Theme 4 LOAs Flashcards
Emerging markets benefit
-as emerging economy is fast growing but not fully developed
-growing number of middle income earners
-who have increased demand for luxury goods
-not currently met by domestic businesses in emerging economy
-opportunity for foreign businesses (uk businesses) to export to emerging economy
-increased demand
-PED or GDP link
Emergency markets drawback - growth in industrialisation
-as emerging economy fast growing but not fully developed
-rapid growth in industrialisation
-UK business may outsource production to capitalise on low cost of labour
-less employment opportunities in UK
-fall in employment rate
-fall in incomes, reducing spending
-fall in GDP
Emerging markets drawback - greater risk (Ansoff)
-if UK business attempt to target growing middle income earners
-greater risk (market development Ansoff)
-as need to understand cultural differences in new market
-increased investment in market research
-increased cash outflows
-link to liquidity
Exports benefit
-increased exports leads to increase is sales volume for domestic businesses
-increased sales revenue
-increase GDP
-government can raise more tax revenue
-increase fiscal spending
-improvements in education
Exports drawbacks
-increased exports could lead to pollution + resource depletion
-more goods produced for international market
-using countries resources
-supply shortages for raw materials
-increased price of raw materials
-increased cost of production for businesses
-may increase prices for domestic customers
Imports benefit
-increased imports lead to access to foreign goods
-potentially cheaper than domestic goods
-reducing cost of raw materials
-higher GP leading to higher net profit
-increase corporation tax
-increase tax revenue used for fiscal spending…
Imports drawback
-increased competition for domestic firms
-as domestic customer may buy more competitive foreign goods
-fall in demand for domestic goods
-reduced capacity for domestic firms
-increased redundancy
-increased unemployment
Benefit of a country specialising
-focus tax revenue on improving knowledge and technology in one industry
-produce more advanced workers + production methods
-increased productivity
-FC spread
-lower unit FC
-lower selling price compared to other countries
-improved international competitiveness
-increased exports of the good
-increase GDP
-increased government fiscal spending
Drawback of a country specialising
-if country specialises in one or narrow range of products
-likely to be vulnerable to changes in…
-social trends, raw materials, competition, labour
-if one or more change
-country will experience fall in demand
-decreased international competitiveness
-fall in exports
-fall in GDP
FDI benefit - increased productivity
-foreign money invested into country leads to improved knowledge + skills in economy
-introduce new technology + training
-increased productivity
-FC spread over more units
-lower unit costs
-lower selling price
-improved international competitiveness
-increased exports
-increased GDP
-increased government fiscal spending
FDI benefit - increased domestic demand
-foreign money invest into country can create new jobs
-increased average incomes due to lower unemployment
-increased spending on luxury and normal goods
-increased sales from domestic business
-increased GDP
-increased tax revenues
-increased government fiscal spending
FDI drawback - increased competition
-new foreign competition in country
-fall in demand for existing domestic goods
-existing business may be unable to compete
-struggle to survive
-foreign businesses dominate market
-create a monopoly
-lower buyer power
-increased prices in long term
FDI drawback - increased cost
-foreign business requires labour
-lead to labour/skill shortage
-increased cost of labour
-increased FC for domestic businesses
-pressure to increase prices
-cost push inflation
Offshoring benefit -differentiation
-choosing to locate services + production in foreign countries
-to take advantage of access to skilled local labour
-improved quality
-less defective goods
-porter differentiation
-increased sales in domestic + foreign markets
Offshoring benefit - lower unit costs
-choosing to locate services + production in foreign countries
-recruit from local labour supply
-take advantage of lower labour costs e.g. lower average wages
-lower costs of production
-reduce selling price
-increased demand
-EOS
Offshoring drawback
-increased FC to research local legislation + obtain planning permission
- use case study e.g required to improve local infrastructure
-increases expenses
-lower OP
-lower RP
-reduced total equity
Outsourcing benefit - differentiation
-choose organisation to run a function or department of
-use case study - what they specialise in
-specialist workers in that field
-improved quality
-less defective goods (manufacturing)
-Improved customer service (service)
-porter differentiation leadership
-increased sales in domestic + foreign markets
Outsourcing benefit - lower unit costs
-choose an organisation to run function or department of
-use case study - what they specialise in
-experts in their field
-increased productivity
-increased output
-FC spread
-low unit FC
-lower selling price to increase global demand
Outsourcing drawback
-employees of outsourcing company not recruited by organisation
-not part of organisational culture and shared values
-may lack care for…
-more defective goods/ poor customer service
-example from case
-lower sales…
tariffs - benefit for domestic business
-tariffs can have positive impact on domestic manufacturers
-make it more expensive to import foreign goods due to new tax
-recued level of imports
-increased demand for domestic products whos prices are now lower than imports
-increased employment
-increased spending
-increased tax, GDP
tariffs - Increased FDI
-government imposes tariff on price inelastic goods
-demand wont fall significantly as result on price increase
-increased tax rev
-increased government spending on infrastructure
-more attractive investment to foreign
-increased FDI
-increased knowledge/skills
-improved international competitiveness
drawback of tariffs - inflation
-tariff will increase cost of imports
-if good cannot be produced domestically business will continue to import
-may increase prices of goods as result of increased cost of sales
-less disposable income
-employees demand higher wages
-increases expenses
-businesses increase prices
-cost push inflation
drawback of tariff - reduced exports
-tariff on certain goods
-lead to other countries imposing their own tariffs
-more expensive for foreign countries importing
-reduced exports
-negatively impacts trade balance
-reduced tax rev, GDP
import quotas - benefit
-limits supply of foreign goods
-limiting availability
-businesses has to source domestic suppliers
-increased demand for domestic
-increased sales rev for domestic
-increased OP, corporation tax
-increased fiscal spending
import quotas - drawback
-limits supply of foreign goods
-limiting availability
-increased cost of goods
-cost push inflation
-increased spending on necessities reducing disposable income
-reduced spending on luxury + normal
subsidies - benefit
-increased cash (from government) without capital/interest to pay
-increased R+D spending
-improve innovation leading to differentiation
-increased competitiveness (porter)
-increased foreign demand
-increased exports
-increased tax + fiscal spending
subsidies - drawback
-increased cash (from government) without capital/interest to pay
-reduced fiscal spending in other areas due to less government cash to spend
-reduced spending on infrastructure
-weaker broadbrand speeds + access to reliable utilities
-disruption in services e.g banking
-falling demand for uk banking sector leading to reduced exports
globalisation - reduction of international trade barriers
-decrease in use of tariffs/quotas
-reduces price of imported products
-foreign businesses able to compete with domestic goods on price
-wider choice of products available to consumers/more opp to grow abroad
globalisation - political change
-increase in world politics e.g EU
-sharing of ideas + policy e.g reduction in tariffs + setting up trade blocs
-to help reduce global poverty through trade
-increased employment opps globally
-increased incomes
-increase demand for goods around the world
globalisation - containerisation
-large container ships used to transport goods overseas
-more goods can be transported
-fixed costs of transport e.g fuel spread over more units
-lower unit transport cost
-lower cost for exporting
-lower price of foreign goods
-increased demand for foreign goods
globalisation - reduced cost of communication
-internet makes international communication easier
-business able to respond quickly to orders from abroad
-increase availability of foreign products
-business able to order supplies/operate in multiple countries
globalisation - increased significance of TNCs
-increased number of TNCs e.g mcdonalds
-globally recognised brands with operations in multiple countries
-e.g producing goods in asia to be sold in U.K
-increased interconnectedness between countries
