or import quotas (limits to the volumes of imports)
what is the definition of purchasing power parity?
adjusting income levels to allow for differences in the cost of living (e.g. a dollar might buy three times more groceries than in America)
what is the definition of a trading bloc?
a regional grouping of countries agreeing to free trade and sometimes the free movement of labour
what is a deficit?
more imports
what is a surplus?
more exports
how can a saturated domestic market be good?
trade can be an opportunity for growth as it can sell to countries where there is growth
why are some countries better at producing certain goods and services than others? (2)
- relative opportunity cost of production for a good or service is lower than in another country
- a country is relatively more productively than another
what are 2 countries which have specialised in a product and which product?
- Ivory Coast - cocoa
2. Angola - crude oil
what are 5 benefits of specialisation?
- competitive advantage
- greater expertise in that area - total output will increase
- higher quality products
- can be a valued part of your heritage
- average cost per unit should decrease
what are 2 disadvantages of specialisation?
- over reliance on one sector
2. esp in primary sector - can be very repetitive working
what is injection in terms of an economy?
money that comes into an economy
what is leakage in terms of an economy?
money that leaves an economy
what are 5 benefits of engaging with FDI for a business?
- take advantage of lower labour costs in other countries
- operate closer to sources of raw materials and other supplies rather than transporting them long distances
- avoid protectionist measures (tariffs and import quotas)
- earn target returns on investment by buying valuable assets
- support a strategy of market development (e.g. expansion by global brands)
what are 4 advantages of FDI to the country?
- capital inflows create higher output and jobs
- recipient country can benefit from improved knowledge and expertise skills
- investment from abroad could lead to higher wages and improved working standards
- can boost GDP
what are 4 disadvantages of FDI to the country?
- large companies could exploit developing countries working conditions
- developing countries may be tempted to compete on reducing environmental regulation to attract FDI
- more competition within domestic markets from foreign firms
- profits may be taken back to home country
what are 3 negatives of engaging with FDI for a business?
- high risk of failure (cultural issues, political issues)
- over reliance on FDI is dangerous if other countries become cheaper
- large companies can exploit developing countries working conditions
what are 3 impacts of FDI on a business?
- Better training
- take advantage of highly skilled workers so the cost is lower
- technology transfer
what are 3 impacts of FDI on an economy or country?
- creates jobs, reducing unemployment - earn more disposable income
- increase GDP, overall growth
- improving infrastructure
on an income statement, what is an exceptional item?
one off item you earn money from or one off debt you have to pay
what are imports?
goods or services brought into one country from another
Give 3 reasons for opening a production plant in India:
- hourly minimum wage is very low
- large labour force
- standard working week is long
what is a comparative advantage?
occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries
what are 4 benefits of trading internationally?
- import high quality products which the home country may not possess itself
- build relationships between nations - good political relationships
- cheaper supplies - lower price for consumers
- export revenues and jobs help to reduce poverty
what are 4 negatives of trading internationally?
- protectionism laws - quotas/ tariffs/ trade barriers
- currency - exchange rates change causing problems - as can affect prices. Could lose value in profits earned
- products may not suit that market
- damage to environment - infrastructure and transportation and industrialisation. there may be a lack of regulations
what is FDI?
investing your capital into another economy. Investment from one country to another
what are two types of FDI?
inward FDI
outward FDI
what does inward FDI do?
when foreign capital is invested in local resources
what does outward FDI do?
UK businesses/ government investing in other economies
how can FDI impact business growth? (5)
- help expand quickly from takeovers
- create jobs - have more dispensable income
- can improve quality of life
- multiplier effect of growth
- should improve political relationships - improve cultural cohesion
how can FDI enable a firm to grow? (5)
- problems involved in export - can be avoided by using FDI
- transport costs reduced
- avoiding protectionist trade barriers
- access to natural resources
- Lower operating costs
what is the definition of scientific management?
Taylor suggested that managers should maximise worker productivity by calculating how best to divide up tasks into smaller fragments, then incentivise workers to produce exactly as set out by managers
what are 5 factors which have helped increase globalisation?
- increase in technology - communication
- improvement in transport - containerisation
- immigration - spread of knowledge
- improvement in infrastructure
- reducing trade barriers and more trade agreements
what is the reduction of international trade barrier/ trade liberalisation?
reducing restrictions of trade. It is the process of which international trade is made easier through a relaxation of rules which govern it.
what is a trade barrier?
restricts trade and makes it difficult to trade
what are 3 positives of trade barriers?
- encourages citizens to purchase domestically (more expensive elsewhere)
- source of income for the Government from the tariff (tax)
- stimulate production domestically - stimulate economy and make businesses prosper
what does reducing international trade barriers do?
Makes it a consumption economy. This is less risky and more sustainable
what are 5 benefits of the reduction of international trade barriers?
- attracts FDI
- increases competition which lowers prices
- prevents retaliation which could create political/ cultural cohesion
- creates opportunities for business
- can help diversify risks and allocate resources more efficiently
what is OECD and what does it do?
organisation for economic co-operation and development. It stimulates economic growth and world trade
what is WTO and what does it do?
world trade organisation. Countries can trade with each other smoothly. It works by negotiating and can impose sanctions if a country doesn’t behave. Decisions are absolute and every member must abide by them
what is a criticism of the WTO? (example)
with patented drugs poor countries have to wait a while as the WTO kept the patent
how does political change contribute to increased globalisation? (3)
- Governments policy and decisions affect who/how trade occurs
- forge strong relationships (US/ China) - BREXIT (need trade agreements)
- Emerging markets - enabling/ encouraging FDI
what is a G20?
debate a wide range of international issues linked to international financial stability
what is a G7?
members can be lost/ gained. China is not part of it.
what are 2 impacts of political change?
- less protectionist policies (tariffs/ quotas) and more open trade between nations
- Acceleration of global integration and interdependence of economies
how has the reduced cost of transport sonf increase in communication led to increased globalisation? (3)
- communication has allowed information and ideas to travel quickly
- transport is quick/ cheap
- containerisation (bulk shipping - EOS)
how has the increased significance of MNCs led to an increase in globalisation? (3)
- transnational flows of goods and capital
- lowering of barriers to trade
- investment across national borders (FDI) - increased expansion of global economy
how has increased FDI led to globalisation? (1)
- businesses outside of an important markets trading blocs will invest in a business or set up production inside the trading bloc to get around barriers
what is the impact of increased FDI on businesses? (1 negative and 1 positive)
+ can give a country income, jobs, GDP growths, skills transfer and local businesses will experience the positive multiplier effect
- can have a damaging effect on domestic producers, from competition and possible loss of production for domestic rivals
what is human migration?
movement of people from one place to another with the intention of settling temporarily or permanently in the new location
what do lots of countries have in place to prevent migration? (2)
- Many countries maintain extensive legal barriers to prevent foreigners seeking work or residency from entering their national borders
- Immigration policies across the world are becoming stricter as Governments attempt to minimise the economic, cultural and security impacts of large movements of people
what has the impact of migration been on businesses?
- Many TNCs move to LEDCs and therefore are moving the jobs to the migrants rather than the other way around
- immigration provides a source of low income workers for the host nation as well as the young able bodied, skilled workers
what is structural change?
refers to the long term shift in the fundamental structure of an economy, which is often linked to growth and economic development
how has structural change led to globalisation? (1)
- rise of new economic powers has been driven by a shift for LEDCs to secondary sector activities from the primary sector such as mining and agriculture
what has the impact of structural change been on businesses? (1)
- manufacturing is often labour intensive which generates jobs, income and demand for the nation
what is the definition of liberalisation?
minimising the rules and regulations faced by businesses; or, on a global scale, reducing the barriers to freely moving international trade
what is protectionism?
any attempt by a country to impose restrictions on trade in goods and services
what are 4 arguments for protecting your own countries economy?
- avoids over reliance on other countries - consumption economy
- limits possibility of being exploited by large powerful TNCs
- Keeps employment high
- source of revenue the government can invest - infrastructure/ education
what are the 3 main types of protectionism?
- domestic and export subsidies
- tariffs
- import quotas
what is the definition of a tariff?
a duty (tax) that raises the price of imported products and causes a reduction in domestic demand and an expansion in domestic supply
what is the definition of a quota?
volume limits on levels of imports allowed or a limit to the value of imports permitted into a country at a given time
what is the definition of a subsidy?
a payment to encourage domestic production by lowering their costs
what is the definition of technical barriers to trade?
product labelling rules and stringent sanitary standards
what is the definition of import licensing?
Governments grant importers the right to import goods - these can be restricted
what is the definition to intellectual property laws?
patents and copyright protection protecting domestic ideas and products
what are 2 benefits and 2 negatives of a quota?
+ protect infant industries and keep market entry low
+ in market environments where imports are on the rise, quotas are more protective than tariffs
- could create black markets for products - people obtain goods illegally
- often reciprocated which limits trade
what are 2 negatives and 2 positives of subsidies?
+ good for economy - charge lower prices and stimulates demand/ growth
+ keeps domestic product being sold
- businesses could overproduce and become inefficient leading to high waste
- detract FDI and decrease confidence
what is 2 positive and 2 negatives of tariffs?
+ domestic goods are price competitive
+ source of tax revenue
- may not put off consumers
- may increase prices for consumers
what is the impact on a business of a tariff? (3)
- protection from foreign competition
- protect ageing or inefficient industries
- foreign producers will cut production which impacts employment
what is the impact of a quota on a business? (1)
- domestic producers know up to a limit the foreign competition they will have
what is the impact if a subsidy on a business? (1)
- artificially raises the price of foreign goods relative to domestic goods therefore reducing demand for them
why are tariffs imposed? (3)
- raise tax revenue
- environmental reasons (negative externalities)
- production of domestic/ infant industries
why are quotas imposed? (3)
- domestic producers can be certain the volume of imports
- protect domestic jobs
- can be used in negotiating trade
- protect certain industries
why are subsidies imposed? (1)
- money is given to local producers to make their goods cheaper on the domestic market
what is 1 pro and 1 con of legislation?
+ if legislation is passed to protect against imports, the people who will benefit will be domestic firms. They will face less competition
- likely to provoke retaliation
what is the definition of counter-cyclical?
expansionary government policies to counter a downturn in the economic cycle
what is the definition of Keynesian?
an economic policy based on the views of British economist Maynard Keynes, who urged governments tp take action to boost economies when hit by recession
what is the definition of structural unemployment?
potentially long term unemployment as a fundamental economic shift makes an industry and therefore the skills of its workers obsolete.
what is the definition of a trade war?
an economic battle between 2 countries based on protectionist measures such as import quotas, one starts and another retaliates and the spiral continues
what is the definition of a trade bloc?
an intergovernmental agreement where barriers to trade are reduced in the participating countries to allow free trade
what are the three main trading blocs?
- NAFTA
- ASEAN
- EU
what does NAFTA stand for?
North American free trade agreement
what are 5 advantages for members of trading blocs?
\+ free trade within the bloc \+ market access and trade creation \+ economies of scale \+ jobs \+ protection
what are 4 disadvantages of trade blocs?
- loss of benefits of free trade between countries
- distortion of trade
- inefficiencies
- retaliation
why were EU trade agreements formed?
for peace and prosperity. formed a regional bloc based on the treaty of political, social and economic issues.
what is the definition of a common market?
a more integrated type of trading bloc where goods, labour and capital can move freely between member states
what is the definition of dumping?
where foreign producers sell goods below the cost price in a domestic market, this is considered unfair competition
with the EU being a common market, what does this mean? (4)
- free trade within member states
- no trade barriers
- four freedoms (goods, services, capital and people)
- common standards (standardisation and harmonisation)
what is the impact of BREXIT? (5)
- could mean UK exports are more expensive to EU buyers - tariffs
- imports could become expensive (less trade with EU)
- political unrest - damage relationships
- labour movement - skills shortage?
- dissade MNCs from locating in the UK
what are 5 benefits of how businesses view BREXIT?
- Escape from increased laws and regulations
- Access to new trading opportunities around the world
- Dont have to pay funds to the EU
- Domestic businesses will prosper as supports domestic firms
- form trade agreements with countries anyway
what re 2 negatives of how businesses view BREXIT?
- more of an expense to test products to check if they pass standards
- lose FDI if they locate elsewhere
what are 4 possible short term impacts for the UK of BREXIT?
- weaker exchange rate
- lower economic growth
- housing market
- unemployment
what are 3 benefits for businesses of trading in a trade bloc?
+ forge better relationships and understanding of customer needs
+ cheaper labour/ skills
+ attracts FDI
what are 3 constraints for businesses of trading in a trade bloc?
- competition will increase from free trade so businesses have to be efficient
- domestic brand loyalty
- transportation cost/ logistic costs
what does ASEAN stand for?
association of southeast asian nations
what are 3 opportunities of operating as part of the ASEAN trade bloc?
+ annual disposable income is increasing quickly
+ rapid expansion of middle class (although TNCs have to be aware of brand loyalty)
+ larger market for ASEAN exports
what are 3 drawbacks of operating as part of the ASEAN trade bloc?
- ASEAN divided by income expenditure
- TNCs entering the trade bloc shouldn’t rely on a one size fits all strategy
- income inequality in some of these countries is quite high - bottom of the pyramid is large (poorer people)
what 3 countries is the NAFTA trade bloc between?
Canada, USA, Mexico
what did the NAFTA trade agreement lead to?
- Increased FDI into Mexico - mainly from the USA
2. production often moved from USA to Mexico creating tension among American employees
what is the definition of a home market?
the number of customers that can be reached without needing to jump administrative hurdles
what is the definition of a single market?
dismantling tarde barriers within Europe so all 28 countries can treat the whole region as their home market
