Theme 4 - Global Business Flashcards
1
Q
Globalisation
A
Increasing interconnectedness of economies, businesses and cultures worldwide, leading to greater trade and investment between countries
2
Q
Key features of globalisation
A
- Increased international trade
- Greater Foreign Direct Investment
- Expansion of Multinational Corporations
- Advancements in technology and communication
- Labour migration
3
Q
Factors contributing to globalisation
A
- Trade liberalisation
- Containerisation
- Growth of Multinational Corporations
- Advancements in technology
4
Q
Advantages of globalisation
A
- Access to larger markets
- Lower production costs
- Greater consumer choice
- Job creation
- Transfer of knowledge and technology
5
Q
Disadvantages of globalisation
A
- Small firms may struggle to compete with large Multinational Corporations
- Job losses in developed countries
- Exploitation of workers
- Environmental damage
- Economic dependence
6
Q
Emerging economy
A
Country experiencing rapid industrialisation, economic growth and increasing global trade
7
Q
Examples of emerging economies
A
- Brazil
- Russia
- India
- China
- South Africa
8
Q
Advantages of operating in an emerging economy
A
- Lower labour costs
- Expanding consumer markets
- Great potential for joint ventures and acquisitions
9
Q
Disadvantages of operating in an emerging economy
A
- Political and economic instability
- Cultural differences
- Weak infrastructure
10
Q
Human Development Index
A
Measure to assess a country’s overall development based on health measured by life expectancy at birth, education measured by average years of schooling and standard of living measured by Gross National Income per capita
11
Q
Advantages of the Human Development Index
A
- Holistic measure
- Easy to compare
- Focus on human welfare
12
Q
Disadvantages of the Human Development Index
A
- Ignores inequality
- Doesn’t include environmental factors
- Doesn’t take into account income distribution
13
Q
Advantages of international trade
A
- Increased competition
- Economies of scale
- Can create jobs reducing poverty
14
Q
Disadvantages of international trade
A
- Environmental impact
- Overdependence on foreign markets
- Structural unemployment as patterns of trade change
15
Q
Exports
A
Goods and services produced in one country and sold to buyers in another country
16
Q
Imports
A
Goods and services bought from foreign countries for domestic consumption
17
Q
Specialisation
A
When individuals, business or countries focus on producing a limited range of goods or services that they are most efficient at producing
18
Q
Advantages of specialisation
A
- Increased efficiency
- Economies of scale
- Increased innovation and higher quality products
19
Q
Disadvantages of specialisation
A
- Overdependence on one industry
- Job losses in some sectors
- Supply chain disruptions
20
Q
Foreign Direct Investment
A
When a business or individual from one country invests in a business or assets in another country
21
Q
Advantages of Foreign Direct Investment
A
- Boosts economic growth
- Technology transfer
- Improves infrastructure
22
Q
Disadvantages of Foreign Direct Investment
A
- Loss of domestic control
- Profit repatriation
- Risk of exploitation
23
Q
Free trade
A
Exchange of goods and services between countries without tariffs, quotas, or other trade barriers. It allows businesses to import and export products without government restrictions
24
Q
Advantages of free trade
A
- Greater consumer choice
- Encourages competition and innovation
- Encourages specialisation
25
Disadvantages of free trade
1. Domestic firms may struggle
2. Job losses in some industries
3. Environmental concerns
26
World Trade Organisation
International organization that regulates and promotes global trade by ensuring that trade flows smoothly, predictably, and freely
27
Protectionism
Government policies that restrict international trade to protect domestic industries from foreign competition
28
Methods of protectionism
1. Tariffs
2. Import quotas
3. Subsidies
29
Tariff
Tax or duty placed on imported goods, making imported goods more expensive in order to reduce foreign competition and protect domestic industries
30
Import quota
Government-imposed limit on the quantity or value of a specific good that can be imported into a country over a set period
31
Subsidies
Financial support provided by the government to businesses, industries, or individuals to encourage production, reduce costs, or make goods and services more affordable
32
Advantages of protectionism
1. Protects domestic jobs
2. Infant industry protection
3. Protection against import dumping
33
Disadvantages of protectionism
1. Higher prices for consumers
2. Retaliation from other countries
3. Extra costs for exporters
34
Trade bloc
Group of countries that agree to reduce or eliminate trade barriers between them, such as tariffs, quotas, and import restrictions. This helps to increase trade and economic cooperation among member nations
35
Advantages of trade blocs
1. Increased trade
2. Foreign Direct Investment
3. Greater competition means lower prices for consumers
36
Disadvantages of trade blocs
1. Exclusion of non-members
2. Trade diversion
3. Loss of sovereignty
37
European Union
Political and economic union of 27 European countries that work together to promote economic growth, trade, and political cooperation
38
Four freedoms of the European Union
1. Free trade in goods
2. Mobility of labour
3. Free movement of capital
4. Free trade in services
39
Main export partners for the UK economy
1. United States (16.1)
2. Germany (8.8%)
3. Netherlands (7.7%)
40
Main import partners for the UK economy
1. Germany (12.5%)
2. United States (10%)
3. China (9.8%)
41
Push factor
When businesses feel they have to expand internationally because of domestic market issues
42
Pull factor
When businesses are attracted by compelling opportunities to grow by expanding internationally
43
Examples of push factors
1. Saturated markets
2. Increased competition
44
Saturated market
When a market has high competition and little or no room for growth because most potential customers already have the product or service. This makes it harder for businesses to expand, gain market share, or increase sales
45
Examples of pull factors
1. Economies of scale
2. Risk spreading
46
Factors to consider when assessing a country as a market
1. Levels and growth of disposable income
2. Ease of doing business
3. Infrastructure
4. Political stability
5. Exchange rate
47
Factors to consider when assessing a country as a production location
1. Costs of production
2. Skills and availability of the labour force
3. Infrastructure
4. Government incentives
5. Political stability
48
Exchange rate
Value of one currency compared to another. It determines how much of one currency you can exchange for another
49
Ways exchange rates impact business activity
1. Price of exports in international markets
2. Cost of goods bought from overseas
3. Revenue and profits earned overseas
4. Converting cash receipts from customers overseas
50
Factors affecting exchange rates
1. Interest rates
2. Demand for exports
3. Speculation
4. Level of Foreign Direct Investment into the country
51
Factors affecting the significance of exchange rates on businesses
1. How much they export to other economies
2. Whether domestic businesses face strong competition from overseas firms in their markets
3. How much a business relies on importing goods
4. Price Elasticity of Demand for their products or services
52
Offshoring
When a business moves part of its operations to another country
53
Advantages of offshoring
1. Lower costs
2. Access to skilled labour
3. Competitive advantage
54
Disadvantages of offshoring
1. Cultural and language barriers
2. Political and economic risks
3. Job losses in the home country
55
Reshoring
When a business relocates activities from overseas back to the home country
56
Advantages of reshoring
1. Better quality control
2. Shorter lead times
3. Lower transportation costs
57
Disadvantages of reshoring
1. Potentially higher labour costs
2. Skills shortages
3. Time consuming and expensive
58
Ways to achieve differentiation
1. Superior product quality
2. Branding
3. Wide distribution
4. Sustained promotion
59
Joint venture
Business arrangement where two or more companies collaborate to undertake a specific project or business activity while remaining separate legal entities
60
Advantages of a joint venture
1. Access to new markets
2. Shared risks and costs
3. Combined expertise and resources
61
Disadvantages of a joint venture
1. Conflicts between partners
2. Profit sharing
3. Limited control
62
Glocalisation
Product or service that is developed and sold globally but also adapted to meet the needs and wants of customers in a local market
63
Ethnocentric approach
When the business sees the domestic market and foreign markets as very similar, so there will be no changes to the product for overseas customers and marketing of the product will be the same
64
Advantages of an ethnocentric approach
1. Strong brand identity
2. Centralised control
3. Economies of scale
65
Disadvantages of an ethnocentric approach
1. Ignores local culture
2. Could potentially lose sales as product is not tailored to wants and needs of locals
3. Limited market share growth
66
Polycentric approach
When the business treats each country as a unique market, so they adapt their marketing strategy by tailoring their products to the local market
67
Advantages of a polycentric approach
1. Better market adaptation
2. Cultural sensitivity
3. Higher market acceptance
68
Disadvantages of a polycentric approach
1. Higher costs
2. Complex management
3. Brand inconsistency
69
Geocentric approach
Global business strategy where a company integrates its operations across all markets, treating the world as a single market while balancing local and global needs
70
Advantages of geocentric approach
1. Global consistency and efficiency
2. Sales likely to be higher as product is tailored to meet locals' needs
3. Can develop brand loyalty in overseas markets
71
Disadvantages of geocentric approach
1. Resistance from local markets
2. High costs
3. Logistical difficulties
72
Bartlett and Ghoshal model
Indicates the marketing strategy options for businesses wanting to manage their global marketing, based on two pressures, local responsiveness and global integration
73
Features of the Bartlett and Ghoshal model
1. International (Low pressure for global integration and low pressure for local responsiveness)
2. Multi-domestic (Low pressure for global integration and high pressure for local responsiveness)
3. Global (High pressure for global integration and low pressure for local responsiveness)
4. Transnational (High pressure for global integration and high pressure for local responsiveness)
74
Features of a global strategy
1. Highly centralised
2. Focus on efficiency
3. Little sharing of expertise locally
4. Standardised products
75
Features of a transnational strategy
1. Complex to achieve
2. Aim is to maximise local responsiveness but also gain benefits from global integration
3. Wide sharing of expertise
76
Features of an international strategy
1. Aims to achieve efficiency by focusing on domestic activities
2. International operations are largely managed centrally
3. Relatively little adaptation of products to local needs
77
Features of a multi-domestic strategy
1. Aims to maximise benefits of meeting local market needs through extensive communication
2. Decision making is decentralised
3. Local businesses treated as separate businesses
4. Strategies for each country
78
Cultural diversity
Recognition that groups of people across the globe have different interests and values
79
Factors influencing cultural diversity in markets
1. Economic development
2. Language
3. Weather
4. Religious and social norms
80
Global niche market
Market where customers in many countries have specific needs and wants that are not satisfied by mass market products or services
81
How global niche markets develop
1. Cultural differences
2. Specialist expertise developed
3. Different adoption of technology
4. Distinctive branding
82
Global marketing
When the business does not differentiate its products or marketing between countries, the same product is sold in many countries with only some fine tuning of the product, price or promotion
83
Benefits of global marketing
1. Economies of scale can be achieved in both production and distribution
2. Consistent brand image
3. Power in the market as the brand is known
84
Drawbacks of global marketing
1. Differences in consumer needs, wants and usage patterns for products
2. Differences in the competitive and legal environment
3. Differences in brand and product development
85
Benefits of glocalisation
1. Multinational Corporations get access to larger culturally different markets
2. Multinational Corporations that follow a glocalisation strategy can compete more effectively in those markets
3. More demand from customers familiar with those products
86
Drawbacks of glocalisation
1. Small local businesses will struggle to compete with the Multinational Corporations as they can't get the economies of scale
2. Its expensive, slow and complex to launch new products that have to be adapted to local markets
87
Benefits of selling in a global niche market
1. Less competition and greater customer loyalty
2. Prices likely to be higher
3. Risk may be reduced
88
Drawbacks of selling in a global niche market
1. Co-ordination and communication may be more difficult across differing brands and markets
2. Some products may require unique ingredients or production techniques reducing the scope for economics of scale
89
Features of high context communication
1. Establish social trust first
2. Value personal relations and good will
3. Agreement by general trust
4. Negotiations slow and ritualistic
90
Features of low context communication
1. Get down to business first
2. Value expertise and performance
3. Agreement by specific, legalistic contract
4. Negotiations efficient as possible
91
Problems with operating internationally
1. Different tastes
2. Language barriers and unintended meanings
3. Inappropriate and inaccurate meanings
4. Inappropriate branding and marketing
92
Multinational Company
Business that has operations in more than one country
93
Benefits of MNCs to the countries they operate in
1. Provide employment and training
2. Transfer of skills and expertise
3. Incentive for domestic firms to improve their competitiveness
4. Increase in tax revenues
94
Drawbacks of MNCs to the countries they operate in
1. Domestic businesses may not be able to compete, resulting in business failure
2. MNCs may not meet the host country expectations for acting ethically or socially responsible
3. Profits earned may be remitted back to their home country rather than being reinvested in the host economy
4. May use tax avoidance measures, reducing tax revenue
95
Reasons why the activities of MNCs may need controlling
1. Protect against exploitation
2. Discourage resource depletion
3. Ensure local culture is protected
4. Discourage abuse of market power
5. Protect domestic businesses
96
Ways MNCs can be controlled
1. Political influence
2. Legal control
3. Pressure groups
4. Social media
97
Pressure group
Organisation that seeks to influence government policies, business decisions, or public opinion without seeking political power. These groups represent specific interests and use various methods like lobbying, protests, and media campaigns to achieve their goals
98
Ethics
Moral guidelines which govern acceptable behaviour
99
Ethical behaviour
Doing what is morally right
100
Benefits of behaving ethically
1. Increased demand from positive consumer support
2. Improve brand awareness and recognition
3. Improved employee motivation and recruitment
101
Drawbacks of behaving ethically
1. Higher costs
2. Higher overheads, such as training and communication of ethical policy
3. Danger of building up false expectations
102
Common ethical issues with MNCs
1. Pay and working conditions
2. Environmental impact
3. Supply chain management
4. Marketing
