Theme 4 Flashcards

1
Q

Impact of economic growth on business

A
  • potential for increased profits
  • reduced costs of production
  • increased trade opportunities
  • increase in investment (including FDI)
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2
Q

Impact of economic growth on individuals

A
  • reduced unemployment
  • increased average incomes
  • access to quality public services
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3
Q

Indicators of growth

A
  • GDP per capita
  • health
  • literacy
  • human development index (HDI)
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4
Q

Specialisation

A

Occurs when a country/business decides to focus on producing a particular good/service E.g., Apple focus on the production of technological products and services

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5
Q

Benefits of trade liberalisation

A
  • increase market size -> increase output + benefit from economies of scale
  • reduced costs as imports can be cheaper
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6
Q

Drawbacks of trade liberalisation

A
  • infant industries may not be able to compete against international firms
  • dumping may occur -> businesses abroad may sell excess products at unfairly low prices
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7
Q

Reasons for increased globalisation

A
  • reduced trade barriers/trade liberalisation
  • political change
  • reduced transport and communication costs
  • increased importance of global companies
  • increased investment flows
  • migration (within and between economies)
  • growth of global labour force
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8
Q

Protectionism

A

When a government seeks to protect domestic industries from foreign competition e.g., tariffs and quotas

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9
Q

Tariff

A

A tax placed on imported goods from other countries - they increase the price of imported goods which shifts demand from foreign businesses to domestic business (why it’s used as a protectionist method)

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10
Q

Quota

A

An import quota is a government imposed limit on the amount of a particular product allowed into the country

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11
Q

Trading bloc

A

A group of countries that form an agreement to reduce or eliminate protectionist measures between each other - encourage trade liberalisation between the countries e.g., ASEAN and The EU

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12
Q

Benefits of trading blocs for businesses

A
  • wider markets
  • external tariff walls
  • infrastructure support
  • free movement of labour
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13
Q

Drawbacks of trading blocs for businesses

A
  • increased competition
  • common rules and regulations
  • retaliation
  • inefficiency
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14
Q

Assessment of a country as a market

A
  • levels and growth of disposable income
  • ease of doing business
  • infrastructure
  • political stability
  • exchange rates
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15
Q

Extension of the product lifestyle

A
  • Development
  • introduction
  • growth
  • maturity
  • EXTENSION - sell in multiple markets for example
  • then decline (rather than straight declining after maturity)
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16
Q

Reasons for merger or joint ventures

A
  • spreading risk
  • entering new markets/trade blocs
  • acquiring national/international brand names and patents
  • securing resources/supplies
  • maintaining/increasing global competitiveness
17
Q

Cost leadership

A
  • when a business becomes the LOWEST COST PRODUCER in their industry
  • can be achieved using strategies such as:
    1. Increasing the productivity of their workforce
    2. Using machinery and technology efficiently
    3. Outsourcing
    4. Offshoring
    These reduce prices which increases profit margins and makes them a cost leader
18
Q

Methods of differentiation

A
  • strong brand
  • better design
  • better quality
  • customer service
19
Q

Global marketing

A
  • a business doesn’t differentiate its products or marketing between countries.
  • the same product is sold in many countries with some fine tuning of the product, price, promotion etc.
20
Q

Polycentric

A

Adapt to each market to appeal to local customers to maximise revenue
- changing 3-4 elements of the marketing mix.

21
Q

Ethnocentric

A

Standardise the product for all markets to keep costs low, products sold without adaptations e.g., IKEA

  • A business which believes that a success story in one country can translate into others.
22
Q

Geocentric

A
  • A mixture of polycentric and ethnocentric, branding may be done on a global basis.
  • Have advantages of a standardised global approach to get economies of scale BUT cater for the needs of individual markets to maximise sales.
23
Q

Global niche market

A
  • A subset of the global market.
  • A very small market in each country but the combination of all the countries together makes enough demand to make the business profitable.
  • highly specialised, very loyal customers + premium prices.
24
Q

Advantages and Disadvantages of the global niche market

A

Pros:
- Niche markets in many countries can build up to a significant market where a business can enjoy significant demand.
- sell niche across the world to reduce average costa and spread the fixed costs over more units sold.

Cons:
- A niche market in one country can be very small.
- fixed costs are higher for niche businesses.

25
Cultural factors
- beliefs - moral values - traditions - languages - laws held by a country
26
Social factors
- lifestyle - religions - economic wealth - family structure - education - political systems held by a country
27
High context communication needs
- establish social trust first - value personal relationships + good will - agreement by general trust - negotiations slow and ritualistic Examples: Chinese, Japanese, Vietnamese.
28
Low context communication needs
- Get down to business first! - value expertise and performance - agreement but specific, legalistic contract - negotiations as efficient as possible Examples: Scandinavian, English, German
29
Advantages of MNCs
- MNCs bring FDI - MNCS create jobs for the host nation - MNCs pay taxes to the host nation - MNCs help to increase competition
30
Disadvantages of MNCs
- MNCs send all their profits back to their home nations - MNCs only give menial/temporary jobs to the host nations. All the management jobs go to those from the home nation - Lots of examples of MNCs who don’t pay what they should e.g., Starbucks - MNCs destroy fledgling businesses who cannot compete as they don’t have the economies of scale of MNCs
31
Definition of an MNC
A multinational corporation, a business which operates in more than one country e.g., Coca-cola produces in over 200 countries.
32
Shareholder objectives vs. Ethical objectives SHAREHOLDER
- high profits - high dividends - growth - return on their investment - a positive corporate image
33
Shareholder objectives vs. Ethical objectives ETHICAL CORPORATES
- low emissions - safe waste disposal - paying fair wage rates to employees in other countries - sourcing sustainable raw materials
34
Controlling MNCs
- Political Influence e.g., Lower corporation tax in Ireland - Legal control e.g., new environmental laws - Pressure groups e.g., strong influence, can cause a PR disaster - Social media e.g., can orchestrate boycotts on brands and effect sales and reputation of MNCs