Theme 4 Flashcards
Which emerging economies are BRICS and MINT?
- Emerging economies are when a country has rapid development and high economic growth but not fully developed economy so risky.
- Brazil, Russia, India, China, South Africa
- Mexico, Indonesia, Nigeria, Turkey
How does the growth of the UK economy compare with emerging economies?
- In emerging markets, growth rates have been rapid over recent years. This growth results in higher average incomes and development of new industries and markets within these countries.
- An increase in incomes leads to greater demand. As markets grow, so does the infrastructure in these countries, the quality of education and skills of workforce.
- MNCs are threats to emerging markets as they are significant competition to established global market leaders.
What are implications of growth?
Trade opportunites- including FDI, opportunities for exporting to devloped economies, better infrastructre/ production location.
Employment patterns- as economies develop, unemployment falls. This creates opportunites for international trade as increased incomes generate demand. Growing economies also mean better skilled workforces and gives MNCs opportunity to recruit skilled posts when producing abroad.
What is GDP?
Gross Domestic Product is a measure of all the goods coming out of one country divided by the number of people in the country.
X- GDP uses figures adjusted for inflation
X- GDP can be hard to compare across nations with different currencies. A way to deal with this is to compare the buyer power across countries for a standarised basket of goods (commonly bought products).
What is HDI?
It combines a range of economic statistics for a country, focusing on a country’s people rather than just the economy.
Includes:
- Life expectancy (health good indicator for standard of living and how much disposable income people have- potential demand).
- Mean years of schooling (higher literacy rate, better quality workforce so nature of products and services also better).
- GNI- Gross National Income per capita is the measure of income based on US dollar value of a country’s income divided by it’s population.
What are exports and imports?
How can an agent help?
- Exports are the selling of products and services directly to foreign customers.
- Imports are the buying of products for resale or importing raw materials and components for production of goods from a foreign country.
- A local agent has expertise in the local market, deals with admin and can negotiate with local businesses.
What is a comparitive advantage?
Comparitive advantage is when a business lowers its costs to gain leverage against its compeititors- ability to produce cheaper goods in comparison to other businesses.
What is a competitive advantage?
Competitive advantage is when a business adds value where other businesses can’t. This includes advantges specific to a country, such as knowledge and skills of production techniques which give companies a compeititive advantage in international markets.
What is FDI?
Reasons forFDI?
- FDI (Foreign Direct Investment) is when a business has a head office in one country and sets up factories or offcies in another.
Reasons for FDI:
- Access to local knowledge and resources.
- Access to foreign brands.
- Access to infrastructure and complementary industries.
- Investment in expanding industry and fast growing, profitable business.
What is globalisation?
Globalisation is the increasing integration and cooperation between countries and the growth of international trade. It creates opportunities for international and domestic businesses. Though, there may be some restrictions, such as protectionism and caps on migration.
- Protectionism involves protecting domestic business and home industries against foreign competition.
- Protectionism may force businesses to use more expensive domestic suppliers, therefore making them less competitive. It may also encourage businesses to move abroad to avoid trading barriers.
- Tariffs -tax on imports to increase price of imported goods, raises gov income and makes domestic businesses competitive.
- Subsidies- government grants for exporting businesses so they can lower their prices to compete internationally.
- State procurement- favouring domestic businesses as suppliers over foreign competition.
- Soft loans- generous loans given to exporting businesses to help compete in foreign markets.
- Technical barriers- rules governing standard of products entering country.
- Quotas- physical limits on imports.
What are the 7 types of trade agreements?
(Trading blocs)
- Protectionism- protecting domestic businesses and markets.
- Preferential trade areas- certain products from certain countries get tariff rates.
- Custom unions- involve an agree set of tariffs for non-tade bloc members.
- Free trade areas- free trade, no trade barriers.
- Common markets- free movement of trade, capital and labour.
- Single markets- free trade, common laws are adopted to harmonise standards and tax.
- Economic unions- integration of economic, political and cultural factors,including common currenct like the euro.
What are NAFTA, ASEAN and the EU?
- NAFTA (North American Free Trade Agreemeent)- free trade zone. Member countries negotiate seperate deals with outside members.
- ASEAN (Association of East Asian Nations)- free trade agreement.
- EU (European Union)- single market with free movement of people, goods and services. EU also adopts common laws around employment and consumer legislation. Most member states also part of monetary union- the Euro.
✓- opportunities to expand into new markets.
✓- allows business to benefit from comparitive advantage- cheaper and better quality products.
✓- easier to source labour if free movement is permitted.
✓- aligns international legislation, making markets more efficient.
X- countries and businesses outside trading bloc may have better comparitive advantage which members are unable to access.
X- infant industries vulnerable to large MNCs.
X- tensions with regions outside of trading bloc.
X- inefficient producers may be protected leading to poor quality and high prices.
What are push factors?
Push factors are adverse situations that force businesses to look for opportunities in international markets. Including:
- Market saturation- as domestic markets become saturated and growth slows, businesses will look for international markets with higher growth potential.
- Competition- domestic competition (or that of other international firms) can make competing at home unprofitable.
