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A LEVEL BUSINESS : ADVANCED INFO > Paper 1- Theme 4.2- Global markets and business expansion > Flashcards

Paper 1- Theme 4.2- Global markets and business expansion Flashcards

1
Q

define global competitiveness

A

the ability of a business to compete in domestic and foreign markets against foreign firms

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2
Q

benefits of global competitiveness

A
  • access specialised, higher quality materials (less distribution costs)
  • high competition leads to strive for innovation and efficiency
  • diversify risk (reduce dependence on one stream)
  • large scale EoS
  • global brand —> increases perceives quality —> brand loyalty
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3
Q

define exchange rate

A

the price of one currency, expressed in terms of another

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4
Q

Weak currency helps….

A

exporters

product is cheaper for foreign consumers

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5
Q

Strong currency helps….

A

importers

can buy more products for same amount of money

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6
Q

if pound appreciates

A
  • UK exports are more expensive for other countries

- UK imports are cheaper for UK businesses

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7
Q

Exchange rate acronym to remember how the strength of the current affects cost is imports and exports

A

SPICED

Strong
Pound
Imports
Cheap
Exports
Dear
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8
Q

Explain how Exchange rate affects price of imports and exports and profit

A

exchange rate is value of one country’s currency compared to another

if UK exchange rate gets stronger: imports become cheaper but exports more expensive

  • this means any profit made in foreign country’s is worth less in UK
  • if the country you locate in gets a stronger exchange rate, your profit brought back to your home country will be worth more
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9
Q

how does the exchange rate affect businesses

A
  • price of raw materials
  • how much there product costs overseas
  • profit repatriating may lose value
  • fluctuating exchange rates can act as barrier to entry
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10
Q

define a commodity rich economy

A

other countries import from them

e..g Brazil

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11
Q

extent to which exchange rates impact a business depends on

A
  • price elasticity (if inelastic may not be as affected)
  • level of competition and substitutes
  • reliance on imports or exports
  • extent to how much profits are being returned from foreign countries back home (repatriating)
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12
Q

extent to which exchange rates impact a business depends on

A
  • price elasticity (if inelastic may not be as affected)
  • level of competition and substitutes
  • reliance on imports or exports
  • extent to how much profits are being returned from foreign countries back home (repatriating)
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13
Q

what is competitive advantage

A

a feature of a business that allows them to be more successful in their given market

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14
Q

Porter’s Generic strategies to achieve competitive advantage

A

cost leadership - lowest unit cost so can charge low prices

product differentiation - making the perception of your brand as unique and superior to other brands

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15
Q

Porter’s 4 generic strategies

A

Cost leadership - mass market, use cost as source of competitive advantage

Cost focus - niche market, use cost as source of competitive advantage

Differentiation leadership - mass market, use differentiation as source of competitive advantage

Differentiation focus - niche market, use differentiation as source of competitive advantage

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16
Q

why did Porter say you don’t want to be “stuck in the middle”

A
  • less profitable –> confuse customers as to brand position

- conflict of interests

17
Q

strategies to achieve cost leadership

A
  • outsourcing
  • offshoring
  • cost minimisation in production
  • increasing productivity (capital intensive, culture/motivation)
18
Q

strategies to achieve product differentiation

A
  • quality control –> improve quality
  • heavy marketing or sponsorship or publicity –> brand perception
  • wide or unique distribution
  • ethical stance
  • renowned product development and innovation
  • develop USP (function, aesthetics)
  • sustained promotion
  • customer service (need high moral—> improve motivation)
19
Q

define a skill shortage

what may cause it

A

demand for workers with the right qualifications in the industry, doesn’t meet the supply

  • lack of spend on training & apprenticeships by business
  • government supplying wrong type of education schemes
20
Q

the impact of skill shortages on international competitiveness of firms

A

impact on firms with differentiation leadership strategy

  • produce less quality products —> as workers less capable pf producing high standard (need workers with very high expertise or craftsmanship)
  • firm may have to turn away work as don’t have enough workers of necessary skill to complete it (undermine brand perception

impacts on firms with cost leadership strategy
- if want to attract from competitors, it drives up wages

21
Q

actions that governments can undertake to overcome skill shortages

A
  • invest in training
  • provide more apprenticeships and higher education schemes
  • encourage inward migration of skilled workers
  • provide incentives (subsidies) for firms to invest in training or education
22
Q

actions that businesses can undertake to overcome skill shortages

A
  • recruit from overseas, entice with higher wages
  • offshore labour
  • outsource to specialists
  • increase capital intensive production
  • increase current productivity
  • provide more training than competitors
23
Q

acronym to remember the factors that affect the suitability of a country as a production location

A

selling PC (selling pop chalk)

24
Q

Factors that affect the suitability of a country as a production location

A
  • cost of production
  • skills and availability of workforce
  • natural resources
  • location in trade bloc
  • government incentives
  • likely return on investment
  • infrastructure
  • ease of doing business
  • political stability
25
Q

how does skills and availability of workforce affect suitability of a country as a production location

A
  • high unemployment level = large pool of potential candidates
  • high literacy and skill- require less training, quicker understanding
  • low cost
  • must strike balance between skill level and cost
26
Q

how does natural resources affect a country’s suitability as a production location

A
  • if possess abundance of useful natural resources, attractive to locate next to
  • for economic gain, or production
  • reduce costs of transporting supplies
  • reduce cost of generating power
27
Q

how does location in a trade bloc affect the suitability of a country as a production location

A
  • easy access to markets in these countries
  • access to lower taxes on exports
  • easier travel of labour and goods
  • proximity to potential target market
  • access to specialisation in many countries
28
Q

define infrastructure

A

the physical and organisational facilities required to support the operation of everyday economic activity, in society

29
Q

how does infrastructure affect the suitability of a country as a production location

A
  • less investment needed
  • distribution easier
  • easier to generate power and electricity for production to take place
30
Q

how does the likely return on investment affect the suitability of a country as a production location

A
  • use investment appraisal techniques, weigh up opportunity costs and risk versus return, to evaluate likelihood of success
  • because heavy investment is required to offshore production
  • must consider if option is sustainable too
31
Q

define ease of doing business

A

how straightforward it is for businesses to start production in a new country

32
Q

how does ease of doing business affect the suitability of a country as a production location

A
  • excessive bureaucracy- inc costs and time
  • legal systems an regulations may restrict business activity
  • protectionism may create barrier to entry
  • how easy is it to adapt to cultural differences and language barrier
  • economic and political instability
33
Q

how does political stability affect the suitability of a country as a production location

A
  • hard to access skilled, motivated workers in war torn areas
  • corruption
  • —> big leaders may externally influence business decision making
  • —> government may take bribes from competitors
  • government control taxes, interest rates and trade policies —> may be fluctuating in unstable economies (less attractive)
34
Q

how does government incentives affect the suitability of a country as a production location

A
  • low tax areas??? (SEZ) special economic
  • are you being offered tax incentives, grants, cheap loans, subsidies, or promises to invest in local infrastructure, in order to attract FDI
35
Q

why would government want to incentivise

A
  • attract FDI into country —-> can invest in infrastructure and education or health system
  • creates employment - increases tax revenue, increase disposable income—> ^ demand
  • skills and knowledge transfer
  • boost GDP, economic growth
  • increase competition - drive for efficiency and innovation
  • increase exports —> improve BoP —> appreciate currency —> imports become cheaper

A LEVEL BUSINESS : ADVANCED INFO (23 decks)

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