Theme 4 Flashcards
Bric economies
Groupings of countries with global influence and power
They have economical cultural and geopolitical influence
Bricks- Brazil Russia India china
Mint economies
Mints - Mexico Indonesia Nigeria and turkey
Economy
Is the state of a country in terms of comsuption and production of goods and services and the supply of money
Indicators of growth
Gross domestic product per capita
Literacy
Health
Human development index
GDP
Figure for a country shows the sum total of everything they produce as a nation
Literacy
Literacy levels are a key indicator of the economic growth of the worlds countries
Health
World health organisation keeps a record of life expectancy at both in years (the higher the better )
Hdi
This is a statistic which combines :life expectancy,education, and income which are used to rank countries
Imports
When a country gets foods from another country
Exports
This is when countries trade with another countries and they send products abroad
Specialisation
The process of concentrating on and becoming expert in a particular
Benefit of specialist ion
A country can specialise in a particular industry
Down fall of specialisation
A country may become over reliant on one industry and they are not risk spreading
Fdi
Foreign direct investment this is when a business from one country decides to establish themsleves in another country
Globalisation
This is when a business enters international trade
Trade liberalisation
Is the process by which international trade is made easier through the relaxation of tariffs and barriers
World trade organisation
Exists to reduce barriers for trade and to make sure countries stick to their agreement
benefits of trade liberalisation
Libralised trade diversifies risks and channels resources tow where returns on investment are highest
Consumers benefit as librealised trade can help to lower prices
Drawbacks of trade liberalisation
Competition increases between nations and business which can lower profit margins
Increases trade cab mean pollution or over cu
G7 group
The seven major adavances economies which are Canada, France , Germany , Italy , Japan and the uk and the usa
Globalisation caused by reduced cost of transport
Cost of Goods being transported long dsitance has been reduced by cargo containers
And business can gain large eos shipping large quantities at once
Globalisation cause by reduced cost of communication
More communication by the internet means that messages are sent intanstpy and all countries are able to communicate
Globalisation caused by trading blocs
Businesses outside of important matteket trading blocs will,invest in a business set up in that trading block this has lead to globalisation is ,pre companies in more countries
Structural change
is a economic condition that occurs when an industry changes the way it operates
Protectionism
The theroy of shielding (protecting a country’s domestic industries from fore gain competition by taxing imports !or passing laws etc
Tariff
A tax which is placed on a import to increase its price and decrease its demand
Tariffs impact on business
Pre text their forgein domestic industries from forgein competition
If a business has to pay high tariffs they may have to reduce production and this can mean a loss in jobs
3 reasons why tariffs are imposed
To raise tax revenue
For enviormental reasosn -eg cigs
Protectism
Advantages of tarrifs
Domestic produced good don’t get tariffs so are cheaper
Domestic business have a competitive advantage as importers pay more
It can raise important face revenue
Disadvantages of tariffs
Some products even with high tariffs costs added don’t put off customers willing to pay for and imported product
Tariffs may just increase the price for consumers
Others countries may retaliate by imposing their own tarrifs on imports
Import quota
A quota is a physical limit on the quantity of goods imported or exported
By country doing this it increase the share of the market available for domestic products
Uses of import quotas
Are Imposed to protect jobs of domestic products
Also imposed as a barging chip to be used in negotiations on trade
Protect strategic industries - defence etc
Advantages of import quotas
Protect domestic industries
Safe guard jobs in domestic industries
Benefit to the costumers the prices of imported goods rise so domestic goods appear cheaper and better value
Disadvantages of import quotas
When one country uses quotas it’s trading partners do the same equaling unless exporting opportunities for both counties
Quotas are also complex for the country using them, they require a lot of paperwork
Government legislation
Some countries are not able to set tarrifs and quotas because of their trade agreements or are part of a trading bloc so they use government legislation to process their domestic industries
Advantages of government legislation
Can be a power tool in stoping fake imports into the country
Also customers can trust the products they are buying are genuine
Disadvantages of government legislation
,every import into the uk cannot be check
The profit goes to organised crime and is in many sectors
Domestic subsidies
subsidy is a way of protecting their domestic markets
Money is given to the local producers ro make their goods cheaper on the domestic market
Trading bloc
Is a type of intergovernmental agreement to reduce regional trade barriers
Eu trading bloc
It contains 28 countries where there is free movement of people , goods and sevrecives between all 28 countries
ASEAN trading bloc
Started with Thailand mayalsia , Philippines and Singapore there are now 5 more countries it has nnegotiated a feee trade agreement with other countries like china too
NAFTA trading bloc
There are 3 countries which are USA , Canada and Mexico and they trade without tarrifs
Opportunities of free trade
Freedom to trade
Enlargedmarket
Protection from international competition outside of the bloc
Freedom of movement of people
Drawbacks of freed trade
Freed trade agreements can create problems for the business
Dominance of devolved countries in global trading
It can kill off domestic business in devolping nations
Push factors
Push fcators which may force business to consider selling abroad
High levels of demotic competition
Saturated markets with only low growth opportunities
Pull factors
Pull factors are what may force a business to consider selling abroad
Significant opportunities to sell to overseas markets
Ability to spread risk across more moarkets
Ability to gain eos
Offshoring
This is when a business relocates some of its production prices to another country
This may be to cut costs like labour pay or to take advantage of trade blocs and trade deals
Outsourcing
This is where a business function such as pay roll is contracted out to a third party business
Factors the business can outsource
Production
Payroll
Purchasing
Delivery
Extension of product life cycle
Extending the product lifecycle by selling in multiple markets eg international markets
Factors to look for when assessing a country as a market
Levels and growth of disposable income
Ease of doing business
Infrastructure
Political stability
Exchange rates
Importance of infrastructure
It means that road , rail and transport and without this it means a business can deliver it product on time also telecommunications which a business needs right now communicate with it suppliers and costumers
Factors when assessing a country as a
Production location
Cost of production
Skills and availability of labour
Infrastructure
Location in trade bloc
Government incentives
Ease of doing business
Political stability
Natural resources
Likely return on investment
Government incentives
The government of a country my off incentives to companies to set up there this could be like tax thus is in hope that foreign investors will bring capital their
Joint venture
Is a commercial enterprise undertaken by two or more parties which otherwise retain their distinct identities it is only a temporary arrangement ( two or more business come together to collaborate on one project
Advantages of joint ventures
Access to knowledge and resources
Access to new opportunities
Shared exposure to risk risk spreading
Helps maintain global competitiveness
Dis advantages of joint ventures
Large number fail because of the many risks involved and the complexity of integrating operations and work culture of two different companies
Two main ways to gain competitive advantage
Low cost leadship
Differation
Factors to gain low cost leadership
Good resources management
Efficient production methods
Waste minimisation
Factors of a product to make I different
Performance
Style
Design
Consistency
Durability
Reliability
Reparablilty
Skill shortages affect on business
The lack of a bailout to find skilled workers will affect business which are operating on a differentiation method which will mean they will lose their competitive advantage
Global marketing strategy
Means that a business doesn’t differ are its products or marketing between countries
Normally global brands as they create products which can be used globally
Advantages of global marketing
Economies of scales can be achieved - lower the. Average marketing costs
Power in the market
Consistency in brand image
Able To leverage good ideas quickly and efficiently
Glocalisation
Glocalisation is a combination of the
words ‘globalisation’ and
‘localisation’ and 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
Peg approach
The decision whether products sold in a new international marketshould be adapted or standardised
Polycentric – adapt to each market to appeal to local customers tomaximise revenue
Ethnocentric – standardise the product for all markets to keep costslow
Geocentric – a mixture of the two
Cultural sensitivity
Means under adding that people all over the world have different interests and values
Global niche market
A global niche market is a very small market in each country, but the
combination of all the countries together make enough demand to
make the business profitable
• A global market niche is a subset of a global market
• A global market niche is highly specialised and is characterised by very loyal customers and premium prices
Advantages of selling in global market
There is less competition and greater customer loyalty in nichemarkets.
Prices are likely to be higher andtherefore profits may be greater.
Risk may be reduced
Specialist products reduce PED and premium prices may be
possible
Dis advantages of selling in a global market
Some of the possible global economies of scale may not be achievable as each market will need individual attention
Co-ordination and communications may be more difficult across differing brands andmarkets
Some products may require uniqueingredients or productiontechniques reducing the scope for economies of scale
Cultural factors
Include beliefs,moral values, traditions , language ,laws
Social factors
Include lifestyle , religion, economic wealth , family structures, education m and political systems
High context co,munication needs
Establish social trust first
Value person
A relations and good will
Agreement by general trust
Negotiations slow and rituasttic
Low context communication needs
Get down to business ditsy
Value expertise and performance
Agreement by legalistic onstrcat
Negotiations efficient as possible
Understanding markets
Different stuff mean different menaing in countries like colours , animals , words etc a business must undertake when selling and promoting a product their
Also how different countries have different tastes so they should understand to sell different variants of their products in different markets
Positive impacts of mncs
Creates employment
Increases skill base
Increases standard of living
Raises country’s profile
Improves balance of payments
Improves infrastructure
Negative impacts of mncs
Profit leakage
Low paid jobs
Pull out quickly
Poor safety record
Increase urbanisation
Widens the poverty gap
Mncs balance of payments
In ward investment of a lot of capital straight to the government and also increased exporting for the country while import subisdition as products they used to have to import they can now buy domestically
Mncs and fdi flows
Countries normally offer mncs government incentives so they set up their this is npr to attract investment (fdi) to their country
Mncs impact on tax revenue and transfer pricing
transfer pricing” as shorthand for multinational
corporations shifting profits to tax havens to avoid tax in developedcountries
Ethics
Means having moral principles that govern how a company does business
Political influence to control Mnc activity
Government create harsher laws to stop mncs taking advantages of contraries like by paying very little tax they have introduced international tax laws however many people in government can be bribed and in some devolping countries the amount of jobs and wealth and mnc brings they tend to ignore they illegal activities
Legal controls to control mnc activity
Conditions that promote trade pull and push
Saturated markets
Competitors
Economies of scale
Risk spreading
Exchange rates impacts on exports
Exports
Strong pound
Appear more expensive in international markets - less competitive,less sales , less revenue
Weak pound
Appear cheaper within international markets - more competitive, more sales , more revenue
Exchange rates impacts on imports
Strong pound
Cheaper to buy the same amount of supllies - reduced costs which equals in a reduced price leading to increase in demand increasing sales
Weak pound
More expensive to buy same amount of supllies -increased costs equals in a increased cost leading to a decrease in demand and sales
