Context Flashcards
Vertical intergration
Amazon no longer relies on third-party delivery services, either, instead implementing its own logistics service provider, this means amazon doesn’t have to rely on external providers.
Horizontal integration
Facebook and instagram, the acquisition of Instagram by Facebook (now Meta) in 2012 for a reported $1 billion. Facebook’s horizontal integration of Instagram was truly historic with a return of 100% in just over six years.
Conglomerate integration
eBay and PayPal, n 2002, eBay bought PayPal, providing it with a streamlined payment process for its goods.
Demerger
eBay and PayPal, two companies split in 2015 because of pressure from stockholders and the rapidly changing business environments in both commerce and payments, but they signed a five-year agreement that guaranteed reliable income to PayPal while it successfully expanded its platform to other competing retailers and financial firms.
Business objectives
Asda, claimed their objective is to pursue sales maximisation and increase market share, even at the expense of lower profits. The willingness of shareholders to accept low profit can vary with the industry. For example, with IT/internet firms like Amazon, shareholders have proved more willing to tolerate low dividends and seek market penetration with the potential for more profit in the future.
Diseconomies of scale
Apple, perhaps running into problems designing a desirable product that they need to produce 200 million times over the course of a year. The iPhone is so popular a product that Apple can’t include any technology or source any part if it can’t be made more than 200 million times a year. If the supplier of a cutting-edge part Apple wants can only provide the company with 50 million per year, it simply can’t be used in the iPhone.
Economies of scale
Apple, Since Apple sells millions of iPhones each quarter, Apple can commit to component orders at significant volumes, with favorable negotiating leverage that results in volume-based supplier discounts.
There are also many Apple products that share the same components (e.g. processing chips, display screens), enabling Apple to place even larger (and even better-priced) orders.
Dynamic efficiency
Porsche, make eletric sports car in £700m project, aimed to challenge teslas dominance of battery powered sports car market. accounts for 11% of Porsche’s total sales and makes a profit, which is a rare feat for an electric vehicle.
Collusion
Apple and google, were investigated for an agreement between the two companies where they agreed not to hire staff from the other company. This was an attempt to prevent wage spirals due to workers moving between the companies. The companies agreed to make a settlement rather than take it to court.
Contestablity
Aldi and lidli, majority of products are own label giving them monopsony power. 2010-2015 shared market share 4.5%.
Monopsony power labour market
Government, nurses in London paid less than average regional wage.
Policies to tackle labour immobility
HS2, project scaled back due to increasing costs. Anticipated cost of. project over tripled.
State provision
Flood defences are provided by the government as rational firms will not provide them in the free market. 2020 budget government to double investment in flood and coastal defences.
Taxation
Sugar taxation, poor. diet costs economy £74bn a year. Following sugar tax there was an 8% reduction in obesity in girls between age 10-11.
Privatisiation
Royal Mail, t made a 57% increase in its share price over seven years after the privatisation despite a sudden drop in 2018 after its profit warning. The government raised £3.3bn from selling its stake in Royal Mail.
Minimum pricing
Alcohol minimum pricing in Scottland, 13% drop in alcohol related deaths and hundreds fewer hospitalisations.
India nominal GDP
$3.2tr
India population
1.4 billion
India diversification & global competitiveness
Successful for manufacturing and service industries eg. high profile businesses like Tata, Bollywood, IPL
India living standards
Catching up as achieved 10% GDP per head relative to USA at PPP in 2010
India median age
28 - productive
India distribution of GDP in 2015
50% services, 30% industry, 20% agriculture
India gini co-efficient
0.35
India % living >$1.90 a day
21%
India urbanisation
35%
India HDI ranking
131st
Cambodia nominal GDP
$27bn
Cambodia gini co-efficient
0.37
Cambodia urbanisation
24%
Cambodia % living > $1.90 a day
13%
Cambodia HDI ranking
144th
Cambodia population
17 million
Cambodia income status development/projection
Reached lower middle class in 2015 and aiming to reach upper middle class by 2030
Cambodia rates of HDI growth
8th fastest by extreme poverty reductions of 48% in 2007 to 14% in 2014, improved education/healthcare
Cambodia median age
26 - productive
Cambodia trade as a share of GDP
125%
Cambodia development improvements
investment in garment industry, construction boom, tourism revenue
Cambodia development suffering
environmental threats of plastic pollution, urban-rural divided in disposable incomes
Cambodia corruption ranked
161/180 in 2018
Vertical integration (backwards)
Volkswagen invests in mines to secure electric battery supply
Tax (pro)
Scandinavia has incredibly high taxes, however its spelt on public services which may be why income inequality is lower. And employment rate remains fairly high.
Interest rates
UK’s biggest bank HSBC> benefitted in profits from recent + in interest rates as they are a global large business
.>+ interest rate on loans are paid to savers> + incentive to save
. > Service fees
.> Brokerage % on services ie currency x-change & buying and selling shares.
automatic stabilisers
Furlough scheme > used to + stimulate spending in the economy to boost AD as it provides income support.
Regulating
OFGEM reviews way in which energy sector is being run
> and told them they must reinvest profits back into improving services for the next 5 years.
Market failure
BoE has said: “Global financial crisis cost everyone £20k per person in the uk”
Price Fixing (LIBOR scandal)
LIBOR = benchmark interest rate that is used to set the cost of borrowing for financial products i.e mortgages
scandal was manipulation of the LIBOR by some of the banks that participated in the rate-setting process.
some banks were artificially lowering or raising the LIBOR to benefit their own financial positions, such as by making their own borrowing costs appear lower than they actually were.
This manipulation artificially affected the cost of borrowing for millions of people and businesses around the world.
Price fixing (Pfizer & Flynn)
Pfizer and Flynn have been fined £70 million for abusing their dominant positions to overcharge the NHS for a life-saving epilepsy drug.
> e.g of anti-competitive behaviour being investigated by CMA
Monopsony position Exploitation
Tesco votes to charge suppliers for fulfilling online orders.
however the marginal cost of an online sale is zero so this is ridiculous!
Offshoring (Toblerone)
Involves relocating these functions or services to a different country, often to take advantage of lower labor costs, tax incentives, or regulatory environments.
Toblerone removes mountain peak from packaging to avoid violating a Swiss law that protects national symbols, as the brand’s owner shifts some production out of Switzerland.
PED (Tesla)
Ped is inelastic so
Tesla has cut the prices of its most expensive models in the USA for a second time this year with the starting price of the Model S being reduced 5% to $89,990 to + revenue.
Specialisation, division of labour and exchange
Specialisation / division of labour in firms: car production, fast-food restaurants, construction companies Specialisation within a country: UK with finance in the SE, China with manufacturing near the coast etc
Externalities
Vaping: information failure, and consumption and production externalities
Cigarettes/alcohol: considered demerit goods (information failure), also consumption and production externalities
Gym memberships
