Flashcards in 4.1 - Globalisation Deck (58)
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1
Define Economic growth
Is the increase in a country’s productive capacity, usually measured using GDP
2
Explain the patterns in growth rate in the UK economy
150 years ago the UK produced manuafactured goods that were exported all over the world
Figures show the UK manufacturing output grew by 2.8% in 2014, UK products remain competitive.
Has a strong and growing service sector and manufacturing is starting to decline with firms offshoring to emerging countries
3
Define emerging economies
Why do they interest innvestors
Are the economies of developing countries where there’s rapid growth , but also significant risk
Investors like emerging countries as they are likely to grow quicker than more mature markets, allowing a business to increase its profits
4
State the BRICS and MINT emerging economies
BRICS- Brazil, Russia, India, China, South Africa
MINT- Mexico, Indonesia, Nigeria, Turkey
5
Explain the patterns in the economy and economic power of Asian and African countries
China frequently tops the rankings as an exporter and receiver of FDI
In 1990, China produced 3% of the global manufacturing output, in 2015 it had risen to 25%
China has a significant impact on South East Asian countries through supply chains and offshoring
Emerging markets in Africa are challenging the dominance of global firms
70% of the world’s GDP growth comes from emerging countries
6
What are the implications of economic growth for individuals and businesses (5)
Trade opportunities- increased consumption and disposable income leads to a more elastic income, higher demand fro goods and services imported and domestic
New export opportunities- emerging countries incomes rise, opening up new markets for businesses to export to
Offshoring production - firms in developed countries may see economic growth and offshore production to achieve higher profits.
Increased entrepreneurship- increased incomes in emerging markets could see more start up businesses who look to compete with large firms
Alter employment patterns- increased employment
7
Explain GDP per capita as a indicator of growth
What is the importance of PPP (Purchase Power Parity)
GDP shows the sum total of everything a country produces as a nation, within the nation
PPP is used as an estimate for GDP, a measure that uses the price of a basket of goods and services in order to compare prices between countries
8
Explain Literacy rate as an indicator of growth
Is the percentage of adults (over 15) that can read and write. Gives a firm an insight into the quality and skills of a country’s workforce
9
Explain health measures as an indicator of growth
WHO collects information on life expectancy, infant and maternal mortality rate, pollution exposure and access to clean water. Allows investors to measure absenteeism of workers, to be cost effective.
10
Explain the human development index (HDI) as an indicator of growth
Explain the measures
Combines statistics on life expectancy, education and income for a country, to assess people and their skills.
Life expectancy is how many years on average a person is expected to live, indicates the health of the nation
Mean years of schooling considers how long a person spent in education, indicates the skills of the nation
GNI (gross national income) shows the income earnt by the population, indicates the wealth of a nation
11
Why does a business use a range of measures when deciding whether to invest in an emerging economy
Will use a range of measures to gain a better understanding into where to invest, to maximise productivity and profits
12
Define Export
Are goods and services that a firm produces in its home market, but sells in a foreign market. Has become easier due to trade liberalisation which reduces tariffs and quotas.
13
Define imports
Are goods and services that are bought into one country from another
14
Define international trade
Consists of exporting and importing, where firms trade between countries because they benefit from it
15
Define division of labour
Is different workers specialising in different productive activities
16
What are the risks of importing and exporting for a business
Is heavily reliant on exchange rates, unfavourable exchange rates can increase a businesses costs.
If quotas and tariffs are in place this can increase the businesses costs
17
Define specialisation
A production strategy where a business focuses on a limited scope of products or services. This results in greater efficiency, allowing goods to be produced at a lower unit costs
18
Define comparative advantage
Is the theory that a country should specialise in products and services that they can produce more efficiently than other countries
19
Define competitive advantage
When competitive advantage occur
Is the idea that a business should specialise in any area (products, services, management or research) where it can perform better than its competitors
Can occur if a business has highly trained and specialised employees, access to local markets and resources or better organiser at cross-border trade
20
Define foreign direct investment (FDI)
Is investing by setting up operations or buying assets of businesses in another country
21
Why may a business use FDI (3)
A potential for making a profit if it invests in a new location
Trying to acquire direct knowledge of the local market
Attempting to avoid barriers to the market
22
Define horizontal FDI
Give and example
Refers to a business producing the same product or service as they produce in their home country
Lloyds bank FDI into spanish bank, sabadell
23
Define vertical FDI
Give an example
Is where one firm invest in a foreign business in a different part of the supply chain.
British toy company invests in a plastic producing Chinese company
24
Explain the different forms of FDI (3)
Joint venture- An agreement between two parties to invest in a business and share control
Strategic alliances- when firms contract to share resources or certain skills
Cross-border mergers or takeovers
25
Explain what real GDP is
Is a measurement of economic output that accounts for the effects of inflation and deflation.
Provides a more realistic of growth than normal GDP, good indicator of where the economy is in the business cycle
26
What is economic development
Is the process by which a nation improves its economic, political and social well-being of its people, to improve their quality of life.
27
Define globalisation
Is the growing integration of the world’s economies
28
State the causes of globalisation (8)
Reduction in trade barriers
Political change
Reduced costs of transport and communication
Growth of TNC’s
Migration
Increased investment flows
Growth of the global labour force
Structural change
29
Explain reduction in trade barriers as a cause of globalisation
Has meant that an increasing number of countries around the world have opened up there economies, making it easier to trade.
A reason for this is due to the world trade organisation (WTO), who caused trade liberalisation.
Trading blocs like the EU and NAFTA allow trade without quotas and tariffs.
30
Explain political change as a cause of globalisation
Give examples
Due to radical changes in political regimes of certain nations globalisation has been helped to increase.
In 1991, the end of the Communist rule of the USSR saw members dissolve and become independent. This allowed for members to open up their own economies and trade with other countries.
China adopted an open door policy in 1970 to allow trade with other countries.
31
Explain reduced costs of transport and communication as a cause of globalisation
Has occurred due to considerable improvements in international transport networks over the years.
The cost of flying has fallen and the number of flights has increased allowing people and goods to be transported quicker and easier.
Containerisation has allowed huge volumes of goods to be transported across the world, causing goods to be transported for $0.16 per tonne.
32
Explain the growth of TNCs as a cause of globalisation
Has seen a growing number of large firms develop significant business interests overseas. TNCs are companies that own or control production and service facilities outside the country in which they are based.
33
Explain migration as a cause of globalisation
Is the movement of people who aim to set up permanent or temporary residence in a new location
Migrants import new cultures into a country, seen the importation of goods from their home country.
Migrants often provide a supply of low-cost labour, helping to fill skill gaps
34
Explain increased investment flows as a cause of globalisation
Give an example
Due to FDI a company makes an investment in a foreign country.
In 2013, a Malaysian company paid £400 million for Battersea power station, creating around 13,000 jobs
35
Explain a growth of the global labour force as a cause of globalisation
A bigger labour market helps drive global demand, due to people having increased disposable income.
Rising number of people in labour leads to a growth of labour costs and causes offshoring into other countries
36
Explain structural change as a cause of globalisation
In the UK a decline in primary and secondary industries has seen increased globalisation due to offshoring production overseas.
37
Define Protectionism
Is an approach used by a government to protect domestic producers
38
Explain the reasons for protectionism (5)
Protect jobs- unemployment is undesirable and a government would be criticised if jobs are lost to overseas.
Protect infant industries- need protection until they can grow, become established and exploit economies of scale
Prevent dumping- prevents overseas firms from dumping goods below the domestic price
Raise revenue - tax from tariffs can be spent on government services to improve the standard of living.
Prevent the entry of harmful and undesirable goods
39
Explain regulations as a method of protectionism
Give an example
Can prevent a Country from importing certain goods from other countries.
And example of this is the band of importing chemically washed US chicken, due to EU food safety regulations
40
Explain subsidies as a method of protectionism
Give an example
Involves giving financial support such as grants or interest free loans to domestic producers to help them increase supply and charge lower prices to customers.
And example of this is the Japanese government subsidising $65 million to Japanese firms to reduce reliance on imports from China
41
Explain tariffs as a method of protectionism
Example
Or taxes on imports to make the more expensive, reducing demand for overseas goods and increasing demand for domestic goods. Also raise tax revenues
And example of this is the US imposing tariffs on solar products from China and Taiwan
42
Explain quotas as a method of protectionism
Example
Or physical limits on the quantity of imports allowed into a country. An extreme quarter is and in Bago, which is a total ban of imports from certain countries.
An example of a quota is the 34 overseas films allowed in China per year. An example of an embargo is the ban of goods imported into the USA from Cuba in the 1960s
43
Define an Economy
Is the state of a country or region in terms of the production and consumption of goods and services and the supply of money
44
Define a Trading bloc
Is a group of countries that has signed a regional trade agreement to reduce or eliminate tariffs, quotas and other protectionist barriers.
45
Define a regional trade agreement (RTA)
Is an agreement made between two or more countries within a geographical region, which is designed to facilitate by bringing down barriers
46
State the trade blocs that exist
Preferential trade areas (PTA)
Free Trade Areas (FTA)
Custom unions
Common markets
Single market
Economic unions
47
Explain preferential trading areas (PTA) as a trading bloc
Allow certain types of products from participating countries to receive a reduced tariff rate. Is the beginning of the process of economic integration.
48
Explain Free Trade Areas (FTA) as a trading bloc
Exist where member states remove all trade barriers, such as tariffs and important quotas, between themselves but keep barriers against non member states.
49
Explain Customs Unions as a trading bloc
Similar to FTA’s where all trade restrictions are removed except that members adopt a common set of barriers and rules against non-members.
50
Explain Common Markets as a trading bloc
Allow goods, labour and capital to move freely across the member states. Work together on economic and political policies that effect the market.
51
Explain a single market as a trading bloc
Means all trade barriers are removed and members have common laws and policies. Borders, standards and taxes are harmonised as much as possible to not interfere with trade between members
52
Explain economic unions as a trading bloc
Involve both a customs union and common market, where there are economic, political and cultural ties between members. Has an economic and monetary union.
53
Define rules of origin in terms of trading blocs
Is a system of allocating certificates where a certain amount of products or services must be certified as being produced within that region.
54
Define a economic and monetary union in terms of trading blocs
Is an economic union that uses a common currency
55
Give three examples of trading blocs and explain what they do
European union (EU) is a economic union, most powerful in the world, who guarantees the free movement of people, goods and capital. Most members use the Euro as a common currency.
ASEAN- Is a common market of South-East Asian countries who’s work together to promote growth and social progress between members. Have similar financial and labour policies.
NAFTA- A FTA of North American countries who’s agreement covers trade and investment, labour, financial dealings, intellectual property and environmental issues.
56
Explain the factors for businesses to consider with the effect of a trading bloc
Where to produce- locate in a country with the cheapest labour and resources
Where to sell- trading blocs can increase market, providing opportunities and threats
How to enter market- firms can adapt entry strategy
Business strategy- changes where firms can import and export goods
57
Explain the opportunities for a business of a trading bloc
Increased market size
More able to exploit economies of scale
Resources may be easier to source and labour easier to recruit
Greater competition may result in greater efficiency
Gives firms better power to negotiate in global market
58
