Theme 4- Global business Flashcards
what is globalisation?
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
what is the definition of a push and pull factor and state some examples
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
what is a saturated market like?
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
what are the 6 types of economies of scale explained
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
explain the extension of the product life cycle by selling in multiple markets
- 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
what does BRICS and MINT stand for?
Brazil, Russia, India, China, South Africa
Mexico, Indonesia, Nigeria, Turkey
what is an emerging economy?
use to describe an economy that is going through rapid industrialisation (secondary manufacturing) and growth, markets are making a transition
what are 5 features of an emerging economy?
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
why is Nigeria seeing significant growth?
- lots of young people
- many working class
- opening up to FDI
- stable currency
- corruption still an issue
what is Turkey seeing significant growth?
- non commodity
- strategic location between Asia and europe
- political instability
explain the growth rate of the UK
- 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
what was the annual growth rate in china, UK, Nigeria, turkey and Indonesia in 2018
China- 6.6% UK- 1.4% Nigeria- 1.9% Turkey- 2.8% Indonesia- 5.2%
explain the philippine’s economic growth
- 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
what are the 5 opportunities to UK businesses of growing economies
- 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
what are the 5 threats to UK businesses of growing economies
- 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
explain the implication of economic growth for employment patterns
- 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
what are the points for why and why not emerging economies are likely to continue to enjoy high growth rates?
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
what are the 4 indicators in measuring growth?
- GDP per capita
- Health
- Literacy
- HDI
explain the use of GDP per capita as a measure of growth along with its limitations and examples
- 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
explain the use of health as a measure of growth along with its limitations and examples
- 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
explain the use of literacy as a measure of growth along with examples
- 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
explain the use of HDI as a measure of growth along with its limitations and examples
- 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
what is international trade?
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
what is comparative advantage?
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
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
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
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
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
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
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
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
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
