Theme 4- Global business Flashcards
1
Q
what is globalisation?
A
the process in which the world economy becomes increasingly interdependent, the economies are more interlinked
it is the flow of money and goods on not only a domestic scale but also international, operating on a global scale
- trade agreements/open economies in terms of trade
2
Q
what is the definition of a push and pull factor and state some examples
A
push factors
- where businesses sees they have to expand internationally because of domestic/home market issues
e. g: - domestic market saturation
- intense domestic competition (focusing on a new foreign market if a powerful competitor comes in)
- PLC stage (if in decline), a product in the growth stage of another country
- regulations, high tax rates
pull factors
- where businesses are attracted by compelling opportunities to grow by expanding internationally
e. g: - economies of scale, if costs are to go down
- offshoring and outsourcing. labour costs drop, lack of restrictions allow for exploitation
- risk spreading/diversification, less risk, extending product life cycle by selling in multiple markets, risk of only operating in one market if its economy crashes
3
Q
what is a saturated market like?
A
a market where growth has ceased and there are no significant opportunities to boost sales other than stealing market share from existing rivals. fewer opportunities for growth
4
Q
what are the 6 types of economies of scale explained
A
purchasing- when you buy in bulk, unit costs drop the more you buy
managerial- a form of division of labour, large scale manufacturing employ specialists to supervise production systems, manage marketing systems and oversee human resources, co-ordiante operations
financial- urger firms are usually rated by the financial markets to be more ‘credit worthy’ and have access to credit facilities, with favourable rates of borrowing, smaller firms often have access to higher rates of interest
marketing- a large firm can spread it advertising and marketing budget over a large output and can purchase its input at bulk at a discounted price, e.g Coca Cola dont need to do separate advertisements, for all stores around the world
technical- large scale businesses can afford to invest in expensive and specialist capitalist machinery, e.g. Tesco investing in technology that improves stock control, not possible for smaller businesses
risk-bearing economies- the ability of large firms to spread risks over a larger number of investors, diversification of location
5
Q
explain the extension of the product life cycle by selling in multiple markets
A
- once a product hits its decline stage those who want to extend its PLC may look to international sales as a successful way to boost sales
- helps avoid the heavy investment and uncertainty involved in introducing a new product
- launching into new territories serves as a series off extension strategies
6
Q
what does BRICS and MINT stand for?
A
Brazil, Russia, India, China, South Africa
Mexico, Indonesia, Nigeria, Turkey
7
Q
what is an emerging economy?
A
use to describe an economy that is going through rapid industrialisation (secondary manufacturing) and growth, markets are making a transition
8
Q
what are 5 features of an emerging economy?
A
1) market volatility
- political instability, more vulnerable to risk of fluctuations in exchange rates and market performance, their economy is not stable enough
2) high rates of economic growth- they tend to implement policies that favour industrialisation and rapid economic growth
3) growing disposable income- rise in the middle class, simulating demand for products from businesses in the developed world
4) TRANSITION, economies are making a transition, restructuring their economy
5) they have a struggle to access global markets, lack of global presence in terms of trade
9
Q
why is Nigeria seeing significant growth?
A
- lots of young people
- many working class
- opening up to FDI
- stable currency
- corruption still an issue
10
Q
what is Turkey seeing significant growth?
A
- non commodity
- strategic location between Asia and europe
- political instability
11
Q
explain the growth rate of the UK
A
- it has grown at around 2.25% a year for more than 200 years
- the annual growth rate of real GDP has been weakening since 2014 due to weakening in consumer confidence due to economic uncertainties
12
Q
what was the annual growth rate in china, UK, Nigeria, turkey and Indonesia in 2018
A
China- 6.6% UK- 1.4% Nigeria- 1.9% Turkey- 2.8% Indonesia- 5.2%
13
Q
explain the philippine’s economic growth
A
- 6.7% growth in 2018
- a growing middle class
- a large young population
- economic dynamism is rooted in strong consumer demand supported by a vibrant labour market
- major infrastructure projects boosting related industries
14
Q
what are the 5 opportunities to UK businesses of growing economies
A
- opportunities for outsourcing and offshoring, growing market
- competition could drive innovation and growth
- growing middle class and growing consumer spending
- cultural shifts means there is higher demand for personal products
- opportunities to position product in a different setting
15
Q
what are the 5 threats to UK businesses of growing economies
A
- competition and risk of saturation, out innovate markets
- decline in certain industries, structural gaps, job shortages
- inadequate protection of brands and intellectual property (copying brands, rayberry), disregarding trade marks
- undervalued currencies makes exports cheaper
- cultural differences/sensitivities, need to do market analysis
16
Q
explain the implication of economic growth for employment patterns
A
- employment patterns are going to cause sector shifts, the move to tertiary and quaternary , structural change in employment
- key implication of growth is the transfer from physical labour on the land to machine-assisted labour in factories and then people-focused jobs in services
- the rise of the middle class tends to sit alongside the structural change in employment
- working women, migration, the rise of the multi job, home working
17
Q
what are the points for why and why not emerging economies are likely to continue to enjoy high growth rates?
A
yes:
- their economies growth will eventually decelerate
- their way of growth is unsustainable, risk of overtrading
no:
- per capita growth, innovation and infrastructure will continue to grow
- technological advancements in many emerging markets
- workforce will continue to improve skills and be more productive
18
Q
what are the 4 indicators in measuring growth?
A
- GDP per capita
- Health
- Literacy
- HDI
19
Q
explain the use of GDP per capita as a measure of growth along with its limitations and examples
A
- measuring GDP per head of population means that you have an effective measure of changes in living standards
- it gives a better representation of the individual wealth
- India = $1640, USA = $54,600
limitations:
- far from reality, large disparity
- the dispersion of wealth issues
20
Q
explain the use of health as a measure of growth along with its limitations and examples
A
- as societies become more prosperous, malnutrition falls and life expectancy rises
- nigerian baby is 20 times more likely to die before the age of 1 than one in south korea
-measured through life expectancy, maternal mortality, infant mortality
LE in China= 75, 80.5 in the UK, Norway on top at 88.3
limitations: - even a struggling economy can provide good healthcare, as long as the gov has the determination
21
Q
explain the use of literacy as a measure of growth along with examples
A
- having good literacy levels leads to higher economic growth through better qualifications
- india sees high economic growth but its high levels of illiteracy may hamper the ability for them to expand
adult illiteracy in India 2015 = 28.8%
adult illiteracy in china 2015 = 3.6%, they spend 4% on their education
22
Q
explain the use of HDI as a measure of growth along with its limitations and examples
A
- combines life expectancy, education and GDP per capita, published by the UN in 1990
top 3 in 2014: Norway, Australia, Switzerland
bottom 3 in 2014: - Sierra Leone, chad, Central African republic
limitations:
- standard HDI measures does not take into account quantitative factors such as human rights, political freedoms
- the GDP per capita figure and therefore HDI figure rakes no account of income distribution
23
Q
what is international trade?
A
it is the exchange of products (goods and services) on an international scale
- trade takes place between the economic agents of a country, such as businesses, governments or consumers
24
Q
what is comparative advantage?
A
the ability of an individual/group to carry out a particular economic activity more efficiently than other activity, exists when there is a relative opportunity cost for certain countries
25
explain the comparative advantage of Angola, Bangladesh and Zambia in terms of their exports
Angola- more than 90% of exports is crude oil
Bangladesh- textile industry amounts for 80% of exports
Zambia- copper mining accounts for 85% of exports
26
what is business specialisation?
businesses specialise when they produce a limited range of products. at its most extreme, some businesses house to only produce one product.
- specialisation is viewed to make firms more efficient by those who believe in the Taylorite scientific management. through breaking jobs into smaller components it will allow employees to specialise, this logic of doing the same ask will mean they can become highly proficient at carrying out their task, productivity up
27
what are the impacts of specialisation?
- if each country specialises, total economic output can be increased
- in many countries, competitive advantage is shifting towards specialising in and exporting high-technology manufactured good and high knowledge services which get a higher price
- nations at a lower stage of development tend to have fewer capabilities and thus export a narrower range of products
- training expenditure decreases, in a multi-product firm there will be a greater need for the workforce to be flexible
28
how can specialisation create a competitive advantage?
- economists say that specialisation makes firms more efficient, leading to lower average costs and therefore being able to benefit from a cost advantage over its rivals
- in a highly competitive market, an fraient firm might use its cost advantage to lower its retail prices.
- to make these lower prices profitable the business must lower its costs to be more efficient
29
explain the impact of imports and exports on the UK economy
- intertwines global economies
- exporting allowed a business to expand, operate on an international scale
- transferable skills, skills will increase
- determines current account deficit, the UK have persistently been in a current account deficit, poor export performance
- $40 billion of goods exported from the UK to USA in 2014
30
What are the benefits of international trade?
- economies of scale, lower unit costs and prices
- opportunities for new goods imported
- more competition, broader options, cheaper options for consumers
- spread of foreign knowledge and ideas
31
what are the drawbacks of international trade?
- transport costs, both economic and environmental
- external shocks, integrated industries, more affected by global crises
- structural unemployment as patterns of trade change
- exploitation of emerging economies, unethical approach
- uneven gains of trade, rising inequality, some getting more than others
32
give a definition of FDI along with the two branches of inward and outward FDI and examples of each
FDI involves establishing operations or acquiring tangible assets, including stakes in other businesses. it is normally by companies rather than governments.
Inward FDI- when you receive FDI from abroad
e.g. China investing in canary wharf
Outward FDI- occurs when a British firm invests in a facility abroad
e.g. Tesco building supermarkets all across Eastern Europe during the last decade
33
what are the benefits of FDI to MNCs and host countries
MNCs
- global reach, new markets
- larger labour pool that is often cheaper, costs down
- operate closer to raw materials rather than transporting them long distances, avoid higher prices may establishing mines in resource-rich countries, environmental concerns
- avoid protectionist trade barriers, allows them to avoid tariffs and quotas, perhaps benefit from lower corporation tax
Host countries
- financial injection into growing economies, increasing exports
- employment, fill job shortages
- clustering and agglomeration, specialisation
- infrastructure development
34
what are 6 strategies in attracting FDI?
- privatisation
- trade blocs
- infrastructure (roads, rail)
- education
- low corporation tax (0% in bermuda)
- eliminating monopolies (eliminate high barriers of entry)
35
how can FDI encourage business growth?
- in times of market saturation in the domestic market, managers will have to look overseas to find new unsaturated markets
- the main way to supply an overseas market is through exporting. this works particularly well when factories at a low level of capacity utilisation, this will make it generally cheap and easy to produce the extra output
36
what are two negatives of FDI?
1) problems involved in exports- number of problems that can arise from exporting, all if which can be avoided if they were to stay in their domestic market
2) transport costs- it takes time and money to transport products from one country to another. this can potentially affect profit margins if not done in the most efficient way. the bulkier the product, the more expensive it will be to transport
37
explain F.W Taylor's scientific management
Taylor suggested that managers should maximise worker productivity by calculating how best to divide up tasks into smaller fragments, then incentivise workers to produce exactly as set out by managers
38
what are 8 factors that contribute to increased globalisation
- reduction of international trade barriers/trade liberalisation
- political change
- reduced cost of transport/communication
- increased investment flows (FDI)
- migration of workers
- growth of the global labour force
- structural change
- increased significance of global companies
39
explain the factor that contributes to increased globalisation: trade liberalisation
- removing international trade barriers such as tariffs and quotas
- relaxation of the rules that govern it, emerging economies, WTO rely on this
- provides increased market access to businesses that are willing to sell their products abroad
- creates an attractive environment for foreign firms, more competition but this also increases domestic markets to foreign competition
- this gives HUGE opportunities for globalisation
40
explain the factor that contributes to increased globalisation: reduced cost of transport/communication
- transport costs have fallen since 1970s, contributed to growth in global trade, containerisation allows for EOS
- rapid and sustained technological change has reduced the cost of transmitting and communicating information
- the lower unit cost of shipping products globally makes markets more contestable globally
- internet has led to the flow of communication globally, constantly access current news, online banking, huge catalyses for change
41
explain the factor that contributes to increased globalisation: migration of workers
- movements of highly skilled and educated migrants benefit the economy
- when a country allows the free movement of people (UK) they will see an increase in migrants
- through migration it leads to flow of people, cultural globalisation, spread of values and way of life
- leads to the flow of capital globally, economic globalisation through leakages
42
explain the factor that contributes to increased globalisation: increased significance of global companies
- in the pursuit of revenue and profit growth, increasingly global businesses and brands have invested significantly in expanding internationally
- utilising the growth in middle class consumers from abroad
- more flow of people and capital across the world
- global production system, supply chains
- create more competition in the global markets
43
what is protectionism and what are the different types?
protectionism involves any attempt by a country to impose restrictions or trade in goods and services to protect domestic producers from foreign competition
- import quotas
- tariffs
- domestic and export subsidies
- government legislation
44
what are 5 reasons why governments use a policy of protectionism
OVERALL: PROTECT DOMESTIC MARKET
- in order to protect declining industries (sunset industries), a product could have become technologically obsolete or because an industry has become internationally uncompetitive, e.g. in Detroit where ford have lost market share tof foreign-owned rivals. it was done here to prevent a sharp rise in structural unemployment
- to help infant industries as they havent had the time to grow, much more difficult for them to survive as they cant achieve EOS, protectionism is needed for them to grow
- to protect non-renewable resources
- to limit over specialisation, this could occur as a result of taking the theory of comparative advantage to its extreme, reduces the risk that comes from the over-reliance on international trade
- response to a recession/stagnant domestic demand
45
give examples of protectionism in different countries
the EU have put a 30% import tax on sugars and confectionary
- china and the US have put several protectionism measures to exploit each other
- South Korea have placed a 513% tariff to protect the local rice market and have scrapped quotas in exchange for the tariff, none coming in
46
explain the use of tariffs as a protectionism method
- an additional tax or duty that raises the price of imported products and causes a contraction in domestic demand and an expansion in domestic supply, e.g. Mexico imposed a 150% tariff on Brazilian chicken
- the US gov use tariffs to protect their car and truck industry
- they are often used to protect declining industries, tariffs can be used to prevent a sharp rise in structural unemployment
47
explain the use of quotas as a protectionism method
- quantitative limits on the level of imports allowed or a limit to the value of imports permitted into a country in a given time period
- quotas do not normally bring in any immediate tax revenue
- building relationships, import licenses are needed to get into the country
48
explain the use of domestic and export subsidies as a protectionism method
- a subsidy is a payment by the government to domestic producers in order to help them compete in the international market
- soft loans can be used to fund the dumping of products in overseas markets
- in 2012, the US gov imposed tariffs on Chinese manufactures of solar panel cells
- involves government help (state aid) for domestic businesses facing financial problems, e.g. subsidies for loss-making airlines
- subsidies for wind farm investment
- subsidies into the rail industry
49
what is the definition of technical barriers to trade and import licensing
technical barriers to trade- product labelling rules and stringent sanitary standards
import licensing- governments grant importer the right to import goods, they can be restricted
50
explain the use of government legislation as a form of protectionism
- most countries have consumer protection laws, sometimes legislation is used to stop firms from selling dangerous products, other types are designed to protect the environment
- sudden changes in legislation can be hard for exporters because their products must be redesigned to meet the new laws which can take time
- if product standards abroad are fairly similar to those at home then it should be possible to export without many expensive adjustments, since the single market within the UK it has been much easier for UK firms to export to other EU countries, gave single pan-europeans standards
51
why is legislation needed to regulate business activities?
- most firms are happy to live up to their social responsibilities but there will always be a small minority running firms who are prepared to put their profits before their responsibilities
- legislation is therefore designed to protect consumers, employees and the environment
52
what are the pros and cons of the use of tariffs and quotas
tariffs
pros:
- help insufficient firms to survive and prevent structural unemployment
- the revenue raised from import taxes can be used to fund public services
cons:
- make imported products more expensive than they should be, cause material standard of living to fall
- help insufficient firms to survie, if tariffs were removed they would have a greater incentive to find internal ways of becoming efficient
quotas
pros:
- face less foreign competition, likely to generate higher revenues
- workers likely to see greater job security, less unemployment
cons:
- limit consumer choice, making products more expensive
53
what are the pros and cons of using legislation and subsidies
legislation
pros
- domestic firms see less competition and so higher profits for shareholders
- a reduction in external competition should lead to greater job security
cons
- likely to provoke reutilisation , if a country unfairly bans another country's product, aggressive
- higher prices and less product choice for consumers
subsidies
pros
- help the poor by lowering prices and ensuring job security
- help improve a country's balance of payments by reducing imports and increasing export sales
cons
- they have to be financed, higher rates of taxation for households and for businesses that receiving subsidies
- not always sufficient to save an uncompetitive industry
54
what is a trade bloc and what are 3 examples?
usually groups of countries in specific regions that manage and promote trade activities
- the European union
- ASEAN
- NAFTA
55
explain the three types of trade blocs
free trade area
- free trade between countries involved, each country can set their own trade restrictions for those outside the bloc
- no external tariff
customs union
- countries which agree to abolish tariffs and quotas between member nations to encourage free movement of goods and services
- adopt a common export tariff
Single market
- deeper form of integration than customs union, free movement
- adopt a common set of rules governing trade in goods and services within the common market
(EU)
56
explain the European Union bloc
- in 2014, 62% of all exports from the EU countries were to other EU members
- has 31 member states, over 450 million people, enlarged in 2004 and 2007
- a customs unions, a single market with same expectations and standards and now with a single currency
- common standards, standardisation and harmonisation, legal in all EU countries
57
explain the NAFTA trade bloc
- trilateral agreement between USA, Canada and Mexico and was made in 1992 with the idea to supply customers with cheaper goods
- aims to eliminate any trade barriers between the 3 countries and boost trade/prosperity
- they must respect patents,, trademarks and copyrights
- establish procedures to resolve trade disputes, production often went from USA to Mexico leading to tension due to unemployment
58
explain the ASEAN trade bloc
- started in 1967 by Thailand, Philippines and Singapore to promote economic and social growth in the region, since then it has expanded several times, 10 countries
- negotiated a free trade agreement within states and other countries such as China (China no.1 trading partner for ASEAN)
- one of the fastest growing markets in the world, major producer of manufactured goods (textiles, tech, food), many exported to US and EU
- 25% of ASEAN trade is intra-regional trade, aim to increase this
- big disparity in terms of GDP per capita in countries, Singapore ($49k) vs Cambodia ($900)
- taking advantage of china's changing economy, consuming more, richer
59
explain the process of joining the EU along with its future
they must meet the 'Copenhagen criteria'
this includes:
- having a stable institution guaranteeing democracy and human rights
- a functioning market economy and the ability to cope with competitive pressure
- must have a public administration capable of applying and managing EU laws in practise
future of the eu
- some say it is in descent, losing power due to rise of the east
- Brexit, UK holds large role in EU's success, UK leading may initiate others to leave as well
- some doubt the future of the EU post COVID
60
what are 3 positives of brexit on businesses
- opportunities for deregulation, freedom, liberated from strict standards and regulations
- opportunities for us to make deals of our own, new trading opportunities with emerging economies
- save a lot of money, cut contributions to EU budget
61
what are 3 negatives of Brexit on businesses
- those with global supply chains will need to maintain this supply chain, uncertainty, changing interest rates
- loss of innovation, perhaps fall in European migrants and their fresh ideas due to need for visas, loss in foreign workers
- tariffs put in for the UK and interest rates and inflation may change, costs up
- multinational companies may reconsider FDI into the UK, uncertainty
- cost and time in making new regulations
62
what is the European monetary union?
it involves the coordiantion of economic and fiscal policies, a common monetary policy and a common currency, the euro
- 19 of the 27 members use the euro
- interest rates made by the european central bank
- you need to meet the convergence criteria for joining, inflation must not be 1.5% higher than the average in three countries with best price stability, stable currency relative to other EU currencies for 2 years, debt must not exceed 60% of GDP, annual budget deficit not greater than 3% of GDP
63
what are the 3 pros and cons of being part of the EMU
pros
- takes away complexity of exchange rates, long term planning
- economic convergence, co-ordination of macro economic policies, agreeing to keep their economies stable, keeping budget difficiencies under control
- access to the ECB as lender of last resort in case of financial difficulty
cons
- exposure to euro zone economic problems, crisis affects all countries, liability, if the euro falls (Greece)
- differing economic cycles, different intentions
- loss of sovereignty
64
what are the pros and cons of NAFTA
pros
- quadrupled traded, boosted economic growth, lowered prices for consumers
- for car manufacturing, parts are now found in all 3 countries allowing for increased competition, allows them to no longer rely on Japanese imports
- reduced reliance on the Middle East for oil
cons
- NAFTA’s competitive pressure on Mexico led to increase in fertilisers, environmental damage
- they have some conflicting political ideologies
- tensions arised through lots of US manufacturing moving to cheaper Mexico, high unemployment, along with exploitation of workers in Mexico
65
what are the pros and cons of ASEAN
pros
- peace, geo-political stability, previously had a lot of conflicts, still problems with south china sea
- collaboration on security
- they promote a country's identity and raising public awareness while preserving their traditional cultural values
cons
- not a one size fits all, very different countries
- large wealth disparity within members, not same intentions
- they lack identity, not collective
66
what are the positives and negatives of joining a trade bloc
pros
- manufacturers can import without tariffs, cheaper for consumers, economies of scale
- spread risk, stability
- access to other markets without trade barriers, attracting larger market, FDI
- greater competition between countries can increase efficiency
- increased opportunities for distribution with no costs added on
cons
- no protection for domestic industries from other member's exports, increase competition for domestic producers, most established firms will make it
- reaching agreements can be time consuming and difficult, abiding rules can be expensive
- geostrategic location is lost at times once had a comparative advantage over a member country, now need to work together
- new rules and regulations may not suit all businesses, different culture?
67
what is a definition of imports and exports?
Imports- products and services produced abroad and consumed domestically
Exports- products and services produced domestically and consumed abroad
68
what is purchasing power parity?
GDP or GDP per capita adjusted for different costs of living
69
what is fixed capital formation?
investment in long term assets such as roads and buildings
70
explain the factor contributing to globalisation: political change
- changing gov leaders can often to a change in ideologies, different approaches to globalisation
- e.g. china once had a communist ideology but their new leader adopted a pro-trade approach
- policy makes decide on the degree of globalisation
71
explain the factor contributing to globalisation: increased investment flows (FDI)
- seen through the flow of FDI into countries through MNCs
- businesses outside a bloc will invest in a business in a bloc to get around tariffs
- globalised financial markets allow investors to move their money more easily around the globe to wherever the returns are highest
72
explain the factor contributing to globalisation: growth of the global labour force
- some firms have sought to cut costs through offshoring
- a globalised workforce also helps firms to find the right type of labour needed to expand and grow
- through offshoring it leads to a global production system and a global supply chain, this leads to global flow of commodities and capital globally
73
explain the factor contributing to globalisation: structural change
- unemployment caused by the decline of an industry
- economies go through structural change when they change what they produce, e.g. agriculture to industrial
- globalisation has encouraged countries to specialise more, which has created more structural change
- the structural change of the UK to manufacturing has led to them offshoring abroad
74
what are the 5 factors to consider to assess a market
- levels and growth of disposable income
- ease of doing business
- infrastructure
- political stability
- exchange rate
75
explain the factors to consider the factors of levels and growth of disposable income and ease of doing business as a way of assessing a market
levels and growth of disposable income
- disposable income is the amount a household has left after income taxes have been deducted
- as people get wealthier, they spend their money differently
- price elasticity of demand
- GDP per capita usually equates to DI
- must look at the sustainability of each country's growth rate, they may be running large public and external deficits, may not
ease of doing business
- legislation, labour, language barriers, barriers of entry, supply chain
- New Zealand and Singapore on top, UK 8th
- whether intellectual property can be protected
- culturally, is your business going to work in their culture, negotiation
- they want to be able to do what they do as quickly as possible, e.g. in Nigeria it takes 257 days for electricity to be brought to a new premises, major con
76
explain the factors of infrastructure and political stability in assessing a country as a market
infrastructure
- the provision of the underpinnings of modern life: roads, railway
- all about efficiency, good infrastructure equates to efficiency
- goods can be transported faster and more reliably, JIT allows for keeping costs low
- reliability of data systems (broadband)
- TECHNOLOGY
- reliable power system
political stability
- corruption, CPI, can be rife
- tax and labour regulations
- relies on a flexible and adaptable business model, ready to change operations at very short notice, not possible for many
- civil wards create unrest, reduces business confidence in investing time and capital in doing trade with the country
- poor governance makes it hard to trade successfully
- top CPI: Denmark, New Zealand and Finland
77
what are the 9 factors to consider when assessing a country as a production location (explained)
1) costs of production
- machinery, labour, raw materials, legislation
2) skills and availability of labour force
- education, unemployment rates
3) infrastructure
- wifi, roads and rail for transport of goods, good distribution, accessibility for customers
4) location in trade bloc
- access to free trade within a bloc
5) government initiatives
- subsidies, grants, if need for industry in order to fill job shortages
6) ease of doing business
- corruption, tax, permits, legislation in place, can intellectual property be protected, e.g. apple do not manufacture their chips in china for this reason
7) political stability
- corruption, production involves investing A LOT of money
8) natural resources
- supply chain, sustainable and specific, likely to be protection in short term?
9) likely return on investment
- investment appraisal: ARR, NPV and payback
78
assess the country of Mexico as a production location
1) costs of production
- very cheap labour due to lower cost of living, 40-50% savings in labour costs in Mexico
2) skills and availability of labour force
- 48 hour working week, unemployment 4.7%
3) infrastructure
- focusing heavily on transport infrastructure, $1.7 billion rail-based expansion, seaport access
4) location in trade bloc
- has the most amount of free trade agreements in the world, NAFTA
5) government initiatives
- companies located in the country down pay any local or state income taxes, Govs offering incentives to attract business, manufacturing brings economic growth and jobs
6) ease of doing business
- ranks 60/90 economies
7) political stability
- -0.71 on political stability, fears of corruption, security
8) natural resources
- one of the world's largest producers of oil, silver, copper and gold, in 2010 they were the largest producers of silver in the world
9) likely return on investment
- geo-strategic location so likely to see high returns
79
what is disposable income?
the amount a household has left after income taxes have been deducted
80
what is market attractiveness?
an analysis of the current and future sales and profit potential of a country or market
81
what is GDP?
the measures of the size and health of a country's economy over a period of time, measuring the total value of goods and services produced
