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A-Level Business > Theme 4 > Flashcards

Theme 4 Flashcards

1
Q

BRIC economies

A

Brazil
Russia
India
China

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2
Q

MINT

A

Mexico
Indonesia
Nigeria
Turkey

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3
Q

What is a BRIC economy

A

They are superpowers. Superpowers are countries or groupings of countries with global influence and power

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4
Q

What are MINT economies

A

a group of countries with the potential to realize rapid economic growth

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5
Q

What is an economy

A

An economy is the state of a country or region in terms of the production and consumption of goods and services and the supply of money

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6
Q

UK GDP growth rate

A

1.7%

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7
Q

Implications of economic growth for individuals and businesses

A

Growing economies start to see changes in employment patterns, working women, migration, the rise of multi-job, homeworking and search for a better work-life balance

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8
Q

Indicators of growth

A

GDP per capita
Literacy
Health
Human Development Index

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9
Q

Specialisation

A

Is the process of concentrating on and becoming expert in a particular subject or skill

In terms of countries it means that a country will have industries in which it leads the world

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10
Q

Benefits of specialisation (esp to India)

A

Increased productivity and output, this means reduced average costs and EOS

Scale of production can be increased to gain EOS

Gives a comparative advantage over the next best country esp in regards to call services and telecom

Increased productivity will lead to GDP growth and increasing sales will boost economy

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11
Q

Downside of specialisation

A

A country may become over reliant in one industry (all eggs in one basket)

Other countries may become cheaper in the same industries posing a threat to the country that specialises in that industry

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12
Q

FDI

A

Foreign Direct Investment- this means that a business from one country decides to establish themselves in another county

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13
Q

FDI and business growth

A

FDI may decide to build factories or other business premises which will create jobs for the host nation eg Microsoft,Facebook,Amazon have all set up in India

A more specialised example may be Vodafone who bought an existing business in India and developed it with the latest telecom ideas so MNCs would bring skills and technology to emerging countries

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14
Q

Globalisation

A

Is the process by which the world becomes more integrated and interconnected in relation to culture and markets on a global scale

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15
Q

Trade Liberalisation

A

Is the process by which international trade is made easier through relaxation of tariffs and barriers

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16
Q

General Agreement on Tariffs and Trade (GATT)

A

Was created as a means to kickstart the globe after the world war. It creates the living standards of developing nations allowing exportation of global goods to more industrialised nations

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17
Q

Benefits of GATT

A

.New jobs for unskilled workers

.Labour intensive production manufactures benefitted from comparative advantage due to their cheap costs

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18
Q

World Trade Organisations

A

WTO was created GATT in 1994 and exists to reduce barriers to trade and ensure that countries keep to the agreements they have made

WTO can be seen as the overseers of global trade, tariffs and barriers

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19
Q

Benefits of trade liberalisation

A

.Takes down barriers to trade between nations, removing quotas and tariffs creating more lenient imports and exports

.Helps to lower prices and broaden the range of quality goods and services available

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20
Q

Drawbacks of trade liberalisation

A

.Increased trade can mean pollution or over-cultivation of land to keep up with new demands

.Developing nations can become economically dependent on industrialised ones

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21
Q

Politics in globalisation

A

Used to be carried out by individual governments who wanted to protect the interest of their country however now happens on a global scale through summits and meeting between heads of state

The planet is now one market

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22
Q

Who are the G7 countries

A

Germany
Canada
France
Italy
Japan
UK
USA

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23
Q

Globalisation in transport

A

Cost of transporting goods long distances between countries has been reduced by cargo containers as well as cheaper air flights offer business personnel needing to attend meetings in different countries

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24
Q

Globalisation in communication

A

Reduces cost of communication through the internet. Via messaging and other telecommunications sources such as Skype means that communication is free and far flung countries are no longer isolated from the market

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25
Q

Globalisation caused by significance of MNCs

A

Globalisation has been caused by some large companies setting up or buying existing businesses in other countries. These stem from the G7 countries.

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26
Q

Ways investment flows have increased through globalisation

A

Globalisation caused by FDI. Businesses will invest in a business or set up production inside a trading bloc to get around tariffs

Can give a country income, jobs, GDP growth and skills transfer

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27
Q

Globalisation through migration

A

The free movement of people between nations to work. Provides a source of low income, able bodied workers

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28
Q

Global Work Force

A

Is one that is free to seek better jobs in other countries

this can cause resentment in host nations as some citizens may believe their jobs are being taken

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29
Q

Structural Change

A

Is an economic condition that occurs when an industry changes the way it operates eg a developing country may move from agriculture to a manufacture approach as they become more industrialised

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30
Q

Protectionism

A

Is the theory or practice of shielding a country’s domestic industries from foreign competition by taxing imports, imposing quotas or passing laws

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31
Q

What is a tariff

A

Is a tax placed on an import to increase its price and decrease its demand in an effort to make consumers switch consumption to domestic goods

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32
Q

Impact of tariffs on businesses

A

Imposing a tariff may help a country to protect new domestic industries from foreign competition as well as protect ageing inefficient industries. However if a business faces stiff tariffs they may have to reduce production meaning having to delayer employees

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33
Q

Reason tariffs are imposed

A

To raise tax revenue which can be used to fund a country’s social factors

For environmental reason eg sin tax on cigarettes

Protectionism (:

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34
Q

Advantages of tariffs

A

It can ensure better job security

Tariff protection allows domestic businesses to sell more because they gain price advantage compared to imports

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35
Q

Disadvantages of tariffs

A

Tariffs may just increase the costs to the consumers

Other countries may retaliate by imposing their own tariffs on imports

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36
Q

What is an import quota

A

A quota is a physical limit on the quantity of goods imported or exported eg 10,000 units a year

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37
Q

Why are quotas imposed

A

Allows a country to be sure of the amount of a good imported

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38
Q

Uses of import quotas

A

Imposed to protect jobs of domestic producers

Import quotas are also imposed as a bargaining chip to be used in negotiations on trade

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39
Q

Advantages of import quotas

A

Protects domestic industries

Safeguarding of jobs

Make imports more expensive making domestic products look cheaper and favourable

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40
Q

Disadvantages of import quotas

A

Require heavy paperwork and complex

Other countries may do the same as a result

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41
Q

Government Legislation

A

Is when a country puts in place laws to protect their domestic industries from floods of cheap imports

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42
Q

Advantages of government legislation

A

Can be used in preventing fake imports into countries

Can be used to repel businesses to protect domestic markets

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43
Q

Disadvantages of government legislation

A

Can also repel opportunities for development and profits through FDI

Every import cannot be checked as some are still fake

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44
Q

Domestic Subsidies

A

Money is given to local producers to make their goods cheaper on the domestic market

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45
Q

Advantages of domestic subsidies

A

Encourages businesses to increase their production, this can lead to more jobs being created and tax paid back to the government

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46
Q

Disadvantages of domestic subsidies

A

Domestic subsidies are a form of protectionism and so is open to retaliation from other nations in return. This may mean higher tariffs or quotas on our export

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47
Q

Trading Blocs

A

Is a type of intergovernmental agreement to reduce regional trade barriers and increase trade liberalisation between countries in those blocs. This can be implemented as free trade areas, customs unions etc

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48
Q

3 Main Trading Blocs

A

EU
NAFTA
ASEAN

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49
Q

EU Trading Bloc

A

27 countries excluding the UK with the notable exception of Switzerland who is afraid if it joins, the EU imposed tax may scare MNCs such as Nestle away. It is a single market place where there is the free movement of money, goods, people and services between all 27 countries

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50
Q

ASEAN Trading Bloc countries

A

Thailand
Philippine
Malaysia
Vietnam
Burma
Laos
Cambodia
Brunei

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51
Q

ASEAN Trading Bloc

A

Is a large market consisting of 600 Million. Founded in 1927 to promote economic and social growth in the region. Since then it has expanded with the possibility of China joining the bloc which they have negotiated with for eased movement and travel of people and products

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52
Q

NAFTA Trading Bloc

A

Consists of United States, Canada, Mexico. Was created with the simple idea of giving the customers in the North American region cheaper goods. Without import tariffs between the countries the goods are less expensive which is popular with the consumer but not with the business

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53
Q

Expansion of trading blocs

A

The process of more countries joining an existing trading bloc, thereby making it expand. These benefits might be; access to larger markets, economies of scale by producing and selling more, enhanced competition and migration with a good supply of able bodied labour

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54
Q

Opportunities of trading blocs

A

Freedom to trade

Enhanced Market

Protection from international competition outside the bloc

Freedom of movement of people

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55
Q

Drawbacks of trading blocs

A

Dominance of developed countries in global trading

It can kill off domestic business in developing nations

Can reduce the national identity as countries become standardised, westernised and Mcdonaldised.

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56
Q

Push Factor

A

Makes a business consider selling abroad
-High Levels of domestic competitions
-Saturated markets with only low growth opportunities

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57
Q

Saturated Market

A

A saturated domestic market means that a business or group of businesses has sold a product to just about everyone who will buy one

E.g. Chinese smartphone manufacturers; Apple, Samsung, Huawei and LG all now sell to overseas markets

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58
Q

High levels of domestic competition

A

High levels of competition in the home markets mean that a business will look abroad to where there may be less competition and lucrative market opportunities to trade

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59
Q

Pull Factors

A

Motivates a business to consider expanding abroad

-Significant opportunities to sell to overseas markets
-Ability to spread risk across more markets
-Ability to gain economies of scale

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60
Q

Opportunities in overseas markets

A

Exporting is one way for a business to increase sales and this can contribute to increased profits
• An export opportunity may arise when demand increases for your product in other countries

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61
Q

Ability to spread risk

A

A key benefit of exporting to other nations is that it allows the business to spread the risk
• By selling in other countries the business is less vulnerable to changes in the domestic economy

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62
Q

Ability to gain economies of scale

A

Achieving greater economies of scale will allow the business to become more cost-competitive

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63
Q

Offshoring

A

When a business relocates some of its production process to another country. This may be to cut costs or to take advantage of a trading bloc

64
Q

Outsourcing

A

This is where a business delegates to a third party to produce for it eg payroll

65
Q

Outsourcing examples

A

Production
Payroll
Purchasing
Delivery

66
Q

Extension of product life cycle

A

Extending the product lifecycle by selling in multiple markets
• This means being able to sell a product that might be in decline in the UK into a new international market as a new product

67
Q

Assessment of a country as a market

A

Disposable income
Ease of doing business
Infrastructure
Political stability
Exchange rate

68
Q

Disposable Income

A

Is the amount that a customer has to spend after their bills have been paid. It helps a business assess whether people in that country can afford the product

69
Q

Disposable income per household

A

Household disposable income is the amount of money that a household earns each year after taxes

70
Q

Growth of disposable income

A

The growth rate of a disposable income can signal potential opportunities in that country to sell to

71
Q

Ease of doing business

A

Is an index created by the world bank group. Higher rankings with a loaner number indicate a better and simpler regulations for a business

72
Q

Infrastructure

A

Is the basic physical and organisational structures and facilities (roads, buildings, power supplies) needed for the operation of a society or business

73
Q

Why is infrastructure important for sales

A

Infrastructure can refer to roads and physical structures which a business can use to deliver products. Infrastructure can also mean telecommunications as without it a business cannot communicate with its customers and supplier

74
Q

Political Stability

A

Each new government may see to impose a series of law which will need to be adhered to eg environmental laws, employment laws etc which may ultimately affect the business operations

75
Q

Exchange Rates Acronyms

A

Strong
Pound
Imports
Cheaper
Exports
Dearer

Weaker
Pound
Imports
Dearer
Exports
Cheaper

76
Q

Assessment of a country as a production location

A

Costs of production
Skills and availability of labour force
Infrastructure
Location in trading bloc
Government incentives
Ease of doing business
Political stability
Natural resources
Likely return on investment

77
Q

Costs of production

A

Main cost of production is wages of employees. A business may asses the national minimum wage of that country to forecast their profits with that cost ad whether they will make a return on investment

78
Q

Skills and availability of labour force

A

A high unemployment rate means large pool of candidates for every position

79
Q

Infrastructure in assessment of a country as a production location

A

A business will need to assess if the country has adequate road, rail, sea and air transport systems so goods can be exported and imported easily

80
Q

Location in trade bloc

A

Some business may start production in a country as a way into a trade bloc. This could be to avoid protectionism tactics from countries and take advantage from the leniency in trade

81
Q

Government Incentives

A

The government of a country may offer incentives for businesses to set up there. One way is through tax incentives in hopes to attract FDI and another example is through government grants

82
Q

Natural Resources

A

A business may need raw materials from that country as import can be expensive and push the costs of production. An example of a country with natural resources is China with rare Earth elements

83
Q

Likely return on investment

A

If a business sets up production in another country, it is expensive eg hiring staff, buying machinery etc. investors will need to know that these expenses will be returned with profits

84
Q

Joint ventures

A

A joint venture is a commercial enterprise undertaken jointly by 2 or more parties. They retain their distinct identities and is a temporary arrangement

85
Q

Mergers

A

A merger is where 2 businesses come together to become one, on a permanent basis eg Orange and T mobile became EE

86
Q

Characteristics of joint ventures and mergers

A

Spreading risk over different countries/regions
Entering new markets and trade blocs
Acquiring national/international brand names

87
Q

Spreading risk with a joint venture

A

Moving production or sales into another country can be very complex and risky for a single business to go in alone. Often a business might decide to enter into a joint venture to share the risk

88
Q

Spreading risk with a merger

A

Risky can also be reduce by entering into a more long term arrangement with a merger. This can be accessing a wider market and audience as well as access to fresh expertise

89
Q

Advantages of joint ventures

A

Access to knowledge and resources
Access to new opportunities such as new markets
Shared exposure to risks and financial responsiblit

90
Q

Disadvantages of joint ventures

A

Many risks involve and complexity of integrating operations
Coping with different cultures, management styles etc

91
Q

Brand name acquisition

A

A business may look to merge with another business in order to acquire a lucrative brand name

92
Q

Patent acquisition

A

A joint venture allows investors to move their products to market quickly with less financial risk

93
Q

Securing resources and supplies

A

A business in one country may need resources that are only found in another country and so they may enter into a joint venture to secure access to these resources

94
Q

Maintaining global competitiveness

A

A joint venture or merger may be essential to ensure that the business remain competitive in a dynamic global market

95
Q

Exchange rates

A

Is the. Value of one currency in terms of another

96
Q

Appreciations and exports

A

If the pound appreciates, gets stronger against other currencies then UK exports to other countries will be more expensive

97
Q

Appreciation and imports

A

As the pound appreciates- gets stronger- against other currencies then imports to the UK will be cheaper

98
Q

Depreciation and exports

A

If the pound depreciates- get weaker- against other currencies it will make exports to those countries cheaper

99
Q

Depreciation and imports

A

If a business imports while there is depreciation it will make those imports more expensive

100
Q

Competitive advantage

A

A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices etc

101
Q

Strategies used to gain a competitive advantage

A

Low cost leadership
Differentiation

102
Q

Low cost leadership

A

This is where the business will seek to produce the same quality products as its competitors at a lower price
-They may gain cost leadership due to: waste minimisation, efficient production methods etc

103
Q

Differentiation

A

A strategy where a business will produce a unique product or give a unique service. According to Kotler this may include; performance, style, design etc

104
Q

Skill shortages and their impact on international competitiveness

A

The lack of ability to find skilled worker can cause a decline in competitive advantage as businesses who differentiate the mot find it hard to locate expertise in that niche field

105
Q

Global Marketing

A

A global marketing strategy means that a business doesn’t differentiate its products or marketing between countries. The same product is sold with some fine tuning of the product price, promotion etc

106
Q

Global Brands

A

A global brand views the world as a global marketplace and creates products that will suit a world audience

107
Q

Global Marketing Decisions

A

In global marketing promotional messages may be the same all over the world leading to reduced average marketing costs, economies of scale

108
Q

Advantages of global marketing

A

Economies of scale can be achieved in both production and distribution

Power in the market as the brand is known

109
Q

Disadvantages in global marketing

A

Differences in consumer needs and wants

Differences in the legal environment

110
Q

Glocalisation

A

Is used to describe products and services that are both developed and sold to global customers but designed so that they suit the needs of local markets

111
Q

Glocalisation and the local market

A

Globalisation is where businesses are aware of the identities of the local market and as a result combine the base product to fit that particular markets

112
Q

The PEG Approach

A

Polycentric
Ethnocentric
Geocentric

113
Q

Polycentric

A

This is the International approach and is where the business adapt the marketing mix to maximise sales in different countries

114
Q

Ethnocentric

A

Is an approach which believed that success in one country can mean success in other countries markets therefore no adaptation to the product is done

115
Q

Geocentric

A

Is an approach where a business aims to achieve economies of scale but cater for the need of an individual market to maximise sales

116
Q

2 variations of the 4Ps

A

Standardised
Adapted

117
Q

Product Standardised

A

International standardisation states that as people travel the world they can be assured that where ever they go the product they buy will be the same

118
Q

Product Adapted

A

Coca-Cola makes its products sweeter for some markets to take account local tastes

In Canada it has taken the decision to make it less sweet to bring it in line with other countries

119
Q

Place Standardised

A

Distribution in national markets such as the UK will consist of the traditional distribution chain; manufacturer, wholesaler, retailer, consumer

120
Q

Place adapted

A

In an overseas market there will be more parties involved because the goods need to be moved around a foreign market where the business practices may differ from the local practice

121
Q

Price Standardised

A

Setting an international price is complex as it would be unethical to demand the same price from Mexico and Brazil as it does from France due to the difference in disposable income

122
Q

Price Adapted

A

Business needs to consider factors such as; the cost of transport, import duties, exchange rates etc

123
Q

Promotion standardised

A

This type of marketing strategy conforms to work across different cultures and countries to promote a product. This reduces costs and ensures the brand is known worldwide

124
Q

Promotion Adapted

A

Advertising messages in countries may have to be adapted because of language, political climate, cultural attitudes and religious practices

125
Q

Application and Adaptation of Ansoff’s Matrix to global markets

A

Ansoff Matrix is a management tools that helps business leaders decide how to grow their business. Ansoff suggested that a there were only 4 real strategies that a business would follow

126
Q

Niche Market

A

Is a small specialised market which caters for a particular product or service

127
Q

Cultural diversity

A

Having cultural sensitivity means understanding that people all over the world have different values and interests
-International Business
-Cultural differences eg greetings rituals

128
Q

Global Niche Market

A

Is a very small segment in each country but the combination of all the countries together make enough demand to make the business profitable. A global market niche is highly specialised and is characterised by very loyal customers and premium prices

129
Q

Advantages of selling in a global market niche

A

There is less competition and greater customer loyalty
Prices are likely to be higher and therefore greater profits

130
Q

Disadvantages of selling in a global market niche

A

Vulnerable to market change

Co-ordinated communications may be more difficult across differing brands and markets

131
Q

Product in a global niche market

A

Products that succeed in global markets are usually at the premium end of the market

132
Q

Price in a global niche market

A

Global niche markets provide an opportunity for businesses to charge premium prices a the products tend to be more unique

133
Q

Place in a global niche market

A

A business may choose to sell to select and exclusive outlets and distributors. They may also choose reach and sell to the target audience online

134
Q

Positives of MNCs

A

.Improves infrastructure eg communication links rails and roads
.Creates Employment
.Increases skills base
.Increases the standard of living

135
Q

Negatives of MNCs

A

.Widens the poverty gap
.Profit Leakage
.Low paid jobs
.Poor safety record

136
Q

Cultural Factors

A

Includes thing such as beliefs, moral values, traditions, language and laws held by a country

137
Q

Social Factors

A

Include thing such as; lifestyle, religion, economic wealth, family structure and education etc

138
Q

High Context Countries

A

Establish social trust first
Value personal relations and good will
Agreement by general trust
Negotiations slow and ritualistic

Examples: Chinese, Korean, Arab

139
Q

Low Context Countries

A

Get down to business first
Value expertise and performance
Agreement by specific and legalistic contract
Negotiations efficient as possible

Examples: Italian, English, North American

140
Q

Different Tastes

A

In different countries the customers demand different things due to tradition and what they are used to. For example caramel and apple is sold in the USA but not in the UK or Australia due to different tastes

141
Q

Language

A

Sometimes translating things into different languages may result in mistranslations and may also be costly to translate into different languages

142
Q

Unintended Meanings

A

Sometimes meaning may have no significance to the host country however other countries may have a problem with wordings and abbreviations. Eg Toyota MR2 didn’t do well in France as MR2 ounces like the word ‘Merde’

143
Q

Factors used in controlling MNCs

A

Political influence
Legal control
Pressure groups
Social media

144
Q

Political influence

A

Governments can apply pressure to attempt to change the behaviour of MNCs eg for MNCs that have been avoiding paying tax

145
Q

Pros of political influence

A

If MNC gains political approval they may find trading smoother and easier

MNCs may wish to get political approval from governments which in return may help set up in a new country

146
Q

Cons of political influence

A

Politicians ca be bribed

MNCs bring in large amounts of wealth therefore weaker governments might ignore unethical activities

147
Q

Legal Control

A

Some countries put in place legislation to control the activity of an MNC or to stop them exploiting their country eg child labour laws and environmental laws

148
Q

Benefits of legal control

A

Laws can be passed at any point

MNCs cannot break these laws as they are rigid

149
Q

Cons of legal control

A

MNCs may simply move production to another country

MNCs can afford expensive legal defences

150
Q

Pressure groups

A

Pressure groups are organisations which campaign for changes in the law or new legislation in specific areas eg Greenpeace, Friends of the Earth

151
Q

Pros of pressure groups

A

Can raise public awareness of MNCs activities

Pressure groups can create PR problems for MNCs eg boycotting

152
Q

Cons of pressure groups

A

The pressure group must be large to have any form of influence

The size and wealth of MNCs mean that smaller pressure groups pose little threat

153
Q

Social Media

A

Social media networks can be used to orchestrate a boycott on an MNC which will affect the sales and reputation of the MNC

154
Q

Pros of social media

A

Social media is powerful and peaceful

Can reach a large audience quickly

155
Q

Cons of social media

A

Social media may only cause short-term change

An MNC can ignore or debunk social media through PR tactics easily

A-Level Business (4 decks)

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