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Business A-level (Edexcel) > Theme 4 - Global Business > Flashcards

Theme 4 - Global Business Flashcards

1
Q

What is an emerging economy

A

An economy which the country is becoming a developed nation, often driven by economic growth & trade

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2
Q

What are the BRICS economies

A

Brazil, Russia, India, China & South Africa
[countries with global influence & power]

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3
Q

What are MINT economies

A

Mexico, Indonesia, Nigeria & Turkey
[emerging economic giants]

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4
Q

What are 2 opportunities for businesses in emerging economies

A

High rates of economic growth
Rising disposable income
Demand for goods rising (as secondary sector growing)

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5
Q

What are 2 threats for businesses in emerging economies

A

Increased risk of intellectual property theft
Restrictions in methods of doing business
Competition

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6
Q

What does EMDE stand for

A

Emerging Market and Developing Economy

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7
Q

What is Gross Domestic Product (GDP)

A

The total value of output & services produced in an economy in a stated time period

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8
Q

What are the 4 indicators of economic growth

A
  1. Gross Domestic Product (GDP) per capita
  2. Literacy rate
  3. Health
  4. Human development index (HDI)
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9
Q

What is the UK average literacy rate

A

86.3%
[compare to Nigeria 19.1%]

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10
Q

What country has the healthiest citizens

A

Norway

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11
Q

What is the Human Development Index (HDI)

A

A statistic which combines life expectancy, education, and income to rank countries into 4 tiers of human development (given a no. Between 1 (perfect) & 0 (awful))

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12
Q

What is international trade

A

The practice of selling & buying goods / services from abroad

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13
Q

How do firms benefit from trade

A

•Allows lower production costs
•access to range of resources & products

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14
Q

How do countries benefit from trade

A

Consumers in country receive lower prices, increased choice & increased living standards

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15
Q

What are exports

A

Goods/ services that a firm produces in a home market but sells in a foreign market

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16
Q

What is trade liberalisation

A

When trade barriers are removed & free trade is allowed to take place

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17
Q

What are imports

A

Goods/services that are purchased & brought into one country from another

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18
Q

What is specialisation

A

The process of concentrating on & becoming an expert in a particular subject or skill

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19
Q

Give 2 reasons why a country may have industries in which it leads in the world

A

Proximity & availability of raw materials
Low labour costs
Historical ability to produce

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20
Q

Who is theorist for Comparative advantage

A

David Ricardo

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21
Q

What is comparative advantage

A

When a country decide to specialise in a particular industry / sector due to it being the lowest opportunity cost

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22
Q

What are 2 limitations of comparative advantage

A

•It assumes the world doesn’t change
•It assumes that goods have no cost of distribution

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23
Q

Who is theorist behind competitive advantage

A

Michael Porter

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24
Q

What is competitive advantage

A

When a country or business produces a product or operates an industry better than competitors or other countries

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25
Q

Give 3 advantages for a country that specialises

A

+Increased productivity & output = reduced average costs & EofS
+ increased scale of production = EofS
+ Gives domestic industries comparative advantage
+ Increased productivity = increased GDP & boost growth

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26
Q

Give 2 disadvantages of a country specialising

A
  • over reliance on one industry
  • other countries may become cheaper in the same industry & harder to compete
  • if businesses grow too big, can gain diseconomies of scale (lack of communication & coordination )
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27
Q

What is FDI (foreign direct investment)

A

When a business from one country decides to establish themselves in another country

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28
Q

How does the UN define FDI

A

Where a firm takes an equity stake of more than 10% in a foreign enterprise

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29
Q

Give 2 reasons why a business might prefer FDI over exporting or licensing

A

•Managers can keep control over operations
•Protects intellectual property
•To be closer to consumers in foreign market
•To avoid high distribution & logistic costs
•To avoid trade barriers or political opposition

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30
Q

What are the 4 different types of FDI

A

Joint venture
Strategic alliances
Cross-border M&As
Build green field facilities

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31
Q

Give 3 advantages of FDI for developing countries

A

+ economic growth & employment
+ capital inflows can help current account
+ higher exports
+ tax revenue

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32
Q

Give 3 disadvantages of FDI for developing countries

A
  • TNCs wield too much power
  • profits made go back to home country of corporations
  • ethical issues with TNCs working conditions
  • over reliance on TNCs
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33
Q

What is globalisation

A

The economic integration of different countries through increasing freedoms in the cross-border movement, goods / services, technology & finance

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34
Q

Give 3 reasons why globalisation has increased

A

•Trade liberalisation
•Political change
•Reduced cost of transport & communication
•Increased significance of transnational companies
•Increased investment flows (FDI)
•Migration
•Growth of the global labour force
•Structural change

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35
Q

Give 2 advantages of trade liberalisation

A

+ allows businesses to increase their market size
+ reduced costs as imports are cheaper

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36
Q

Give 2 disadvantages of trade liberalisation

A
  • infant industries / domestic firms may not be able compete against international firms
  • some industries may be subject to dumping as business abroad may sell excess products at very low prices
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37
Q

When did China join the World Trade Organisation (WTO)

A

2001 - led to significant increase in exports

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38
Q

Why did transport and communication costs reduce and lead to globalisation

A

Innovation in containerisation
Technological advancements

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39
Q

What is a transnational company

A

A business that operates in more than one country

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40
Q

Give an example of structural change causing globalisation

A

UK shifting from manufacturing to tertiary sector over the last 50 years

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41
Q

What is protectionism

A

The theory/practice of shielding a country’s domestic industries from foreign competition by taxing imports, imposing quotas or passing laws

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42
Q

Give 3 reasons why governments impose trade barriers

A

Protect jobs
Protect infant industries
Raise revenue
Prevent dumping
Prevent harmful goods
Improve balance of payments

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43
Q

What is a tariff

A

A tax placed on an import to increase its price & decrease its demand

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44
Q

Give 2 disadvantages of tariffs

A
  • Can increase import costs of raw materials for some businesses
  • can erode consumer incomes if PED is inelastic
  • other countries may retaliate
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45
Q

What is a import Quota

A

A physical limit on products coming in to the country

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46
Q

Give 2 disadvantages of Quotas

A
  • difficult to measure degree of protection offered
  • hard to implement & lots of paperwork
  • retaliation
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47
Q

Give 3 examples of other trade barriers

A

Embargos
Gov legislation
Domestic subsidies

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48
Q

Give an advantage and disadvantage of gov legislation as a trade barrier

A

+ can be powerful in preventing fake imports
- difficult to check each import
- black markets

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49
Q

Give 2 advantages of domestic subsidies as a trade barrier

A

+ encourages increased production
+ can give domestic producers first mover advantage when exporting
+ can help domestic businesses gain EofS

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50
Q

Give 2 disadvantages of domestic subsidies as trade barriers

A
  • encourages business activity that would be unprofitable & inefficient without a subsidy (not sustainable?)
  • open to retaliation
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51
Q

What is a trade bloc

A

A formal agreement between two or more regional countries that remove trade barriers

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52
Q

What are the 6 types of trade blocs (In order of least to most integrated )

A
  1. Preferential trading areas
  2. Free trade area
  3. Customs union
  4. Common market
  5. Single market
  6. Economic union
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53
Q

What is a preferential trading area

A

A group of countries that allow certain types of products from participating countries to receive a reduced tariff rate

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54
Q

What is a free trade area

A

2 or more countries where trade barriers between them are abolished but each country maintains its own tariffs against non-member countries
(E.g. NAFTA & ASEAN)

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55
Q

What is a customs union

A

Like a free trade area except that member countries maintain a common external tariff against non-member countries

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56
Q

What is a common market

A

Like a free trade area but there’s a free flow of factors of production between the countries

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57
Q

What is a single market

A

Where almost all trade barriers between members have been removed & common laws or policies work to make the movement of FofP very easy

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58
Q

What is an economic union

A

Same as a common market but there is a common tax system & the same currency is used in member countries

59
Q

What is the EU

A

An economic union
(However has single market and common market included with some countries not adopting certain aspects like the currency)

60
Q

What is ASEAN

A

A free trade area
(Association of Southeast Asian Nations)

61
Q

What is NAFTA

A

Free trade area
(North American Free Trade Agreement)

62
Q

What are two factors that prompt businesses to trade

A

•Pull factors (entice companies to new markets)
•Push factors (conditions in existing market pushing companies to seek opportunities elsewhere)

63
Q

What are 3 pull factors for businesses to trade

A

•Opportunities (e.g. new/bigger markets, lower costs, expertise,etc.)
•Economies of scale
•Risk spreading

64
Q

What are 3 push factors that prompt businesses to trade

A

•Saturated markets
•Competition
•Excessive red tape
•Government intervention
•Polítical instability

65
Q

What can selling in multiple markets do for the business

A

•Reduce risk
•Extend the product life cycle (developing countries can see matured products as new & exciting, string brand loyalty & rep can create ‘timeless’ products)

66
Q

What is offshoring

A

The relocation of business activities from the home country to a different international location (increasingly common with calm centres)

67
Q

Give 2 reasons why businesses use offshoring

A

•Lower manufacturing costs
•Potentially better skilled & higher quality labour
•To be closer to customers & demand
•To overcome protectionism

68
Q

Give 3 disadvantages of offshoring

A
  • longer lead times for supply
  • implications of CSR
  • additional management costs
  • more exposed to exchange rate changes
  • communication issues (language & time zones)
69
Q

What is outsourcing

A

Where 1 or more business function is contracted out to a 3rd party business, who then owns, manages & administers the selected process to an agreed standard (national or international)

70
Q

What are 4 processes that could be outsourced

A

Production
Payroll
Purchasing
Delivery

71
Q

Give 2 advantages of outsourcing

A

+ access to specialist suppliers with greater capability & quality
+ reduce costs
+ makes operations more flexible
+ focuses the business on its core activities where it can ‘add’ value

72
Q

Give 2 disadvantages of outsourcing

A
  • risk that supplier will fail to meet agreed terms (quality, standards)
  • potential loss of expertise for business
  • no guarantee that costs will be lower
73
Q

Give 3 things a business should consider when assessing a country asa production location

A

Cost of production
Skills of workforce
Infrastructure
Trade bloc
Ease of doing business
Political stability
Likely return on investment
Unemployment rate (available labour)

74
Q

What are 2 factors to consider when deciding on a country to sell in

A

Disposable income
Infrastructure

75
Q

Who measures the disposable incomes of countries

A

OECD Better life index

76
Q

Who measures infrastructure of countries

A

Using Global Competitiveness Index by The World Economic Forum

77
Q

What country is rated the best to start a business in

A

Singapore

78
Q

What is a franchise

A

A business (franchisor) sells the brand/rights/processes/etc. to another business or individual (franchisee) un exchange for financial royalty

79
Q

What is a joint venture

A

A commercial enterprise undertaken jointly by 2 or more parties which otherwise retain their distinct identities (only a temporary arrangement)

80
Q

Give 3 differences between an international merger and joint venture

A

Merger
• New company, must be CMA approved, Higher risk, long-term
Joint venture
• Existing companies, project & short-term basis, less risky, recommended before a merger

81
Q

Give 2 advantages of Joint Ventures

A

+ CMA aren’t involved, limited regulation
+ access to resources & knowledge
+ lowered risk to enter a market
+ shared exposure to risks, workload & financial responsibility

82
Q

Give 2 disadvantages of Joint Ventures

A
  • 50% of JV fail due to risks & complexity of integrating operations & cultures
  • coping with different practices, culture, management styles is difficult
83
Q

What are all the ways a business can sell into a new market abroad

A

Exporting
FDI
Joint Ventures
Mergers / takeovers
Franchising
Licensing

84
Q

What is licensing

A

Where permission is given by one firm to allow another firm to use its brand name, intellectual property or to reproduce its products / services in return for a significant price

85
Q

Give 2 advantages of MNCs achieving global competitiveness

A

+ Bigger EofS
+ improved sourcing of supplies
+ diversified risk

86
Q

What are exchange rates

A

The value of one currency in terms of another

87
Q

What is the acronym for exchange rates impacting global competitiveness of a country’s exports

A

Strong
Pound
Imports
Cheaper
Exports
Dearer

88
Q

Give 3 factors that impact the significance of exchange rates on the global competitiveness of a business

A

Elasticity of demand
Economic growth in other countries
Cause of the fluctuation

89
Q

Give 2 types of buying contracts to avoid exchange rate fluctuation issues

A

Fixed contracts
Future / options or both

90
Q

What is economic risk

A

The risk that cash flows will change due to unexpected exchange rate changes

91
Q

Who is theorist behind competitive advantage

A

Michael Porter

92
Q

What is a competitive advantage

A

An advantage over competitors gained by offering consumers greater value

93
Q

What are the 2 ways of achieving a competitive advantage according to Michael Porter

A

Cost competitiveness
Differentiation

94
Q

Give 3 ways to cost compete

A

EofS
Reducing training costs
Reducing quality
Standardisation
Capacity utilisation

95
Q

Give 2 ways of differentiating

A

Performance
Style
Design
Consistency
Reliability

96
Q

What is one of the biggest threats to global competitiveness for businesses in the UK

A

Skills shortages
(Particularly for businesses who differentiate & niche businesses )

97
Q

What a niche market

A

A small specialised market as a subset of the entire market which caters for a particular segment , product or service

98
Q

What is a global niche market

A

A group of customers all over the world that have a particular need that is not met by the global mass market

99
Q

What is a global brand

A

A business that views the world as a global marketplace & creates products that will suit a world audience (e.g. Microsoft)

100
Q

Give 2 advantages of being a global brand

A

+ power in the market as your brand is known
+ consistency in brand image
+ EofS

101
Q

Give 2 disadvantages of Global brands

A
  • differences in consumer needs, wants & usage patterns
  • differences in competitive environment
  • differences in legal environment
102
Q

What are the 2 approaches to Global marketing

A
  1. Global marketing strategy
  2. Glocalisation
103
Q

What is glocalisation

A

When a global company company adapts products / services to suit local tastes & markets (e.g. Starbucks in China)

104
Q

What is the acronym for the 3 different marketing approaches

A

Polycentric
Ethnocentric
Geocentric

105
Q

What is a Polycentric marketing approach

A

Where a business adapts to each market to appeal to local customers to maximise revenue (each host country is unique)

106
Q

What is an Ethnocentric marketing approach

A

Products sold without any adaptation - a business believes one success story in a country will translate in all other countries

107
Q

What is a Geocentric marketing approach

A

Where a business keeps their brand but alters some of the product/services they offer to localised tastes

108
Q

Give 2 considerations when adapting the Product to global markets

A

Product life cycle
Ansoff
Boston matrix

109
Q

Give 2 considerations when adapting the Place to global markets

A

Distribution channels
Transportation (land locked?)
Availability of resources

110
Q

Give 2 considerations when adapting the Price to global markets

A

Different currencies & expected values
Pricing strategies
Tariffs & import duties
Luxury item? (How is it seen?)
Income in countries

111
Q

Give 2 considerations when adapting the Promotion to global markets

A

Below the line, above the line
Culturally acceptable
Correct translation

112
Q

Give 3 factors to consider when deciding which PEG marketing approach to use

A

Finance
Risk
Culture
Brand strength
Flexibility to change
Supply & demand in local markets
How the marketing mix is affected

113
Q

What are cultural factors

A

Beliefs, morals, traditions, language, laws, etc

114
Q

What are social factors

A

Lifestyle, religion (s), economic wealth, family structures, education, political systems

115
Q

What is ethnocentrism

A

The tendency to view their own culture, ethics & norms as superior

116
Q

What is a cultural audit

A

The first-hand study & examination of an organisation cultural characteristics to determine whether they hinder or support its vision & mission in different countries

117
Q

What is high context communication

A

Tend to have uncertain & mixed meaning and relationships and trust needs to be built before negotiation

118
Q

What is low context communication

A

Tend to say what they mean and use formal documentation to negotiate and agree (get down to business first)

119
Q

Give 3 positive effects of MNCs for a country

A

•Improve infrastructure
•Creates employment
•Increased standard of living
•Increase skills base
•Raises country’s profile
•Improved balance of payments

120
Q

Give 3 Negative effects of MNCs for a country

A

•MNCs pull out quickly
•Poor safety record
•Low paid jobs
•Increased urbanisation
•Profit leakage
•Widen the poverty gap

121
Q

How do MNCs impact FDI flows into a country

A

Governments will offer incentives to firms in the form of grants, subsidies & tax breaks to attract investment into their countries
(India has had $300 billion of FDI to date)

122
Q

How do MNCs impact the Balance of Payments of a country

A

•Inward investment improves BofP
•Indirect businesses being used (e.g. transportation) improves competitiveness
•Import substitution (instead of importing, buying domestic)

123
Q

How do MNCs impact Technology & Skill transfers in a country

A

Bring in new tech & production methods
Workers are then trained so domestic firms can use new tech too (tech transfer)

124
Q

How do MNCs impact consumers in a country

A

Gain a wider choice of goods/ services & at a price likely lower than imports

125
Q

How do MNCs impact on business culture

A

Cultural & social impacts
Large numbers of foreign businesses can dilute customs & traditional cultures

126
Q

What is a supply-chain

A

A system of businesses, people, activities, info and resources involved in moving a product/ service from supplier to customer

127
Q

What is forced labour

A

Consists of MNCs threatening harm or harming workers, restricting movement, retaining wages & identity documents, debt bondages, etc.
(E.g. in Qatar World Cup building)

128
Q

Give 3 ways MNCs can behave unethically

A

-Labour exploitation (child & forced labour)
-Environment exploitation
-Misleading or inappropriate marketing

129
Q

What prevents misleading labelling in the UK

A

The Trade Descriptions Act
(Labels must be accurate & cannot contain false information on price, size, quantity, etc.)
- However, doesn’t apply outside UK

130
Q

What are the 4 ways to control MNCs

A

Political controls
Legal controls
Pressure groups
Social media

131
Q

What are political controls

A

The government applying pressure to attempt to change the behaviour of MNCs
(E.g R Sunak putting tax avoidance on G20 agenda, gov forcing Google to pay tax)

132
Q

Give an advantage of using political controls on MNCs

A

+ MNCs incentivised to get gov approval for ease of doing business

133
Q

Give 2 disadvantages of political controls on MNCs

A

-Regulatory capture & bribery
-Some MNCs bring so much wealth & employment to country that unethical activities are ignored by gov
-Only effective if it’s a joint effort from lots of countries, to get rid of capital flight fear

134
Q

What are legal controls

A

Legal system applying pressure on MNCs to behave legally and fairly
(E.g. Corp. tax, min wage, US gov forcing BP to compensate Mexicans affected by the Deepwater Horizon disaster)

135
Q

Give 2 advantages of Legal controls on MNCs

A

+ laws can be passed at any point to control MNC actions
+ laws mean consumers have some rights against MNCs (e.g Mclibel case)

136
Q

Give 2 disadvantages of legal controls on MNCs

A

-Laws can still be broken by MNCs
-May simply move production to a less restrictive country
-Capital flight deters laws being passed
-MNCs can afford legal defence of any challenge

137
Q

What is a pressure group

A

An organisation that campaigns for changes in the law or new legislation in specific areas
(E.g. WWF, Amnesty, Greenpeace)

138
Q

Give 2 advantages of pressure groups for controlling MNCs

A

+ can raise public awareness of unethical behaviour
+ can create PR problems for MNCs which can create a change in their behaviour

139
Q

Give 2 disadvantages of Pressure groups as a control of MNCs

A
  • They need to be large & organised to make any impact
  • Big & wealthy MNCs can silence or easily counter PG activity
140
Q

Give an advantage of using social media to control MNCs

A

+ can be very powerful to change the behaviour of MNCs
(E.g. Twitter can organise boycotts worldwide that affect MNC’s sales & rep)

141
Q

Give 2 disadvantages of social media as a control for MNCs

A
  • SM can inflict only short-term change as it’s a dynamic medium & consumers easily get bored and move on
  • An MNC can ignore and carry on (depends on elasticity )
142
Q

What is a transfer payments

A

A form of tax avoidance through having ‘license holders’ that pay the HQ in a tax haven

143
Q

What is global marketing

A

Treating the market as one market undifferentiated approach

144
Q

2 pull factors influencing production location on exam specification

A

EofS
Risk spreading

Business A-level (Edexcel) (5 decks)

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