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a level business : advanced info > Paper 1- Theme 4.1- Globalisation > Flashcards

Paper 1- Theme 4.1- Globalisation Flashcards

1
Q

Define protectionism

Key aim of protectionism

A
  • any attempt by a country to impose restrictions on trade of goods and services
  • main aim is to protect domestic business from overseas competition
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2
Q

Types of protectionism

A
  • tariffs
  • import quotas
  • domestic subsidies
  • government legislation
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3
Q

Reasons for protectionism

A
  • protect employment in domestic industries
  • protect new declining, fledging and infant industries (government may need to protect them while they develop)
  • protection of strategic industries (in future will be profitable)
  • protect culture
  • respond to recession
  • respond to trade deficits - lead to weaker exchange rate
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4
Q

arguments against protectionism

A
  • higher prices for consumers, increased poverty
  • retaliation from other countries
  • –> widespread protectionism increase costs of exporting
  • inefficiency in production and allocation of government resources may damage economy for sake of saving jobs
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5
Q

Define tariff

A

tariff is a duty that raises the price of imported goods to make domestic products more appealing

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6
Q

Pros and cons of tariff

A

PROS:

  • create revenue of imported goods
  • protects declining, infant and fledgling industries from foreign comp.

CONS:

  • imported more expensive for consumers (lower $OL)
  • firms may become reliant on tariff and so won’t drive for efficiency
  • quality of domestic products may be lower than imports
  • damage international relationships (possible trade war)
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7
Q

Define a quota

A

annual limit on the quantity or value of imports allowed into a country to be sold

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8
Q

Pros and cons of quotas

A

PROS:

  • protect domestic suppliers & their workers
  • government receive more tax capital as employment rate is higher
  • prevent dumping

CONS:

  • limit consumer choice
  • because supply decrease, foreign products become more expensive
  • restricting competition means less renovation and improvements in the industry
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9
Q

Define government legislation

A

rules and laws set out by government in order to protect the businesses, environment and health

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10
Q

Define domestic subsidies

A

-sum of money given by the government to the producers of a certain product or in a certain industry

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11
Q

pros are cons of domestic subsidies

A

PROS:

  • encourage domestic production as unit costs lowered
  • improve a country’s balance of payments as increases exports (due to being able to lower the prices but maintain the same profitability)
  • help inefficient firms by stimulating demand for them

CONS:

  • finance has to come from somewhere else (e.g. possibility higher tax)
  • other factors affect what consumers buy, not just lower price
  • artificial inflation of competitiveness, reduces inefficiency
  • reliance
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12
Q

define dumping

A

when firms sell their excess products in foreign markets significantly below prices in the home market, causing other producers to struggle

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13
Q

define an embargo

A

official ban of any commercial trade with another country

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14
Q

Define a trade bloc

A

a group of countries from specific regions that form an agreement to promote and allow free trade

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15
Q

Positives to businesses of joining a trade bloc

A
  • beneficial pressures of widespread competition in the trade bloc (pressures to be efficient)
  • increased specialisation of countries due to access to different services across borders
  • —> higher quality products at lower cost
  • smaller countries get a say in global trade agreements about how their businesses are affected
  • free movement of labour (access to workforce) and goods (ease of travel)
  • —> lower distribution costs
  • external tariff walls to the trade bloc protect businesses from worldwide competition
  • larger market to sell to
  • economies of scale in production, if all countries have same
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16
Q

Negatives to businesses of joining a trade bloc

A
  • increased competition due to freer trade
  • increased dependence on other countries performance
  • countries outside of trade bloc may impose retaliation tariffs
  • domestic businesses can be exploited by large MNCS within the trade bloc
  • rules to govern the market may be bureaucratic (slow growth), or may not be suited to your business
  • common regulation may restrict trade growth
  • immigration - impact on welfare state–> migrants draining resources of health care, education
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17
Q

different types of trade blocs

A

single market

free trade area

customs union

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18
Q

Describe the rules of a free trade area

A
  • no tariff between members
  • no external tariff
  • increase trade of goods and services between each other
  • free to negotiate own trade deals with non member countries
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19
Q

Describe the rules of a customs union

A
  • no tariff between members
  • common external tariff
  • trade deals with non members apply for all countries in the union
  • no customs border checks of goods
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20
Q

Describe the rules of a single market

A
  • no tariff between members
  • common external tariff
  • common rules and regulations
  • freedom of moving goods and people
  • sometimes common currency
    (more strict then customs union)
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21
Q

Key information about the EU

A
  • combination of a single market and a customs union trade bloc with 27 countries
  • labour, goods and capital allowed to move freely (no custom checks or customer duties)
  • sets large amounts on employee and customer rights that give businesses a “level playing field”
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22
Q

How to join the EU

A

Copenhagen criteria

  • must have a functioning economy that can cope with large pressures from the EU
  • be able to guarantee democracy, the rule of law and respect for human rights
  • ability to meet needs of what a member must do
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23
Q

Key information on the ASEAN trade bloc

A
  • free trade area of 10 countries e.g. Thailand, Singapore, Philippines
  • very high economic growth
  • access to each countries workforce and consumer base
  • very dependent on China, also India and South Korea
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24
Q

Key features of the NAFTA

A

-worlds largest Free trade area with 3 member countries

  • tariffs eliminated- therefore lower costs of imports and exports
  • increased GDP of all countries
  • put lots of Mexican farmers out of business
  • bigger markets for businesses to operate in
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25
Q

BRICS

A 
Brazil
Russia
India 
China
South Africa

world’s leading emerging economies

26
Q

MINT

A

Mexico
Indonesia
Nigeria
Turkey

nations that are the net new great emerging markets

27
Q

define international trade

A

exchange of capital, goods and services across international borders

28
Q

export =

import =

A

export = goods and services a firm produces in home market that they sell in foreign market

import = goods and services brought in, from another country

29
Q

benefits of international trade

A
  • access rapidly growing markets
  • expand target market
  • reduced cost of and increased quality of supply resources
  • knowledge and skills transfer over borders
  • drive for low prices as market more competitive
  • can extend product life cycle
  • build relationships and reduce conflict or political unrest
30
Q

drawbacks of international trade

A
  • transport costs
  • vulnerable to exchange rate changes (uncertainty)
  • may be restricted by trade blocs or protectionism
  • domestic markets may struggle to compete with large foreign competitors, and dumping
  • market research would be costly, to determine which strategy of EEG model to use
31
Q

define business growth

A

process of improving some measure of a firm’s sucess

-e.g. sales volume, market share, total sales revenue,

32
Q

define competitive advantage

A

a feature of a business that allows it to perform more successfully than others in a market

33
Q

define specialisation

why are some countries better at producing certain products compared to other countries

A

• when a country focuses their resources on goods and services that they are relatively the best at producing
(they are more productively efficient

_ e.g Brazil - coffee

  • better access to necessary resourses
  • higher efficiency and lower cost of unit
  • infrastructure needed is present
34
Q

why is specialisation useful in international trade

A
  • lowest cost per unit (produce more at lower cost)
  • creates competitive advantage for business (sustainable way to stay ahead of competitors)
  • barrier to stop others entering market
  • less developed nations can focus on export fewer range of products with lower cost and higher output
  • specialising in high tech and high knowledge goods or services, increases revenue
  • whole global economic output increases
35
Q

how does specialisation link with competitive advantage

A
  • using countries unique skills in workforce, can become more efficient, can improve quality
  • lower costs, lower prices
  • opportunities with EoS, with larger global market
  • increased competition leads to drive for lower prices
36
Q

law of comparative advantage

A

both countries will benefit, when they both specialise and trade with each other

37
Q

define FDI

A

foreign direct investment

  • capital spent by MNCs into a host economy in order to set up operations or acquiring tangible assets (e.g. takeovers)
38
Q

define inward FDI

A

capital invested into local economy by foreign MNCs

39
Q

define outward FDI

A

capital invested from domestic firm into foreign country, in order to expand its operations

40
Q

how businesses can grow through FDI

A
  • mergers, takeovers or partnerships with foreign firms to enter new market
  • offshoring production to country with lower costs (develops competitive advantage, therefore can grow sustainably)
41
Q

strategies to attract FDI

A
  • lower corporation tax
  • invest in high quality infrastructure
  • trade agreements
  • tax reliefs or subsidies
  • creation of special economic zones (SEZ) - where business and trade laws are different from the rest of the country
42
Q

define globalisation

A

process in which the world’s economies becoming increasingly inter-connected and inter-dependent

43
Q

list the factors contributing to increased globalisation of a country

A
  • reduction of international trade barriers (trade liberalisation)
  • political change
  • reduced cost of transport and communication
  • increased significance of MNCs
  • increased FDI (investment flows)
  • migration within and between economies
  • growth of global labour force
  • structural change
  • deeper specialisation of labour (components come from more countries)
44
Q

define trade liberalisation

A

trade liberalisation = removal of restrictions or barriers to free exchange of goods between nation

45
Q

pros and cons of trade liberalisation

A

pros:

  • increased EoS
  • take advantage of law of comparative advantage by trading with other specialising economies
  • greater competition - strive for lower costs and higher quality
  • consumers benefit from wider range of p/s at lower prices
  • companies can diversify and spread risk
  • domestic economy receive more inward FDI

cons:

  • domestic firms less protected from MNCs
  • infant industries may not be able to develop and lost to foreign competition
  • wasted opportunity - if strategic industry is taken over and grows massively
  • dumping may occur (a country has excess stock so sells below cost on global market, causes other producers to struggle
  • lose income from tarrif
46
Q

how has political change contributed to increasing globalisation

A
  • countries allowed more businesses to be owned privately
  • joining trade blocs
  • trade liberalisation due to new rulings (e.g in Indonesia)
  • political stability establishes FDI
47
Q

how has transport and communication cost decreased

A

transport:

  • large cargo ship reduced in cost (containerisation)
  • oil become cheaper
  • —–> less cancelling out of benefits of comparative advantage

communication

  • internet
  • mobile phone
  • mobile network
  • —-> provides cheap marketing with global reach for all business to compete with
48
Q

how has communication cost decreasing contributed to increasing globalisation

A
  • people can order via telephone and get delivered to different country
  • easy, instantaneous, global communication
49
Q

how has the growing significance of MNCs contributed to increasing globalisation

A

MNC = operate in more than one country, selling and producing the same or similar products with an HQ in one country

  • develop infrastructure in less developed nations
  • knowledge and skills transfer across nations
  • provide foreign direct investment
  • sales and profits flow across borders
50
Q

what is increased investment flows

how has increased investment flows contributed to increasing globalisation

A

investment flows are the inward and outward FDI (e.g. mergers, takeovers, offshoring)

  • links countries together in trade further, increases communication and profit flows
51
Q

how has growth of the global labour force contributed to increasing globalisation

A
  • MNCs offshoring to take advantage of high skilled low cost labour (e.g. in India)
  • larger pool of talent, more high skilled workers—> technological advancements
  • cheaper labour, reduce operating costs —> more capital to spend on FDI
52
Q

how has increased migration contributed to increasing globalisation

A

high skilled migrants can get jobs in quaternary sector, help with technological advancements in transport and communication —–> further globalisation

53
Q

define structural change

how has it contributed to increasing globalisation

A

when a country’s economy shifts the way it functions and operates, from between primary, secondary, tertiary and quaternary

  • countries rely on others to supply specialised goods/services that they cant produce
  • industrialisation of a country enters it into the export and import market
  • further technological advancements in quaternary sector
    —-> further globalisation
54
Q

injection =

A

income entering country

55
Q

withdrawal =

A

capital leaving country

56
Q

define intellectual property as a barrier to trade

A

prevents other firms copying, producing and selling your product, service or brand

57
Q

benefits of the European Monetary Union

A
  • no exchange rate changes –> prices and costs don’t change

- higher price transparency as across EU currency is same

58
Q

drawbacks of the European Monetary Union

A
  • lose power to set monetary policy (interest rates) –> all countries have different economies
  • lose sovereignty
59
Q

benefits of leaving EU

A
  • negotiate new trade deals with EU countries and emerging countries (adapt to UK’s ideal trade)
  • no longer have to pay large sum to EU or abide to expensive EU policies
  • —> more capital available to spend on welfare state,
  • Europe needs the UK, so trade deals should form easily
  • greater control over fiscal, monetary, environmental and competition policy (more sovereignty)
60
Q

drawbacks of leaving EU

A
  • multinationals might reconsider FDI as may have located in trade bloc to avoid tariff
  • lose tariff free access to a huge goods market
  • UK businesses face more price competition, as no external tariffs
  • relationship with European countries may be damaged, harder to construct beneficial trade deals
  • bureaucratic costs for UK creating and adapting to new laws
  • end of free movement of labour so skill shortages increase

a level business : advanced info (23 decks)

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