Theme 4 Flashcards
Growth rate of the UK economy compared to emerging
economies
UK has a lower growth rate than emerging economies. Emerging economies are growing due to growth of manufacturing sector. Businesses chose to manufacture in emerging economies due to lower labour costs and access to raw materials.
Emerging economies
A
Emerging economies are economies that have increasing growth rates but relatively low income per capita
– India, china, brazil
What is growth rate measured by
annual change in GDP
Implications of Economic growth on businesses
Potential for increased profits
Reduced costs of production
Increased trade opportunities
Increase in investment
Implications of Economic growth on individuals
Reduced unemployment,
Increased average incomes
Access to quality public services
Indicators of economic growth
GDP per cap
literacy
health
HDI
The link between business specialisation and competitive
advantage
If they can increase the value added on their goods/services, this can help to gain an edge over their competitors
FDI
An investment into a country involving an external or foreign company either investing in or purchasing the goods of a local economy.
+ and - of trade liberalisation
+ Allows businesses to increase market size
+ Reduce costs, source cheaper
- infant industries cant compete
-dumping
Reasons for increased globalisation
Political change
Reduced cost of transport and communication
FDI
MNCs
Migration
Growth of the global labour force
Structural change
Domestic subsidies
Payments given to domestic businesses to help lower costs of production
Government Legislation
laws to restrict certain imports to protect customers and businesses
Free Trade Areas
reduction of import tariffs and quotas on trade between member countries.
– NAFTA
Customs Unions
removing trade barriers but also establishing a common external tariff on imports from non-member countries
– EU
Monetary Unions
common currency shared by member countries.
– Eurozone
+ and - for regional trade agreements
+ increased trade
+ efficiency gains
+ economies of scale
- Complexity
-exclusion
-loss of sovereignty
WTO
Facilitating trade negotiations among member countries to reduce trade barriers
Push factors
factors that push a business to expand outside of their domestic country
Example of push factors
Saturated markets
Intense competition
Pull factors
encourage businesses to operate within markets abroad which present significant growth opportunities
Examples of pull factors
Benefiting from economies of scale
Spreading risk
Offshoring
moves part of the production process, or all of it, to another country
Reasons for offshoring
Lower labour costs
Access raw materials
Access skilled labour
Outsourcing
hires an external organisation to complete certain tasks or business functions
Reasons for outsourcing
Reduced costs
Allows business to focus on core competencies
Easier to comply with rules and regulations
Assessing of a
country as a market
Infrastructure
Ease of doing business
Levels of growth and disposable income
Exchange rates
Political Stability
Assessing of a
country as a production location
Costs of production
Skills and availability of labour force
Infrastructure
Location in a trading bloc
Return on investments
Natural Resources
Political Stability
Ease of doing business
Government Incentives
Reasons for Global Mergers & Joint Ventures
Spreading risk
Entering new markets /
Acquiring national/ international brand names and patents
Securing resources
maintaining global competitiveness
Global competitiveness
ability of a business to perform better than its rivals across markets in different countries
S.P.I.C.E.D
Strong Pound Imports Cheaper Exports Dearer (dearer means more expensive)
W.P.I.D.E.C
Weak Pound Imports Dearer Exports Cheaper (dearer means more expensive)
Glocalisation
aim to reach customers globally and also take into consideration the needs of the local market
Global marketing strategy
planning, producing, placing and promoting a business’s product or service to the global market
Different Marketing Approaches
Domestic/ethnocentric
Mixed/geocentric
International/polycentric
+ and - for ethnocentric
+ economies of scale
+ research costs are lower
- lose sales if not tailored to needs
- cultural insensitivity
+ and - for polycentric
+ sales increase as meets needs
+ develop brand loyalty
-product development
- market research costs
+ and - for geocentric
+ sales increase as meets needs
+ develop brand loyalty
- Costs for changes
marketing mix
tools that a company uses to promote its brand or product in a market
— product , price , place , and promotion
Ansoff’s matrix
strategic planning tool that helps businesses identify potential growth opportunities by analysing their product and market strategies
Ansoff matrix axis
Y - global markets
X - products
Existing, New
Inside Ansoff Matrix
Top left, market penetration
Top right product dev
Bottom left market dev
bottom right diversification
Global Niche Markets
small segments of the global market that are characterised by unique and specific needs and preferences
Features of global niche markets
Customer Service
Innovation
Prioritising profit
Expertise
quality
Understanding of customer preferences
Factors to Consider in Global Marketing
Cultural differences
Different tastes
Language
Unintended meanings
Inaccurate translations
MNC
business that is registered in one country but has manufacturing operations/outlets in different countries
+ and - of MNCs on Employment
+ job creation
+ competitive wages
+ working conditions
-exploit workers is regulations are weak
- pay relatively low wages
-relocate workers from their own country
+ and - of MNCs on Local Businesses
+ boost local economy
+ joint ventures
-reduce supply of workers
-competition
+ and - of MNCs on Local Communities and Environment
+ job oppurtinites
+ infrastructuree
+ pay taxes
+charitable initiatives
- damage to environment
- leave production facilities
Impact of MNCs on the National Economy
FDI flows
Consumers
Balance of payments
Technology and skill transfer
Tax revenue
Business culture
Controlling MNCs
Political influence
Legal control
Pressure groups
Social media
