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Edexcel Business A-Level > Theme 4 > Flashcards

Theme 4 Flashcards

1
Q

Indicators of economic growth (4)

A
  • GDP
  • Literacy rate
  • Health rate
  • Human development index
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2
Q

BRIC economies

A

Brazil , Russia , India , China
- Over 40% world population
- Cheap labour costs
- Removing barriers will lead to an increase in trade

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3
Q

MINT economies

A

Mexico, Indonesia , Nigeria, Turkey
- Emerging economies
- High population growth
- Close to large markets eg.USA

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4
Q

Importing

A
  • Bringing products from overseas
  • Increases the variety of goods/ services
  • Cheaper products than domestically produced one
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5
Q

Exporting

A
  • Products sold overseas
  • Money flows into the country
    -Increased market size
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6
Q

Foreign Direct Investment : definition and benefits

A

Firm in one country invests in a business in another country

  • Gives access to new markets
  • Reduce firms costs
  • Skilled labour = higher productivity
    -Overcome international trade barriers
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7
Q

Trade liberalisation advantages (4)

A
  • Imported raw materials will be cheaper = lower costs
  • Easier and cheaper to export goods
  • Increase in consumer choice
  • Cheaper products for consumers with increased competition
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8
Q

Trade liberalisation disadvantages

A
  • Domestic business may be forced out of business if their not competitive
  • Removing natural cultures from countries
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9
Q

Primary Industry

A

Raw materials (agriculture and mining)

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10
Q

Secondary Indusrty

A

Manufacturing of goods from raw materials

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11
Q

Tertiary Indusrty

A

Services eg. Sales , financial , healthcare

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12
Q

Quaternary Industry

A

Knowledge based services eg IT or scientific research

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13
Q

Advantages of tertiary and quaternary industries

A
  • Creates growth and more demand for new products
  • Increase in income
  • Specialised
  • Skilled staff
  • Tend to trade internationally to gain EOS and do global recruitment
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14
Q

Causes of increased globalisation (8)

A
  • Trade liberalisation
  • Political change
  • Economic development (tertiary , quaternary industries )
  • More people able to work
  • Migration
  • FDI
  • Increase in global companies
  • Transport and communication has become cheaper
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15
Q

How does migration increase globalisation

A

People might create new demand for certain products , which allows a firm to sell in a new place

If skilled staff are willing to migrate it is easier for a business to set up international opertantions

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16
Q

Globalisation definition

A

The measure of how interconnected the world is

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17
Q

Protectionism defenition

A

Government protects domestic business and jobs from foreign competition

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18
Q

Three ways government prevents foreign competiton

A
  • Tarrifs and Quotas
    Tax on a specific import
    Restriction of the volume of products that can be imported
  • Government legislation
    Restrictions on international trade
  • Domestic subsidies
    Money provided by government to decrease production costs of domestic products and encourage workers to remain in the industry
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19
Q

Trade bloc definition

A

A group of countries with trading agreements between them

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20
Q

Examples of trade blocs

A
  • NAFTA
  • ASEAN
  • EU
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21
Q

Advantages of being inside a trading bloc

A
  • Obtain supplies cheaply
  • Fewer regulations
  • More access to skilled workers
  • Expnded market
  • Higher internal competition can lead to efficiency
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22
Q

Disadvantages of being inside a trading bloc

A
  • More expensive to import from countries not in the bloc
  • Might have to find a new supplier to cut costs
  • Small firms may be forced out of business by bigger firms in the bloc easing to unemployment
  • Might have to adjust business to comply with the rules which is a short term cost
23
Q

Opportunities of trading internationally (5)

A
  • Selling in oversea markets
  • Gaining raw materials from overseas
  • FDI
  • Moving production abroad
  • Relocating to another country
24
Q

Push factors in Domestic markets (3)

A

Saturated markets
- Once the market is saturated (demand is met) there is no opportunity for growth so a company will move to a emerging market

Competition
- Reduces sales and profitability
- move to a country with less competition or become a new entrant

Change in government policies
- If taxes rise business will look for a cheaper choice

25
Q

Pull factors in oversea markets (9)

A
  • Global EOS
  • Spread of risks
  • New unreached markets
  • More profitable markets
  • New education/training
  • low production costs
  • Low material cost
  • High resource availability
  • Gain oversea trading licence
26
Q

Offshoring

A

When a business locates one or more of its departments overseas
Typically customer service or manufacturing

27
Q

Reshoring

A

Business moves it department back to the county of origin because :
- Bad reputation of worker treatment overseas
- Easier to manage quality in same country
- Distribution is cheaper

28
Q

Specialisation ( benefits + risks)

A

Provide a certain skill or service

  • Attracts oversea firms
  • Creates a competitive environment within the country leading to low prices and better service
  • Risk of other countries gaining the same skill
  • Lack of motivation as one job is available
  • Diseconomies of scale
29
Q

Non financial benefits and costs to a business locating abroad

A
  • Create new jobs in new country = increasing standard of living and raise income
  • Invest in new country by paying taxes to fund new infrastructure
  • Loss of job and investment in original country
  • Oversea workers may be exploited if not under correct protection = bad brand reputation
30
Q

Outsourcing

A

Business contracts some activities to other business rather than the performing them themselves

Helpful when there is a short-term increase in demand
Can outsource : finance, recruitment , IT , advertising

31
Q

Benefits and drawbacks of outsourcing

A
  • Benefit from specialised knowledge
  • Doesn’t pay for permanent staff
  • No control over the quality produced
32
Q

Assessing a country as a market (5)

A
  • Levels of disposable income
  • Ease of doing business
  • Good infrastructure levels
  • Political stability
  • Exchange rates (high exchange rate means cheaper imports)
33
Q

Production location factors (9)

A
  • Cost of production
  • Skills and availability of workers
  • Infrastructure
  • Trading blocs
  • Ease of doing business
  • Government incentives
  • Political stability
  • Natural resources
  • Likely return on investment
34
Q

Why might a business decide to become a joint venture or do a merger (4)

A
  • Spread risk
    -Share knowledge of the markets
  • have access to a range of markets
  • Secure resource and supplier
  • Obtain intellectual property (patent, copyright, brand name )
35
Q

How can joint ventures and mergers beat competiton

A
  • Take advantage of economies of scale and lower their product prices
  • Merging with the competitior
  • New skills can lead to innovation
  • One county may have lower taxes = lower costs
36
Q

Cost competitiveness

A

When a business has low costs it can set its prices low to maintain competitiveness

They may achieve low cost with low production costs compared to their competitor

Low quality products can gain cost competitors as they reduce costs by buying cheap raw materials

37
Q

Differentiation

A

Product contains features that are not seen in competitors

Usually a short term effect unless the business contains a patent for the idea

To maintain differentiation a business may outsource some of its products

38
Q

Problems with skill shortages in a country

A
  • Business will have to offer a higher wages to attract the most skilled workers
  • May have use less skilled staff resulting in lower quality
  • Less internationally competitive
39
Q

Glocalisation

A

Adapt their marketing starry to different countries

“Thick globally , act locally ”

40
Q

Ethnocentric approach

A

All the markets are treated similarly , using the same marketing approach for all countries eg apple

Advantages
- Reach EOS by producing the same products
- Same promotional tools = saves costs
- Less time spent on market research
- Easier to find supplier/ distributors which know the brand

Disadvantages
- Approach may not suit all places and may cause backlash

41
Q

Polycentric approach

A

Different products and marketing strategies in each country

  • Ensured sales by targeting specific markets
  • Expensive market research
  • Create individual promotion for every product
  • Fewer chances of EOS
42
Q

Geocentric approach

A

Combination of ethnocentric and polycentric approach , the BRAND is the same the MARKETING is different

  • Some promotion my be reused saving money
  • Global brand image
  • May be costly to adapt products
43
Q

Global niche markets

A

Products created due to difference in religion. tradition , history , economic status

44
Q

Advantages and disadvantages of global niche markets

A
  • Minimal competiton
  • High customer loyalty
  • Price inelastic = charge high prices
  • Risk can be spread
  • Low sale volume = No EOS
  • Less revenue then mass market
  • If there’s a fall in demand some countries weill suffer
  • High profit may attract competiton
45
Q

Multinational cooperation definition

A

Business with a head office in one country and different branches and departments in other countries

46
Q

Positive effect of MNCs on local economies (4)

A
  • Create employment
  • Reduces government spending on benefits
  • Improves local standard of living
  • MNC might invest in improving infrastructure
47
Q

Negative effect of MNCs on local economies (4)

A
  • If they bring their own labour source it can put a strain on local resources
  • Profits move out of region as people will buy from the MNC not locally and coal businesses will not be able to afford to pay its workers the same wage
  • Might exploit its workers
  • Use unsustainable natural resources
48
Q

MNCs and tax

A
  • MNC pays tax for the country where their branch department is located in
  • Tax can build schools and hospitals
  • Tax avoidance can be done legal by transfer pricing (MNC buys sm from the same MNC)
  • Countries that have low tax rate might rely on the MNC so thy won’t ban tax avoidance
49
Q

Positive effect of MNCs on national economies (6)

A
  • Create large FDI flow
  • Introduce new technology
  • Pay for training of workers or tech for suppliers
  • Transfer skills
  • Entrepreneurship levels will rise
  • Benefit of EOS
50
Q

Negative effect of MNCs on national economies (3)

A
  • Causes money to leave the national economy
  • Forces domestic firms out of business
  • Loss of national culture
51
Q

Ethics

A

Rules and principles which state what behaviours are acceptable for society

52
Q

Ways a MNC can be unethical

A
  • Use child labour
  • Work long hours
  • Not updated health and safety precautions
  • Greenhouse gas emissions
  • Waster disposal
53
Q

How can the government influence MNC behaviours
(2 but explain )

A

Change the law
- Increase tariffs on raw material import to use local resources
- Employement laws = minimum wage , protectionism
- Prevent a monopoly
- Prevent transfer pricing (tax avoidance)

Political Influence
- Might offer subsidies , low tax , grants

54
Q

Pressure group cation on MNCs

A
  • Shame a business by being unethical
  • Make target campaigns to force MNCs to change their behaviours
  • Raise awareness on social media (be aware that some messages could be distorted )
  • Some actions ie property damage might weaken the message

Edexcel Business A-Level (4 decks)

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