Theme 4 Flashcards
What are the BRICS?
Brazil Russia India China South Africa - ranked among the world's fastest-growing emerging market economies for years, thanks to low labour costs, favorable demographics and abundant natural resources at a time of a global commodities boom.
Economic growth?
An increase in a country’s productive capacity
Emerging economies?
The economies of developing countries where there is rapid growth, but also significant risk
Human Development Index (HDI)?
A collection of statistics that are combined into an index, ranking countries according to their human development
Literacy rate?
The percentage of adults (over 15) that can read and write.
Purchasing Power Parity (PPP)?
A measure of real growth the uses the price of purchasing a standardised basket of goods and services in order to compare prices across economies
Comparative advantage?
The theory that a country should specialise in products and services that is can produce more efficiently than other countries.
Competitive advantage?
The idea that a business should specialise in any area (products, services, management, research etc.) where it can perform better than its competitors
Division of labour?
Different workers specialising in different productive activities
Foreign Direct Investment (FDI)?
Investing by setting up operations or buying assets in businesses in other country
Possible reasons for international growth?
- Benefit from EOS
- Risk spreading - Ansoff - Market Development
- Labour productivity - costs - avaliable skills
- Revenues - domestic growth exhausted - saturation and mature
- Competition from domestic markets
- Saturated markets
- Market power and share
Factors that contribute to globalisation?
- Containerisation
- Technological change
- Economies of scale
- Differences in tax systems
- Less protectionism
- Growth strategies of TNCs and MNCs in pursuit of revenue and product growth
- Infrastructure
Whats an ethnocentric approach?
.
Whats an polycentric approach?
.
Whats an geocentric (mixed) approach?
.
What are the 4 MINTS?
what the economies have…
MINT members are Mexico, Indonesia, Nigeria and Turkey. Similarly to BRICS ,the four MINT nations have been identified as emerging economic giants.
The MINT economies all have large and growing populations with abundant numbers of young people of working age.
What is offshoring?
Offshoring is where a business relocates all or part of its operations to another country, e.g. functions such as production, customer service, and finance. More on this in Section
What demand will be like in emerging economies?
Demand in emerging economies is likely to be income elastic, providing opportunities for increased revenue and profitability.
Why countries import and export?
Many products and services cannot be offered by the domestic economy for various reasons, e.g. climate; whereas others are more cost-effective to be produced outside of the country due to specialisation.
What is specialisation?
Specialisation is where a country, or group of countries, focus on the production of a specific or limited range of products and/or services.
The aim of specialisation?
The aim of specialisation is to maximise the efficiency of the production process, thereby creating a range of benefits
Benefits of specialisation?
2…
Lead to comp…
- Lower unit cost, which then allows a business to reduce its prices or increase profit margins.
- Leads to local clusters of workers with expert professional skills/experience.
- -> The competitive advantage will enable the business to either reduce the price of its products compared to rivals or alternatively differentiate itself to justify a higher price than rivals
What is FDI?
It is a measure of foreign ownership of land, factories and organisations, leads to inward capital investment.
What is globalisation?
globalisation is the process through which economies–and, therefore, domestic businesses–integrate into global markets.
How globalisation is achieved?
It is achieved through developments in the liberalisation of international trade, improvements in communication, increases in migration and, also, through cultural exchange.
Globalisation is characterised by:
- Increased trade
- Increased capital flows ( increases in international investment)
- Increased migration
What is trade liberialisation?
What in encourages…
Trade liberalisation, otherwise referred to as free-trade, is the reduction or removal of restrictions on international trade
- promotes and encourages the development of unfettered international marketplaces, allowing economies, and individual agents, to import and export products and services without restriction.
Benefits of trade liberalisation?
> Efficiency - productivity - in order to compete with domestic and abroad firms
Specialisation
Increased market share - opportunity to increase their potential market size
Economies of scale - exposed to more demand - increase production - reduce unit costs
Outsourced production processes - to other countries that are able to undertake them more cheaply
Factor inputs - import factors of production, that aren’t abundant in the domestic economy–e.g.skilled labour, rare earth elements, etc.
Drawbacks of trade liberalisation?
> Increased Competition - domestic businesses unable to compete on an international scale
Economic Development - could be argued that protectionism is better for economic protection - as unable to protect infant industries
Sweat Shops - criticised because of the creation of sweat-shop economies, or a global race to the bottom to find the cheapest available labour
Environmental and Cultural Issues - bring differing culture and more business - spillover to environment
Advantages of multinational corporations?
.> MNCs contribute to the growth of international economies. Investment by MNCs into foreign economies often results in improvements
> MNCs are able to achieve economies of scale because international markets are large enough to realise efficient scales of production.
> often sell standardised products to consumers across the world, whichguarantees an appropriate level of quality
Disadvantages of multinational corporations?
.> Often, workers’ salaries are considerably lower than a salary that would be considered appropriate by Western standards
What we gain from increased migration?
- Cultural exchange - more multicultural
- Transfer of labour
- Remittance - transfer income to home-country
Why use protectionism?
- Protect infant industries
- Employment protection
- Dumping - artificially low prices…
- Revenue gains - tax…
- Improve balance of payments
Problems with protectionism?
- Allocative inefficiency ( inhibits the efficient allocation of the world’s resources by dampening the process of specialisation)
- Trade wars
- Can be counter-productive to competition
- Special interest - manipulated to party interest
Factors influencing expansion into a market:
- levels and growth of disposable income
- ease of doing business
- infrastructure
- political stability
- exchange rate
Factors influencing the location of production sites: costs of.. attributes of... complement structure... where it is... incentive... ease... political... the reso... ROI...
- costs of production
- skills and availability of labour force
- infrastructure
- location in trade bloc
- government incentives
- ease of doing business
- political stability
- natural resources
- likely return on investment
Factors to consider when mentioning global competitiveness?
- Exchange rates (SPICED)
- Cost leadership or differentiation (Porter’s strategic matrix)
- Skill shortages
Impact of MNCs on the local economy:
⬧local labour, wages, working conditions and job creation
⬧local businesses
⬧the local community and environment
Impact of MNCs on the national economy:
⬧FDI flows ⬧balance of payments ⬧technology and skills transfer ⬧consumers ⬧business culture ⬧tax revenues and transfer pricing
