WHOLE OF EBE Flashcards
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Describe what Globalisation is
Globalisation is the process of increasing connections and interdependence between countries. It allows goods, services, ideas and people to move more easily across borders, creating a more interconnected and global economy.
Drivers of Global Trade:
Tech Advancements: E-commerce and digital tools make global business easier (e.g., Amazon).
Better Transport: Containerisation and air freight
boost global logistics (e.g., Scottish ports).
Fewer Trade Barriers: Trade deals (like the UK’s post-Brexit agreements) open global markets (e.g., ASOS).
Emerging Markets: Growing economies like China and India create new trade opportunities.
Global Media: Social media and digital platforms spread global trends, enabling standardised marketing (e.g., Nike, Zara).
Describe the benefits and challenges of Globalisation
Advantages
Increased Consumer Choice: UK supermarkets offer a wider range of international products (e.g., Spanish fruits, South Korean electronics).
Lower Prices: Global competition leads to more affordable products (e.g., Samsung, LG TVs).
Economies of Scale: Global operations reduce unit costs, making production more efficient (e.g., Toyota cars).
Job Creation: International companies provide significant employment opportunities (e.g., Nissan in the UK).
Knowledge Sharing: Cross-border collaboration drives innovation (e.g., Covid-19 vaccine development).
Disadvantages
Job Losses: Relocation of production to lower-wage countries can lead to local job cuts (e.g., Dyson).
Cultural and Communication Barriers: Language, cultural differences, and business practices create challenges and extra costs.
Supply Chain Vulnerability: Global reliance on international suppliers can lead to disruptions (e.g., Covid-19, Red Sea shipping).
Environmental Concerns: Global trade increases carbon footprint (e.g., cotton T-shirt traveling long distances).
Local Business Impact: Small retailers struggle to compete with global giants like Amazon, causing high street closures.
Cultural Impact: Global brands replace local businesses, altering the character of high streets (e.g., McDonald’s, Starbucks).
What are some of the reasons for Multinationals?
Market Expansion & Dominance: Companies like Apple grow globally by targeting new markets (e.g., India, China) when their home markets plateau.
Access to Resources: Operating in resource-rich countries (e.g., Mars in West Africa for cocoa) ensures a steady supply chain.
Cost Management: Companies reduce production costs by manufacturing in low-wage countries (e.g., Nike in Vietnam, Indonesia).
Production Efficiency: Global operations and economies of scale (e.g., Samsung’s multi-country production) boost efficiency.
Avoiding Import Costs: Local manufacturing (e.g., Nissan in the UK) avoids high import tariffs.
Transport & Technology Benefits: Improved logistics and digital tools enable fast global operations (e.g., Zara’s rapid production-to-store timeline).
Describe the benefits and challenges of Multinationals
Benefits of Multinational Companies (MNCs):
Economic Growth: MNCs like Nissan support local economies through taxes, local supplier partnerships, and infrastructure investment.
Job Creation: Companies like Unilever and GSK create thousands of jobs globally, benefiting both direct employment and supply chains.
Innovation: MNCs drive technological progress, as seen with AstraZeneca’s role in developing Covid-19 vaccines.
Consumer Choice & Competition: Global competition (e.g., Samsung, Apple, Google in smartphones) leads to better products, more choice, and competitive prices for consumers.
Drawbacks of Multinational Companies (MNCs):
Excessive Market Power: MNCs like Amazon can dominate markets, pushing out small businesses (e.g., independent bookshops).
Tax Avoidance: MNCs (e.g., Starbucks, Amazon) use international accounting to minimize tax payments in countries where they generate significant sales.
Job Insecurity: MNCs can relocate operations, leading to job losses (e.g., Dyson and Honda moving production abroad).
Cultural Impact: Global brands replace local businesses, creating a “clone town” effect with similar high streets everywhere (e.g., McDonald’s, Starbucks).
Environmental Concerns: Fast fashion brands like Primark and H&M contribute to pollution, excessive water use, and carbon emissions, despite sustainability pledges.
Describe FDI(Foreign Direct Investment)
Foreign Direct Investment (FDI) is when a company or individual from one country invests in a business in another country, typically by opening a new branch, buying a local company, or expanding operations.
Why do companies use FDI
Access to New Markets: Companies can reach international customers by setting up operations abroad (e.g., US companies in the UK for European access).
Quick Market Entry: Acquiring existing companies provides instant access to local markets and networks (e.g., Tata buying Jaguar Land Rover).
Cost Advantages: Lower wages and operational costs in some countries reduce production expenses (e.g., electronics manufacturers in Southeast Asia).
Access to Resources & Expertise: FDI allows companies to tap into local skills and industry knowledge (e.g., BMW in Oxford’s automotive cluster).
Government Incentives: Tax breaks and grants attract foreign investment (e.g., UK incentives for car manufacturers).
Avoiding Trade Barriers: Local manufacturing helps avoid tariffs and trade restrictions (e.g., Toyota’s UK factories).
What are the advantages and disadvantages of FDI
Advantages of FDI:
Economic growth: FDI creates jobs, boosts tax revenues, and drives innovation (e.g., Nissan’s car factory in the UK).
Technology transfer: Foreign firms bring advanced technologies and business practices (e.g., Google’s investment in London).
Skills development: FDI promotes workforce training and education (e.g., BMW’s apprenticeship programmes).
Infrastructure improvement: Investment often enhances transport, energy, and facility infrastructure (e.g., Tesla’s local upgrades).
Drawbacks of FDI:
Job insecurity: Foreign companies can shut down local operations based on global strategies (e.g., Honda’s Swindon closure).
Economic vulnerability: Heavy reliance on FDI can harm local economies if companies relocate (e.g., Dyson moving to Singapore).
Profit repatriation: Earnings may be sent back to the investor’s home country instead of being reinvested locally.
Local competition: Large foreign firms can outcompete and displace domestic businesses.
Environmental concerns: Lax regulations may attract FDI but lead to environmental damage.
Describe transfer pricing
Transfer pricing is used by multinational companies to shift profits between countries to reduce their overall tax bill.
Costs and benefits of transfer pricing?
Benefits of transfer pricing:
Cost reduction: Helps optimise global profits and reduce tax by shifting income to low-tax regions (e.g., Zara).
Quality control: Aligns finances across operations to maintain product standards (e.g., Apple).
Tax revenue: Can boost tax income in countries where profits are declared.
Drawbacks of transfer pricing:
Reduced tax revenue: Host countries may lose out if profits are shifted abroad.
Unfair competition: Local businesses may struggle to compete with tax-efficient multinationals.
Public backlash: Perceived tax avoidance can damage a company’s reputation (e.g., Starbucks in 2012).
What are the benefits and challenges of the host country
Job creation: MNCs like Toyota and Nissan create thousands of jobs directly and indirectly.
Higher wages and living standards: Foreign firms often pay more than local companies, boosting local economies.
Skills and technology transfer: Local workers gain new skills and benefit from efficient international practices.
Economic growth: Foreign investment brings capital and boosts sectors like the UK car industry.
Increased competition and choice: Companies like Aldi and Lidl improve value and service in local markets.
Government revenue: Taxes and trade from MNCs support public services and infrastructure.
Key Challenges:
Dependency on single employers: Communities suffer if large multinationals close operations (e.g., Michelin in Dundee).
Profit repatriation: Profits often return to the home country, limiting local economic benefit.
Tax avoidance: Complex transfer pricing reduces local tax contributions (e.g., Google in the UK).
Unfair competition: Local firms may struggle against resource-rich multinationals (e.g., small shops vs. Amazon).
Strain on local resources: Large-scale operations can overuse local resources, such as water or energy.
Political influence: Multinationals may receive tax breaks or influence local policies, sometimes controversially.
What are the benefits and challenges on home country
Benefits:
Export success: Global sales generate export earnings and support jobs (e.g., HSBC).
Profit and investment returns: Profits from overseas operations flow back to support the home economy (e.g., Diageo).
Improved competitiveness: Competing globally drives companies to improve efficiency (e.g., Tesco).
Research and innovation: R&D often remains in the home country, creating high-skilled jobs (e.g., AstraZeneca).
Global influence: Successful firms enhance the home country’s international reputation (e.g., UK banks).
Quality jobs: Headquarters provide well-paid roles and global career opportunities (e.g., GSK).
Challenges:
Job losses: Moving production abroad can cause domestic job losses (e.g., Dyson).
Reduced tax revenue: Use of transfer pricing can lower home country tax contributions.
Loss of control: Large multinationals may become difficult for governments to regulate effectively.
Describe the basics of ethics
Business ethics involves making decisions based on moral principles, beyond legal requirements. Ethical businesses build trust, protect reputation, and support long-term success. They consider the impact on all stakeholders—employees, customers, suppliers, shareholders, and communities.
Benefits include improved brand loyalty, reduced risk, stronger stakeholder relationships, and sustainable growth.
Sustainability and CSR are key elements, focusing on environmental care, fair treatment, and social responsibility.
What are the benefits and costs of business ethics
Benefits of Ethical Business Practices:
Stronger reputation: Ethical actions (e.g. Patagonia, LEGO) build public trust and brand value.
Customer loyalty: Shoppers stay with brands they see as responsible (e.g. Lush).
Attracting staff: Ethical values appeal to job seekers, especially younger workers (e.g. Scottish Power).
Marketing advantage: Ethical initiatives enhance brand image and customer engagement (e.g. Co-op, Waitrose).
Challenges of Ethical Business Practices:
Higher costs: Paying fair wages and using sustainable materials increases expenses.
Lower short-term profits: Ethical choices (e.g. Fairtrade, UK manufacturing) may reduce margins.
Implementation complexity: Monitoring ethical standards, especially in global supply chains, is difficult.
Greenwashing & rainbow-washing: Some businesses falsely promote ethical values for marketing without real action, risking public backlash.
How do stakeholders influence environmental business practices
Got it! Here’s a slightly longer summary with key details:
UK net-zero laws require big companies to cut carbon emissions by 2050, leading to changes like solar panels at Tesco and electric vehicles from Ford. Firms must report emissions across their supply chains, and taxes on non-recycled plastics push packaging redesigns.
Customers demand eco-friendly products and transparent information—like carbon footprint labels—driving changes across the food and fashion industries. Employees, especially younger ones, want to work for green companies and often lead sustainability efforts.
Investors and banks now expect clear climate plans and reward good performance with better funding terms. Poor environmental practices can harm share prices.
Companies also pressure suppliers to meet green standards, while global regulations and shipping costs affect sourcing. Business functions adapt: marketing promotes sustainability, operations cut energy use, HR trains staff, and finance funds green projects and handles environmental taxes.
Explain the governments influence on businesses
Fiscal Policy:
Government decisions on tax and spending impact business costs and consumer demand. A rise in Corporation Tax reduces company profits, while changes in VAT or income tax affect consumer spending. Public spending, like infrastructure projects (e.g. HS2), creates business opportunities.
Monetary Policy:
Managed by the Bank of England, it influences interest rates and inflation. Higher rates raise borrowing costs and reduce consumer demand, while lower rates boost spending. Inflation increases business costs, forcing companies to adjust pricing or absorb losses.
Regulation and Legislation:
Businesses must follow laws on wages, working hours, health and safety, consumer rights, and data protection (GDPR). Regulators like Ofcom and Ofgem ensure fair practices. Environmental and competition laws push sustainability and fairness. Brexit has added new trade and legal challenges.
Social Policies:
Education policies support skill development through apprenticeships. Healthcare affects business costs and productivity. Immigration rules influence labour supply, especially post-Brexit. Welfare policies and cost-of-living support impact consumer spending. Regional development schemes like “Levelling Up” support business in underserved areas.
Describe some of the technological developments used in businesses
Artificial Intelligence (AI) & Machine Learning:
AI systems automate tasks like customer service, manufacturing, and marketing. ASOS uses AI for product recommendations, while Ocado uses AI robots for order picking. Advanced AI like language models and visual AI are set to further improve customer service and quality control.
Cloud Computing:
Cloud services (e.g. Microsoft Azure) offer scalable, cost-effective IT solutions. They support remote work and boost system performance, as seen with M&S moving its website to the cloud.
Data Analytics:
Businesses use large-scale data to make informed decisions. Tesco uses Clubcard data to analyse shopping habits, banks detect fraud, and manufacturers prevent equipment failures.
Cyber-Physical Systems (CPS):
CPS links physical devices with digital control systems, enabling real-time monitoring and automation—used in healthcare, transport (like self-driving cars), and smart factories.
Additive Manufacturing (3D Printing):
3D printing builds products layer by layer, enabling customisation and reducing waste. It’s used in healthcare (prosthetics), manufacturing (prototypes), and fashion (custom shoes).
Internet of Things (IoT):
Smart devices communicate via the internet, enabling instant adjustments. Applications span homes, healthcare, transport, manufacturing, retail, and construction.
Blockchain:
Blockchain provides secure, transparent records. Businesses use it for supply chain tracking, secure transactions, and smart contracts.
Impact on Business Functions:
Marketing: Tech enables personalised offers and direct customer interaction (e.g. Boots and ASOS).
Operations: Automation and smart tracking improve efficiency (e.g. Nissan’s AI robots).
HR: Tech streamlines hiring, training, and remote work (e.g. BT’s VR training and AI interviews).
Finance: AI, cloud tools, and secure systems improve accuracy, speed, and fraud prevention in financial management.
Describe the benefits of new technologies for businesses
Benefits
Improved Efficiency and Productivity:
Automation and AI allow 24/7 operations, reduce errors, and free staff for complex tasks. Smart factories and cloud systems speed up processes, while digital tools cut paperwork and streamline communication across departments.
Cost Reduction:
Cloud computing lowers IT costs, automation reduces labour expenses, and data analytics minimises waste. Remote work and virtual meetings cut overheads, while smart energy and inventory systems save on utilities and storage.
Global Market Access:
Technology enables businesses to reach international customers via websites, digital payments, and translation tools. Cloud systems support operations across time zones.
Enhanced Customer Service:
AI chatbots, mobile apps, and data analysis offer fast, personalised service. Tools like NatWest’s app and social media platforms improve customer interaction, while automated systems provide real-time updates.
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*Better Decision Making:**
Real-time data and predictive analytics help businesses make quicker, smarter decisions. Digital dashboards and market analysis tools support planning, while smart alerts catch issues early.
Describe the costs of new technologies for businesses
High Initial Investment:
New technology is expensive to buy and install, with ongoing costs for upgrades, maintenance, and subscriptions. Smaller businesses may struggle to afford these, and systems can quickly become outdated.
Training and Skills Gaps:
Staff need extensive training to use new systems, which is time-consuming and costly. Some employees resist change, and hiring tech specialists is expensive. Rapid tech changes require constant retraining and updated materials.
Security and Privacy Risks:
Cyber-attacks and data breaches can cause major disruptions and damage reputation. Businesses must invest in strong security systems and data backups to meet legal requirements and protect customer trust.
Integration Challenges:
New tech doesn’t always work smoothly with old systems, causing delays and data risks. System updates can disrupt operations, and businesses risk over-reliance on technology, making them vulnerable to outages.
What are some of the impacts of e-commerce on. business operations
Changing Role of Physical Stores:
Stores now act as showrooms (e.g. Currys) and collection points for online orders (e.g. John Lewis), requiring new layouts and trained staff. Some, like Sainsbury’s, also fulfil online orders directly from stores.
Handling Returns:
High return rates, especially in fashion, demand efficient systems. ASOS processes millions of returns annually, and retailers like M&S accept online returns in-store, requiring staff training and tech upgrades.
Warehouse and Delivery Changes:
Warehouses are being redesigned for individual order picking, with automation investments like at Tesco. Retailers partner with multiple delivery firms (e.g. Next with Deliveroo) for flexible options.
Real-Time Stock Tracking:
Retailers like Boots use advanced systems to update stock levels across stores, warehouses, and websites in real time.
What are the benefits of e-commerce
ider Market Reach:
Online businesses like Amazon and Highland Soap Company can sell globally, 24/7, regardless of location.
Lower Operating Costs:
Companies like ASOS save money by avoiding physical store expenses, allowing them to offer better prices.
Better Customer Insights:
Retailers like Boots track customer behaviour to personalise offers and boost sales.
Improved Stock Management:
Next uses real-time data to manage stock efficiently and meet demand quickly.
