Theme 4 Flashcards
Which countries are growing in economic power (BRIC/MINT)?
BRIC:
Brazil
Russia
India
China
MINT:
Mexico
Indonesia
Nigeria
Turkey
Q: What is HDI (Human Development Index)?
HDI is a composite measure used to assess a country’s overall development. It considers:
Life Expectancy
Mean years of schooling
Gross National Income (GNI) per capita.
Define exports
Exports are goods and services that a country sells to other countries.
What is the link between specialization and competitive advantage?
Specialization increases efficiency and expertise, helping businesses reduce costs, improve quality, and differentiate themselves, which creates a competitive advantage.
What is FDI (Foreign Direct Investment)?
FDI is when a company or individual from one country invests directly in businesses or assets in another country
How does FDI link to business growth?
FDI provides businesses with capital, technology, and expertise, helping them expand, create jobs, and enter new markets.
What factors contribute to increased globalisation (x8)
Technology – Faster communication and transport.
Trade Liberalization – Fewer trade barriers.
FDI Growth – More cross-border investments.
Multinational Corporations (MNCs) – Expanding global business influence.
Improved Infrastructure – Better transport and logistics.
E-commerce – Online global trade growth.
Financial Markets – Easier global capital flow.
Political Agreements – Trade deals and economic unions.
How does the reduction of trade barriers/liberalization contribute to globalization?
Encourages more trade by making imports and exports cheaper.
Attracts FDI as businesses expand into new markets.
Increases competition, driving innovation and efficiency.
Helps businesses grow globally, reaching more customers.
How does political change contribute to globalization?
Trade Agreements – Encourage cross-border business and investment.
Deregulation – Reduces restrictions, making global trade easier.
Stability or Instability – Can attract or deter foreign businesses.
Government Policies – Influence tariffs, taxation, and business expansion.
What are tariffs?
Tariffs are taxes imposed on imported goods to make them more expensive, protecting domestic industries or raising government revenue.
What are quotas?
Quotas are limits on the quantity of a specific good that can be imported, restricting supply to protect domestic industries.
What other trade barriers can impact businesses?
Subsidies – Government support for local businesses, making imports less competitive.
Import Licenses – Restrictions requiring approval before importing goods.
Regulations & Standards – Strict rules on product quality, safety, or environmental impact.
Exchange Rate Controls – Government intervention affecting currency value and trade costs.
What are trading blocs?
Trading blocs are groups of countries that reduce or eliminate trade barriers between members while maintaining restrictions on non-members.
What is the EU Single Market?
The EU Single Market allows free movement of goods, services, capital, and people between EU member countries, reducing trade barriers.
What is ASEAN?
ASEAN (Association of Southeast Asian Nations) promotes economic cooperation and trade among Southeast Asian countries, encouraging regional growth.
What is NAFTA?
NAFTA (North American Free Trade Agreement) was a trade deal between the U.S., Canada, and Mexico, later replaced by USMCA in 2020.
What is the impact of trading blocs on businesses?
Increased Market Access – Businesses can easily trade within the bloc without tariffs or restrictions.
Cost Reduction – Lower costs due to reduced trade barriers and easier access to resources.
Increased Competition – More competition from businesses within the bloc can drive innovation.
Regulatory Harmonization – Easier compliance with consistent standards and regulations across member countries.
What push factors prompt trade?
- Saturated markets
- Intense competition
What pull factors prompt trade?
- Economies of scale
- Spreading risk
What is offshoring?
Offshoring is when a business moves part of its operations to another country, usually to reduce costs.
What is outsourcing?
Outsourcing is when a business hires an external company to handle certain tasks or services instead of doing them in-house.
How can extending the product life cycle enable selling in multiple markets
Extending the product life cycle through updates, adaptations, or repositioning allows businesses to enter new markets, keep products relevant, and reach new customer segments.
What factors do businesses need to consider in the assessment of a country as a market?
Market Size and Growth – Potential customer base and the rate of market expansion.
Economic Stability – The country’s economic condition, inflation, and exchange rate stability.
Political Environment – Government policies, regulations, and political stability.
Cultural Factors – Cultural preferences and consumer behavior that could affect demand.
Infrastructure – Quality of transport, communication, and distribution networks.
What factors do businesses need to consider while assessing a country as a production location?
Labor Costs – The cost of workers and their productivity.
Skill Level of Workforce – Availability of skilled labor for the production process.
Infrastructure – Quality of transportation, utilities, and technology infrastructure.
Access to Raw Materials – Proximity to essential resources for production.
Political Stability – The security of operations and government support for businesses.
Regulatory Environment – Labor laws, environmental regulations, and taxation policies.
Exchange Rates – The impact of currency fluctuations on cost and profits.
Logistics and Distribution – Ease of shipping products to target markets.
Trade Agreements – Benefits from free trade agreements or lower tariffs in the region.
What is a global merger?
A global merger is when two companies from different countries combine to form a single entity, aiming to expand their market reach, reduce costs, or enhance competitive advantage.
What is a joint venture?
A joint venture is a business arrangement where two or more companies from different countries collaborate to share resources, risks, and profits for a specific project or business activity.
How do global mergers (GM) and joint ventures (JV) help to spread risk?
Global Mergers (GM): Combining resources and expertise with another company can spread financial and operational risks, as the burden is shared.
Joint Ventures (JV): Sharing investments, costs, and liabilities between partners reduces individual exposure to market, financial, and operational risks in new or foreign markets.
How do global mergers (GM) and joint ventures (JV) help to enter new markets and trade blocs?
Global Mergers (GM): By merging with or acquiring a company in a new market, businesses can gain instant access to local resources, networks, and consumer bases within that market or trade bloc.
Joint Ventures (JV): Partnering with a local company in a new market allows businesses to navigate regulations, reduce barriers, and leverage the local partner’s knowledge of the market and trade bloc benefits.
Q: How do global mergers (GM) and joint ventures (JV) help to acquire brand names and patents?
Global Mergers (GM): When companies merge, they often acquire valuable assets like established brand names, patents, and intellectual property, which can enhance their market position.
Joint Ventures (JV): Through partnerships, companies can gain access to the brand recognition and patents of their local or international partners, improving their competitive advantage in the market.
How do global mergers (GM) and joint ventures (JV) help to secure resources/supplies?
Global Mergers (GM): Merging with a company that controls key resources or supplies ensures a steady and secure flow of essential materials, reducing reliance on external suppliers.
Joint Ventures (JV): By partnering with a local company, businesses can gain better access to local resources, raw materials, and supplies that are essential for production or operations in a specific market.
Q: How do global mergers (GM) and joint ventures (JV) help to maintain and increase global competitiveness?
Global Mergers (GM): Merging allows companies to combine strengths, such as technology, market reach, and capital, improving their ability to compete globally with larger scale and resources.
Joint Ventures (JV): Through partnerships, companies can share expertise, enter new markets, and leverage local knowledge, helping them stay competitive by adapting quickly and efficiently in various global markets.
How do skills shortages impact on global competitiveness?
Reduced Productivity – Lack of skilled workers can slow down production and innovation, making businesses less efficient.
Higher Costs – Companies may need to offer higher wages to attract skilled workers, increasing operational costs.
Limited Growth – Skills shortages can restrict a company’s ability to expand into new markets or develop new products.
Global Talent Gap – Countries with skills shortages may lose their competitive edge in industries that require highly specialized knowledge.
What is glocalisation?
Glocalisation refers to adapting a global marketing strategy to local markets by modifying products, services, or marketing tactics to fit local preferences, culture, and regulations.
What is an ethnocentric marketing approach?
An ethnocentric marketing approach involves using the same strategy in all countries, assuming that what works in the home country will work in others.
What is a geocentric marketing approach?
A geocentric marketing approach combines global and local strategies, aiming to create a consistent brand while adapting to local market needs.
What is a polycentric marketing approach?
A polycentric marketing approach tailors strategies to each market, recognizing and addressing the unique needs and preferences of individual countries.
Apply and adapt the marketing mix to suit global markets
Product – Modify the product to meet local tastes, preferences, and regulations.
Price – Adjust pricing based on local purchasing power, competition, and economic conditions.
Place – Select appropriate distribution channels suited to local infrastructure and consumer behavior.
Promotion – Tailor advertising and promotional strategies to cultural norms, languages, and media preferences in different markets.
Why do businesses need to recognize cultural diversity in global markets?
Businesses should consider cultural diversity to better meet local needs, avoid misunderstandings, and improve relationships with customers in different markets.
How can businesses adapt the marketing mix for global niches?
Product – Customize the product to meet specific niche needs.
Price – Set a price based on niche market demand and value perception.
Place – Use channels that reach the niche market effectively.
Promotion – Tailor promotions to resonate with the niche’s interests and preferences.
What social and cultural factors does a business need to consider (x6)
Language – Adapting communication to local languages and dialects.
Cultural Norms – Understanding and respecting local customs, traditions, and behaviors.
Religion – Acknowledging religious practices and holidays that might affect consumer behavior.
Values and Attitudes – Recognizing local values, attitudes, and lifestyle choices.
Education and Skills – Considering the local population’s education level and skills.
Social Class – Understanding the impact of social class on purchasing decisions and preferences.
What is the impact of MNCs on the local economy?
Job Creation – MNCs provide employment opportunities, often raising skill levels in the local workforce.
Increased Investment – They bring capital, technology, and infrastructure improvements.
Economic Growth – MNCs contribute to the growth of local economies through taxes, wages, and production.
Competition – Local businesses may face more competition, which can drive innovation or lead to closures.
Cultural Influence – MNCs can introduce global brands and cultural changes, affecting local traditions and preferences.
Impact of MNC’s on the national economy
Economic Growth – MNCs contribute to national GDP through investment, production, and exports.
Job Creation – They provide direct and indirect employment, boosting national employment rates.
Tax Revenue – MNCs pay taxes, increasing government income for public services and infrastructure.
Technology and Knowledge Transfer – MNCs bring new technologies and management practices to the country.
What is transfer pricing?
Transfer pricing is the price at which goods and services are sold between subsidiaries of the same company in different countries.
What are the ethics and marketing considerations?
Ethics in marketing means honesty, transparency, and responsible promotion.
What factors control MNCs?
Political Influence – Government policies and regulations.
Legal Control – Laws and regulations in different countries.
Pressure Groups – Advocacy groups influencing business practices.
Social Media – Public opinion and online feedback affecting reputation.
