Theme 4 Flashcards
Implications for individuals and businesses of growing economies
- Trade opportunities
* Employment patterns
Indicators of growth
- GDP per capita
- Literacy rate
- Health development
- Human Development Index
Health Development Index
- Life expectancy
- Years of schooling
- Gross National Income
Economic growth
An increase in a country’s productive capacity
Literacy rate
Rate of population that can read and write.
Exports
Most common route to international expansion
Imports
Goods that enter the country and help to develop economy
Specialisation
Focusing on a limited scope of products and services
Comparative advantage
Specialising in the business’s most efficient production sectors
Types of FDI
- Horizontal
* Vertical
Business forms formed by FDI
- Joint ventures
- Mergers
- Takeovers
FDI
A business setting up or buying assets in another country
Features of globalisation
- Goods traded globally
- Multicultural societies
- Economic interdependence
- Capital flows freely (Shares)
Factors contributing to globalisation
- Reduction of barriers (WTO)
- Political changes (Ven, Bol)
- Migration (Culture, low-cost labour, fill skill gaps)
Globalisation
Growing integration of world’s cultures and economies
WTO
Organisation that promotes free trade.
WTO activities
- Polices free trade agreements
- Settles trading disputes
- Organises negotiations
Protectionism
Approach to protect domestic producers
Purpose of protectionism
- Protect local jobs
- Protect infant industries
- Prevent dumping
- Raise revenue (tariffs)
Ways to limit imports
- Tariffs (increase revenue)
- Import quotas
- Legislation (regulations)
- Subsidies to local businesses
Problems with trade barriers
Retaliation (mutual barriers)
•USA/China
Dumping
Overseas company selling below cost to get rid off local competitors
Embargo
Complete ban on international trade
Infant industries
New local industries that have yet to establish themselves.
Trade barriers
Measures designed to restrict trade.
Trading blocs
A group of countries that have signed a regional trade agreement to reduce or eliminate tariffs.
Types of trading blocs
- Preferential trading areas
- Customs unions
- Single markets
- Free trade areas
- Common markets
- Economic unions
Impacts on businesses of trading blocs
+Economies of scale
+Cheaper labour and resources
+Easier acces for MNC’s
- Tension with non-member countries
- Affects local businesses
- Non-equal benefits (Nafta)
Conditions that prompt trade
- Push factors
- Pulm factors
- Possibility of off-shoring or outsourcing
Push factors
- Saturated local market
* Competition
Pull factors
- Economies of scale
* Risk spreading
Off-shoring
Shifting jobs to other countries
Purpose of off-Shoring
- Reduces costs
* Allows to hire particular skills more easily
Outsourcing
Shifting jobs to other organisations
Purpose of outsiurcing
•Reduces costs
Labour productivity
Amount of goods produced by one hour of labour
Economies of scale
Lower costs per unit of output
Factors that assess a country as a market
- Level of disposable income
- Ease of doing business
- Infrastructure (Communication/Transport)
- Political stability
- Exchenge rate
Disposable income
Amount of money a person has left after paying taxes, insurance, rent, etc.
Exchange rate
Price of one currency against another
Infrastructure
- Basic systems, facilities, services and capital required for an economy to function
- Roads, communications, power stations…
Qualitative reasons to locate production in a foreign country
- Costs of production
- Skill of labour
- Infrastructure
- Trade Blocs
- Government incentives
- Ease of doing business
- Political stability
- Natural resources
- Likely return on investment
Reshoring
Bringing production back home after using foreign production facilities for a period of time
Reasons why businesses join together
- Licensing
- Franchising
- Risk spreading
- Enter new markets/ Trade blocs
- Acquiring brand names or patents
- Gaining access to intellectual property
- Securing resources or supplies
- Mantaining ornincreasing global competitiveness
Ways to achieve global competitiveness
- Economies of scale
- Diversify risk
- Being closer to international customers
Marketing approaches to global localisation
- Ethnocentric approach
- Polycentric approach
- Geocentric approach
Features of global niche markets
- Clear understanding of needs and wants
- Emphasis on quality and customer service
- Expertise in product area
- Innovation
- Prioritising profit over market share
Global niche market
Customers who live in more than one country and have particular needs that are not fully met by global mass markets
Pros and cons of global niche markets
- Higher prices
- Low volume sales
- Specialist retailers
- Lack of economies of scale
Cultural and social factors in international marketing
- Ethnocentrism
- Cultural differences
- Language context
- Unintended meanings
- Differing tastes/beliefs
- Innapropriate branding
Impact of MnC’s in foreign countries
+Western training methods
+Higher wages than usual
+Above-average work conditions
+Job creation
- Attracting over qualifies people
- Local bitterness
- Bad conditions to westerns
- Rolling over local small businesses (unemployment)
Free trade areas
Each member state:
•Free of trade barriers
•Barriers against non-members
•NAFTA
Preferential trade areas (PTA)
- Certain products from certain countries receive a reduced tariff rate
- ASEAN
Customs unions
- Free barrier trade between members
- Common set of barriers against non-members
- CARICOM
Common markets
Free movement accross member states:
•Goods
•Labour
•Capital
•ASEAN
Single market
- Free of trade barriers between members
- Common laws and policies
- Free movement of goods, labour and capital
- Standarised borders and taxes
- EU
Economic unions
Combination between:
•Customs union
•Common markets
- Closer political, economic and cultural ties
- Could be also monetary
Import quota
•To place a limit in the number of imports entering a country.
Reason for import quotas
Protect domestic producers
Ethnocentric marketing approach
•No attempt to adapt product to different markets.
- Apple
- Sony
- Swatch
Pros and cons of ethnocentric approach
+Economies of scale
+No development costs
+More competitiveness
+Lower prices
-Lower adaptation level
Polycentric approach
•Developing a brand and products specifically for the market in which product is planned to be sold.
- Car manufacturers
- Tesco (America)
Pros and cons of polycentric approach
+Should sell well
-Development costs
Geocentric approach
- Same brand, adapted products
- Think global, act local
•Mcdonalds
Marketing mix (4 p’s)
- Product
- Price
- Place
- Promotion
Ansoff’s Matrix
Marketing tool to help a business choose an appropriate strategy to achieve growth
Ansoff’s Matrix divisions
- Market penetration: Existing products in an existing market
- Market development: Exisiting products in a new market
- Product development: New product in an existing market
- Diversification: New products in a new market
