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Flashcards in 4.1 - Globalisation Deck (58)
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Define Economic growth

Is the increase in a country’s productive capacity, usually measured using GDP


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


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


State the BRICS and MINT emerging economies

BRICS- Brazil, Russia, India, China, South Africa

MINT- Mexico, Indonesia, Nigeria, Turkey


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


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


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


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


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.


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


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


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.


Define imports

Are goods and services that are bought into one country from another


Define international trade

Consists of exporting and importing, where firms trade between countries because they benefit from it


Define division of labour

Is different workers specialising in different productive activities


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


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


Define comparative advantage

Is the theory that a country should specialise in products and services that they can produce more efficiently than other countries


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


Define foreign direct investment (FDI)

Is investing by setting up operations or buying assets of businesses in another country


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


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


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


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


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


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.


Define globalisation

Is the growing integration of the world’s economies


State the causes of globalisation (8)

Reduction in trade barriers
Political change
Reduced costs of transport and communication
Growth of TNC’s
Increased investment flows
Growth of the global labour force
Structural change


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.


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.


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.


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.


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


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


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


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.


Define Protectionism

Is an approach used by a government to protect domestic producers


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


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


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


Explain tariffs as a method of protectionism


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


Explain quotas as a method of protectionism


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


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


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.


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


State the trade blocs that exist

Preferential trade areas (PTA)
Free Trade Areas (FTA)
Custom unions
Common markets
Single market
Economic unions


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.


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.


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.


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.


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


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.


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.


Define a economic and monetary union in terms of trading blocs

Is an economic union that uses a common currency


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.


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


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


Explain the threats for a business of a trading bloc

Countries outside the trading bloc may provide cheaper and better quality resources than members of bloc
Increased competition for smaller firms, put pressure on pricing strategies as larger firms can produce at a lower cost
May lead to tensions between members, creating social and political instability, affecting operations