4.1.1 Global emerging economies

Question 1

Globalisation

Answer 1

the process of making the world economy more independent

Question 2

Emerging economy

Answer 2

is used to describe an economy in the process of rapid growth and industrialisation

Question 3

Features of emerging economies

Answer 3

• rapid expansion of trade and investment flows
• rapid growth of middle class with rising disposable incomes
• engaging in global economies
• many residents being taken out of poverty
• location for offshoring

Question 4

MINT countries

Answer 4

Mexico, Indonesia, Nigeria, Turkey

Question 5

Opportunities posed by emerging markets for UK businesses

Answer 5

• opportunities for offshoring, growing market, product lifecycle, international operations
• growth in innovation in the east acts as a source of opportunities for western companies, see that it works and use their ideas
• demand for infrastructure and services from developed countries

Question 6

Threats posed by emerging markets for UK businesses

Answer 6

• drop in demand through intense competition abroad offering cheaper prices
• many domestic businesses based in emerging economies are now actively pursuing expansion into developed economies - become work-leaders in their target market
• doing business in emerging economies not straight forward - increased risk of intellectual property theft, restrictions on the methods of doing business and competitive challenges from established domestic businesses are threats that need to be overcome
• political instability

Question 7

What factors will make sure that emerging countries continue growth?

Answer 7

• urbanisation continues
• industrialisation
• population growth
• per capita income growth, rise of middle class and consumer society
• workforce will continue to improve skills and be more productive
• technological innovation in many emerging markets

Question 8

How does economic growth create trade and employment opportunities?

Answer 8

• the key cause of growth is the transfer of jobs from agriculture to factories or the service sector
• factory labour almost always generates higher value added than working land - creates economic growth
• machine-assisted labour in factories and people focusses on jobs in service

Question 9

Changing employment patterns

Answer 9

• working women, migration, rise of multi job and home working
• as labour and other resources move from agriculture to modern economic activities, overall productivity rises and incomes
• economies see a structural change in employment from primary sector to secondary/tertiary jobs
• rise of tertiary sector as income rises

Question 10

Benefits of entering an emerging economy

Answer 10

• access to large markets
• first mover advantage
• increased demand for western products
• establishing a brand
• growth rate
• brand/corporate image

Question 11

Problems of entering an emerging economy

Answer 11

• investment needed
• cultural differences
• time lags
• limited protection
• local competitors
• political issues

Question 12

Implications of economic growth for businesses

Answer 12

• helps to give a clear idea about where the UK firms have natural competitive advantage
• in most markets, long-term success comes from adjusting your business towards your customer
• glocalisation - using a global brands strengths but designing products for the local market
• to take advantage of economic growth elsewhere needs good strategic thinking backed by strong finances

Question 13

Implications of economic growth for an individual

Answer 13

• emerging markets don’t just grow, they change shape

- new niches emerge - with each new niche, these are chances to launch new products to challenge to existing ones

Question 14

How can an individual prepare for entering a foreign market?

Answer 14

• learn a foreign language

- read broadly - good understanding of global business and different economies

Question 15

Indicators of growth

Answer 15

rise in gdp
gdp per capita
health
literacy

Question 16

What is gdp?

Answer 16

• the value of all newly produced final goods and services produced in an economy within a given time period
• includes household spending, capital investment spending, government spending, exports and imports of goods and services

Question 17

Limitations of Gdp

Answer 17

• includes the output of foreign owned businesses that are located in a country through foreign district investment
• doesn’t represent the amount of inequality in a country
• doesn’t indicate to whether the nations rate of growth is sustainable or not

Question 18

What is gdp per capita?

Answer 18

• a country’s economic output divided by its population
• describes how much citizens benefit from the country’s economy
• good measurement of standard of living

Question 19

Limitations of gdp per capita

Answer 19

• doesn’t take into account the different price levels of different countries
• ignores the distribution of income
• doesn’t show dispersion issues of wealth
• doesn’t show inequalities

Question 20

Health

Answer 20

uses life expectancy

WHO map compares health against the average life expectancy of 71 years

Question 21

Human development index HDI

Answer 21

it combines life expectancy, education and income of population
-tracks progress made by countries in improving 3 basic development outcomes

Question 22

HDI limitations

Answer 22

• does not take into account qualitative factors such as cultural identity and political freedoms - human security, gender opportunities, human rights
• the gdp per capita and hdi doesn’t take into account income distribution

Question 23

4.1.2 International trade

Answer 23

imports and exports being sold between different countries

• the exchange of products and services
• powerful driver of sustained GDP growth and employment
• takes place between economic agents of a country such as businesses, governments and consumers

Question 24

Why are some countries better at producing than others?

Answer 24

• access to natural resources
• developed economies have more money to spend on more efficient production
• skilled workforce
• trade agreement
• Demographics - young population at working age

Question 25

Comparative advantage and gains from trade

Answer 25

- exists when relative opportunity cost of production for a good or service is lower than in another country - a country is relatively more productively efficient than another

Question 26

Specialisation

Answer 26

- focus on what you're good at - countries want to gain a comparative advantage, the best way to do that is to look at opportunity cost - this opens up important potential gains from specialisation and trade

Question 27

Impact of specialisation

Answer 27

- if each country specialises, total economic output can be increased across the global economy - in many countries, comparative advantage is shifting towards specialising in and exporting high-technology manufactured goods and high-knowledge services which gets a higher price - as a country develops more capabilities, it can produce a wider range of closely linked goods and services - highly diversified patterns of exports - Japan, USA - nations at a lower stage of development tend to have fewer capabilities and thus exports a narrower range of products

Question 28

What are the possible gains from specialisation?

Answer 28

- higher output - total production of goods and services is raised and quality can be improved - variety - consumers have access to a greater variety of higher quality products - bigger market - specialisation and global trade increase the size of the market offering opportunities for economies of scale - competition and lower prices - increased acts as an incentive to minimise costs, keep prices down and therefore maintains low inflation

Question 29

Benefits of international trade

Answer 29

- export revenues and jobs help to reduce poverty - low prices for consumer as markets are more competitive - technology is spread, raising productivity - knowledge and skills cross borders - economies of scale - causing lower unit costs and prices - better use of scarce resources

Question 30

Potential drawbacks of international trade

Answer 30

- transport costs - emissions from food miles - negative externalities from production and consumption - structural unemployment as patterns of trade change - movement of tncs - rising inequality - uneven gains from trade - increasing gap between rich and poor - pressure on wages and working conditions - domestic market suffers - risk from global external shocks

Question 31

Impact of exports and imports on UK economy

Answer 31

- low prices due to more competitive marketing - transferrable skills - more skilled workers - more job opportunities - more employment

Question 32

What is FDI?

Answer 32

Investment from one country to another | -establishing operations or acquiring tangible assets, including stakes in other businesses

Question 33

Positives of FDI for businesses

Answer 33

- expand into foreign markets leads to growth - may benefit from lower costs - low labour and taxes - product life cycle - access to new market - access to new technology - spread risk through diversification - revenue streams

Question 34

Positives of FDI for host country

Answer 34

- makes country more attractive which encourages more FDI - seen as economically stable - increases employment opportunities - benefits infrastructure access - improves human capital - promotes competition - consumers get access to cheaper goods and more choice - incentive for innovation

Question 35

What is inward fdi?

Answer 35

a foreign company invests in the UK

Question 36

What is outward fdi?

Answer 36

a UK company invests into another foreign country v

Question 37

What are some strategies to attract fdi?

Answer 37

- highly skilled workforce - large, growing market - deregulation of capital markets - enterprise zones - subsidy - trade blocs - privatisation - open capital markets to allow repatriated profits from the fdi of MNC's