Unit 3 Flashcards
The International Monetary Fund (IMF)
Is concerned with monetary stability in the world economy. Members contribute quota subscriptions. To start a system of fixed stable exchange rates was set up. This evolved in the 1970s into a floating rate system we have today. The IMF still provides loans for countries with balance of payments deficits which are causing their currencies to depreciate very sharply. It gives copious advice on individual governments on economic policy which is often controversial. It still provides a useful talking shop for national economic policy makers.
The World Trade Organisation WTO
Used to be called the GATT (general agreement on tariffs and trade) This was too small, poorly funded organisation. It still managed to organise regular trade negotiations that led to import controls being steadily reduced. This helped many countries to find new markets to export to. In 1995 GATT was relaunched as the WTO with more staff and funding to continue the process of trade liberalisation.
Trade liberalisation
The process of reducing import taxes and cutting quota restrictions.
Trading blocs
Is a type of agreement, often part of regional intergovernmental organisation, where trade barriers to trade are reduced or eliminated among the participating states.
Interdependence
The dependence that countries have on each other. Buyers are often dependant on urging their requirements from other countries because of better values. FDI links to interdependence counties often depend on g MNC help develop their country. A natural consequence of interdependence is that a change in one country will affect many other economies.
Market share
The percentage of total sales f one particular product from an individual business
Market saturation
Occurs when it becomes impossible to expand sales further in that particular market. If the product is a durable good eg a washing machine it may still be possible to sell replacement machines
Market penetration
Refers to the process of expanding market share o as to reach a larger number of customers
Innovation
May mean either a new product development or an improved development or an improvement in the design of an existing product
Process innovation
Urging costs y finding a better method of producing
Extending product lifecycle
Extending the phase which many products go through between their first introduction to the market and the eventual decline in sales that lead to production ceasing.
Business objectives
The underlying reason for businesses searching for new markets is the desire to expand to make more profit and to spread the risk associated with growth.
Supply chain
The sequence of processes which starts with acquiring the most basic inputs no ends with delivery of the product to the consumer.
Outsourcing
Buying necessary inputs from independent suppliers either in the same country or overseas.
Joint ventures
Involve businesses in collaborative relationship with a local producer. They are of particular value to businesses that want to produce and/or sell in an unfamiliar market.
Trade liberalisation
The process of limiting and reducing barriers to trade so that economies move closer to free trade.
Globalisation
The ongoing process by which regional economies ,societies and cultures have become integrated through a global spanning network of communication and trade.
Economies of scale
As outputs grow, businesses can produce at a lower average cost than before.
Foreign direct Investment FDI
Occurs when businesses set up factories or other types of production or distribution facilities in other countries.
Structural change
Occurs when some industries are dealing while others are growing.
Free trade areas
Groups of countries that trade completely freely with each other it’s no trade barriers but each member country retains its own independent trade policies in relation to the rest of the world.
Common markets
Have completely free trade internally and a single unified trade policy covering all member countries trade with the rest of the world. But besides free movement of goods and services there is also free movement of people and capital
Single market
Barriers to the movement of goods services people and capital have gradually been reduced within the EU making it more and more like a single economy.
Harmonisation
Leads to most regulatory control on businesses being common to all Eu member countries.
The common agricultural policy CAP
Protects EU farmers from foreign competitive to a very considerable degree. EU import controls on food products are high
Trade creation
Occurs when there is an increase in the amount of goods and services traded because of reduced trade restrictions within a trading bloc.
Trade diversion
Occurs when a trading bloc reduces imports from non member countries enabling businesses within member countries to increase sales inside the trading bloc.
The World Bank
Set up to fund the reconstruction of war torn economies. In time it became a vehicle of encouraging development in the poor economies of the third world where it is still a significant source of finance and policy advice.
EU benefits
Larger markets
Increased competition
More variety
EU constraints
Getting an agreement between 27 governments can be difficult. There are still many barriers to free trade within the EU
Price transparency
With all prices quoted in euros it is harder for businesses to raise prices above the competitive level and still sell their products.
Inequality
Means that a disproportionate share of national income is going to the rich while large numbers of poor people remain poor.
Joint ventures
Particularly useful wherever language cultural and political barriers exist
Technology transfer
The way in which countries with limited access to new technologies may acquire expertise when multinational companies locate there.
State owned enterprises
Businesses that are run by the government. They have often been run in the public interest but are increasingly expected to be profitable.
Open economy
One in which exports and imports form a significant proportion of GDP. In addition there will be capital movements both in and out of the country and a technology transfer.
Purchasing power
Refers to an exchange rate that has been adjusted to allow accurate comparisons of purchasing power. Used because prices for specific products vary considerably between countries and considerably between countries and consequently so does the purchasing power of a given sum of money.
Centrally planned economies
Where those in which all or most economic decisions were taken by governments. Planning involved deciding on the inputs to be used, the production targets and the prices of all products.
Consumer profiles
Define the characteristics of consumers within a market segment. Maybe based on age, income, tastes.
Market mapping
Places competing producers or products on a grid that shows how the market perceives each in relation to each other.
Market positioning
Defines the products according to likely customer perceptions of their selling points. It allows the business to analyse the market in terms of the key characteristics that defines the different market segments.
Human development index
Constructed by the UN development program and provides a measure of development based on access to health care and education as well as national income.
Diversion of labour
Involves organising employees so that individuals specialise in one part of the production process. As they become quicker and more proficient at specific tasks, output increases.
Specialisation
Means people make the most of their skills by concentrating on what they do best. As a skilled person produces more, output per head rises. This only works if people or economies are in a position to trade thief output for things they need but do not produce.
Absolute advantage
Exists if the real resource cost of a product is lower in one country than another.
Comparative advantage
States that if two countries each specialise in the product with the lowest opportunity cost and then trade then real incomes will increase for both counties.
Barriers to entry
Obstacles which make it difficult for new firms to enter a market. High start up costs requiring heavy investment, patents and colluision between existing firms can all create barriers.
Patents
Give legal protections from competition when a new product or process is registered. Patent holders have monopoly power over innovations for up to 20 years.
X-inefficiency
Occurs where there is a weak control of costs and resource use and no competition to provide the incentive to stimulate efficiency.
Perfect competition
An idealised competitive market.
Imperfect competition
Covers any market situation between the extremes of perfect competition to monopoly. Most real world markets show characteristics of imperfect competition.
Monopolistic competition
Describes a market with many sellers easy entry and exist and product differentiation.
Corporate social responsibility
How companies manage the business processes to produce an overall positive impact on society.
Ethical decision making
Means following codes of practice that embody moral values. The objective is to do the right thing acting with honesty and integrity and taking into considerations the interests of everyone affected by the decision.
Social audits
Highlights the process or lack of it of a business that is committed o acting responsibly towards all its stakeholders
Corporate culture
The set of important assumptions that are shared by people working in a particular business and influenced the ways in which decisions are taken there.
Emerging markets
Usually those that are not yet fully developed but have a group of Middle class consumers that is large and prosperous enough to provide a market for development.
Tariffs
Taxes placed on specific imported goods. They are sometimes called import or customs duties.
Quotas
Physical limits on the level of specific imports in any one year
Dumping
Means exporting at a price that is less than the true cost of production
Infant industries
Those with some prospect of profitability in the long run provided they are given some protection in the short run while they get started.
Organic growth
Occurs when an individual business increases output. This type of expansion is likely to be quite slow but steady and secure.
Merger
Means combining with other companies on a collaborative basis.
Takeover/ acquisition
Refers to the situation where one company is buying another
