4.1.2 Flashcards
(23 cards)
Two benefits of international trade and high levels of growth?
- Economies of scale - more economical with economies of scale when the business is bigger
- Competitive advantage
What are ‘economies of scale’?
Spreading fixed costs over more sales volume, as product increases, the average cost per unit decreases
What are ‘diseconomies of scale’?
The average costs of production rise with output
What are the 6 types of economies of scale?
- Technical
- Specialisation/managerial
- Purchasing
- Financial
- Marketing
- Risk bearing
What are ‘specialisation/managerial economies of scale?’
With expansion, employ staff in specific areas
What are ‘purchasing economies of scale?’
Bulk-buy discounts
What are ‘financial economies of scale’?
Cheaper loans when the business is more established, easier negotiation
What are ‘marketing economies of scale’?
The price of advertisement is less with higher sales volumes
What are ‘risk bearing economies of scale’?
‘Bigger product portfolio, reducing the reliance on individual products’
What is ‘division of labour’?
The division of labour involves organising employees so that individuals so that individuals specialise in one part of the production process. As they become quicker and more proficient at specific tasks, output increases (as does quality)
What is globalisation?
Globalisation is the process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange
What are imports?
Goods and services that are being brought into the country from another
What are exports?
Goods or services that a firm procedures in its home country sells in another
What can be visible or invisible?
Imports and exports
What 3 factors has made exporting easier?
- Changing tastes
- Reduced transportation costs
- Liberalisation/deregulation
How 3 things do countries often use to limit imports?
- Quotas
- Tariffs
- Subsidies
What is the ‘balance of trade’?
The difference between the value of exports and imports,
What is a ‘trade deficit’?
Where imports exceed exports
What is a ‘trade surplus’?
Where exports exceed imports
What is ‘offshoring’?
Where a business relocates part of its operations to another country, e.g. production or customer service
What are two main benefits of ‘offshoring’?
To reduce costs and to hire workers with specific skills
What is FDI?
Foreign Direct Investment
What is ‘foreign direct investment’?
FDI is a primary driver of globalisation and it is a measure of foreign of land, factories etc
