Theme 4 Flashcards
(81 cards)
1
Q
What does BRICS stand for?
Growing Economies
A
Brazil
Russia
India
China
South Africa
2
Q
What does MINT stand for?
Growing Economies
A
Mexico
Indonesia
Nigeria
Turkey
3
Q
What is an Emerging Economy
Growing Economies
A
Economies of devlopiong countries with rapid growth rate, but also significant risk
4
Q
What does increasnig income allow
Growing Economies
A
- Consumers to spend more
- More disposable income
5
Q
Opportunties created through growth of emerging economies
Growing Economies
A
- Better infrastructure
- Exporting to developing economies
- Increase Foreign Direct Investment
6
Q
Implications of economic growth for individuals and businesses
Growing Economies
A
- Trade Opportunities = more disposable income so more trade, demand likely to increase and become icnome elastic
- Employment Opportunities = as economies grow so do levels of skilled workers and quality of education
7
Q
Indicators of growth
Growing Economies
A
- GDP = meausres all goods and services produced in a country in a year, divided by the number of people in the country
- Health = helps to identify prosperity and potential demand in a country. e.g. of health factors; life expectancy, access to clean water, docotrs per 100000 people, polution exposure
- Literacy = give an indication of the standard of living in terms of education and skills of workforce in a country
- Human Development Index (HDI) = a collections of stats that are combined ranking countries according to their human development
8
Q
What is Comparative Advantage?
International Tarde and Business Growth
A
- The theory that a country should specialise in products and services that it can produce more efficiently than other countries
9
Q
What is Competitive Advantage?
International Trade and Businesses Growth
A
- The idea that a business should specialise in any area where it can perform better than its comeptitors
10
Q
What is Foreign Direct Investment
International Trade and Businesses Growth
A
- Investing by setting up operations or buying assets in businesses in another country
11
Q
Reasons for Foreign Direct Investment
International Trade and Businesses Growth
A
- Access to infrastructure and complementary industries
- Access to local knowledge and skills
- Access to foreign brands
- Access to local resources, e.g. wire, copper
- Investment in expanding industries and fast growing, porfitable businesses
12
Q
Why may firms choose to invest directly
International Trade and Businesses Growth
A
- Has a high potential for making profit if it invests in a new location
- Needs to maintain control over its subsidiaries in the new market
- It is trying to acquire direct knowledge of the local market
- It is attempting to avoid barriers to the market
13
Q
Why may firms choose Foreign Direct Investment
International Trade and Businesses Growth
A
- It needs to be close to customers
- Its products incur high transportation and logistics costs
- It faces trade barriers or political opposition
- A frim wants to protect its patents, copyright, trademarks etc
- Managers want to keep tight control over operations in the other country/countries
14
Q
Different forms of Foreign Direct Investment
International Trade and Businesses Growth
A
- Buying through cross-border acquisitions or mergers
- Strategic alliances
- Joint ventures
15
Q
What is Globalisation
Factors Contributing to Increased Globalisation
A
- The growing intergration of the worlds economies
- When firms and people behave as though there is just one market or economy
- e.g. head office in london, manufacturong in china, borrowing money from bank in japan
16
Q
Key features of Globalisation That Lead to Business Intergration and Interdependence
International Trade and Businesses Growth
A
- The flow of capital between countries
- Sharing and merging of cultures
- Economic interdependency between countries
- Interchange of technology
- People can live and work ina country of thier choice
17
Q
Factors contributing to Globalisation
International Trade and Businesses Growth
A
- Reduction of international trade barriers/trade liberisation
- Political change
- Reduced cost of transport and communication
- Increased significance of global companies
- Migration = leads to cultures being imported and therefore demand for new products
18
Q
What is Protectionism
Protectionism
A
An approach used by gov to protect domestic producers
19
Q
Reasons why Gov Feel that Trade Barriers are Sometimes Justified
Protectionism
A
- Protect Jobs
- Protect Infant Industries = Let small industries establish themselves before oversea rivals take over
- Prevent Dumping = Stops foreign producers from selling goods below the cost in a domestic market
- Raise Revenue
- Prevent the Entry of Harmful or Undesireable Goods
- Improve the Balance of Payments
20
Q
What are Tarrifs/Customs Duties
Protectionism
A
- A tax on imports to make them more expensive
21
Q
What is a Trade Barrier
Protectionism
A
- Measures designed to restrict trade
22
Q
What benefit does tarrifs/customs duties has for a country
Protectionism
-
A
- If there is a large amount of tax for importing an item, demand should switch from imported items to home-produced products
23
Q
When will tarrifs/customs duties be ineffective?
Protectionism
A
- When items are price inelastic
- Demand will not fall as price increases
24
Q
What are Import Quotas
Protectionism
A
- A physical limit on the quanitity of improts allowed into a coutnry
25
Why are Import Quotas Good for Domestic Businesses?
| Protectionism
- It reduces threat as they have more market for themselves
- Helps to protect or increase domestic employment
- Help to prevent domestic or imported goods from overpowering the market
26
What may Import Quotas cause for?
| Protectionism
- Increased prices as less cheaper imports are avaliable
27
What is an Embargo?
| Protectionism
- A complete ban on international trade
- Usually for poilitcal reaosns
28
Problems with Trade Barriers
| Protectionism
- Countries may react by imposing its own tarrifs to block goods from coming in
- Tarrifs may be ineffective if demand for imports is price inelastic
29
How is Government Legislation Used in Reducing Amounts of Imports
| Protectionism
- Insisting that imported goods meet strict regulations and specifications
30
What are Administrative Barriers?
| Protectionism
- Rules and regulations, e.g. trading standards and strict specification, that make it hard for improters to penetrate i overseas markets
31
What is a Subsidy
| Protectionism
- Financial support given to a domestic producer to help compete with overseas firms
32
Examples of subsidies that can be given
| Protectionism
- Grants
- Interest-free loans
- Tax breaks
33
What do subsidies do for consumers
| Protectionism
- Lower prices, as production costs are reduced and supply is increased
34
What are Trading Blocs?
| Trading Blocs
- A group of countries that signed a regional trade agreement to reduce or eliminate tarrifs, quotas and other protectionist barriers between themselves
35
What is a Regional Trade Agreement (RTA)
| Trading Blocs
- Agreement made between 2 or more coutnries within a geographical region, which is designed to facilitate trade by bringing down barriers
36
Different Forms of Trading Blocs
| Trading Blocs
- Preferential Trading Areas = Certain types of products from participating coutnries get reduced tarrif rate
- Free Trade Areas = Where member states remove all trade barriers between themselves, but keep barriers between non-member states
- Custom Union = Members remove all tarde barriers between themselves and members adopt a common set of barriers against non-members
- Common Markets = Where goods, labour and capital can move freely across member states; tarrifs are generally removed and non-tarrif barriers are eliminated or reduced
- Single Market = Almost all trade barriers are removed and common laws or policies aim to amke movement of goods, services and capital as easy as the movement within each country
- Economic Unions = Involving both customs union and a common market
37
What is a Preferential Trading Area (PTA)
| Trading Blocs
- Certain types of products from participating coutnries get reduced tarrif rate
38
What are Free Trade Areas?
| Trading Blocs
- Where member states remove all trade barriers between themselves, but keep barriers between non-member states
39
What are Customs Unions
| Trading Blocs
- Members remove all tarde barriers between themselves and members adopt a common set of barriers against non-members
40
What are Common Markets
| Trading Blocs
- Where goods, labour and capital can move freely across member states; tarrifs are generally removed and non-tarrif barriers are eliminated or reduced
41
What are Single Markets
| Trading Blocs
- Almost all trade barriers are removed and common laws or policies aim to amke movement of goods, services and capital as easy as the movement within each country
42
What are Economic Unions
| Trading Blocs
- Involving both customs union and a common market
43
Benefits of Trading Blocs
| Trading Blocs
- Opportunities to expand into new markets
- Allows businesses yto befefit from comparative advantage; cheaper and better quality porducts
- Makes it easier to source better labour if free movement is permitted
- Aligns international legislation making markets more efficient
44
Drawbacks of Trading Blocks
| Trading Blocs
- Countries and bsuinesses outside the traing blocs may have better comparative advantage which members are unable to access
- Infant industries are vulnerable to large international competitors
- Tension with regions outside the trading blocs
- Inneficient producers may be protected leading to poor quality and high prices
45
What does NAFTA stand for?
| Trading Blocs
North America Free Trade Agreement
- Canada, Mexico, US
46
Who are in NAFTA
| Trading Blocs
- Canada
- Mexico
- US
47
What is NAFTA
| Trading Blocs
- A free trade zone
- Including trade, investment, labour, financial dealings and environmental legislation
- Member coutnries negotiate seperate deals with outside members
48
What does ASEAN stand for?
| Trading Blocs
Associaton Of South East Asian Nations
49
What is ASEAN
| Trading Blocs
- A free trade agreement between politically, economically and culturally diverse countries
50
What areas of cooperation are in ASEAN?
| Trading Blocs
- Macro-economic and financial policy
- Labour policies, including education and professional qualifications
- Infrastructure and communication
- E-commerce
- Regional sourcing
51
The EU
| Trading Blocs
- A single market with free trade movement of people, goods and serivces
- Adopts common laws around employment and consumer legislation
- Most member states are also part of the monetry union, the Euro
52
What are Push Factors
| Conditions That Prompt Trade
- Things in the existing market that enocurage an organisation to look for opportunities in international trade
53
Examples of Push Factors
| Conditions That Prompt Trade
- Saturated Markets = Where there is limited opportunity for growth. May be able to sell ina new country where the porduct is just taking off
- Competition = Competitors could be selling at lower prices or higher quality. May be forced to move to a market where competition is less fierce
54
What are Pull Factors?
| Conditions That Prompt Trade
-Factors that entice firms into new markets and the opportunities that businesses can take advantage of when selling into overseas markets
55
Common Attractions for Pull Factors
| Conditions That Prompt Trade
- New or bigger markets
- Lower-costs of transportation
- Lower-costs of resources/labour
- Technological expertise
- Managerial or financial expertise
- Organisational skills
- Assets, e.g. patents
56
Examples of Pull Factors
| Conditions That Prompt Trade
- Economies of Scale = Where increasing scale of production leads to lower cost per unit
- Risk Spreading = Expanding into different markets and coutnries, as they are not dependable on just one country/market bringing in all of their revenue
57
What are two approach into becoming a multinational organisation
| Conditions That Prompt Trade
- Off-shoring
- Outsourcing
58
What is Off-Shoring?
| Conditions That Prompt Trade
- Shifting jobs to other countries
- E.g. moving manufacturing to a different part of the world with lower production costs
59
Benefits to Off-Shoring
| Conditions That Prompt Trade
- Lower wage rate
- Access to raw amteirals
- Access to skilled wokrforce
60
Drawbacks of Off-Shoring
| Conditions That Prompt Trade
- Damage to business reputation in home coutnry
- As economics develop production costs rise
- Cultural and language barriers
61
What is Outsourcing
| Conditions That Prompt Trade
- Shifting jobs to other organisations
- Moving business function to a specialist external provider in another country
- E.g. payroll
62
Benefits of Outsourcing
| Conditions That Prompt Trade
- Allows the business to upgrade
- Takes advantage of a country's comparative advantage
- Access to specialist facilities and knowledge without hvauing to directly invest
63
Drawbacks of Outsourcing
| Conditions That Prompt Trade
- Reliance on 3rd parties, so limited control
- Cultural and language barriers
- Businesses are less flexible if tied into a contract with a specialist provider
64
How may moving into international markets extend the product life cycle?
| Conditions That Prompt Trade
- If any porducts have reached maturity or entered their decline phase in the porduct life cycle, exporting to international markets may extend this life-cycle as it gives the product a chance to be brought by new customers
65
What are the stages of the porduct life cycle
| Conditions That Prompt Trade
- Development
- Introduction
- Growth
- Maturity
- Decline
66
Factors to cosnider when assessing a country as a market
| Assessment of a Country as a Market
- Whether it is a good place to invest
- Levels of growth and disposable income = will there be deamnd from customers?
- Ease of doing business = time and cost of setting up and running the business
- Infrastructure = transport links, communications network
- Political stability = relationship with other countries/trading partners
- Exchange rate = is it stable?
67
What is the Purpose of Assessing a Country as a Market
| Assessment of a Country as a Market
- To reduce risk by identifying the countries with the greatest opportunities and structures to support trade and stability
68
Things taken into account when choosing a production location
| Assessment of a Country as a Producton Location
- Cost os setting up production
- Potential risks
- Conditions within the country
69
Facotrs to consider when assessing a country as a production location
| Assessment of a Country as a Market
- Cost of production = e.g. labour costs
- Skills and avaiability of labour
- Location in a trading bloc = elimnating tarrifs and quotas
- Government incentives = gov may provide subsidies and reduced rates to encourage MNCs to invest in their coutnry
- Ease of doing business = time and cost of setting up and running a business
- Developed Infrastructure = transport link and communicatoin networks
- Political Stability = relationships with other countries/trading partners
- Natural resources = access to local resources that can be used in the production process
70
Factors Contributing to a Country's Infrastructure
| Assessment of a Country as a Market
- Broadband
- Airports
- Ports
- Quality of schools and universities
- Quality of hospitals
- Roads
- Rails
- The maturity of industry (banking, advertising, insurance, IT, etc)
71
Reasons for Global Mergers or Joint Ventures
| Reasons for Global Mergers or Joint Ventures
- Spreading risk
- Global competitiveness = as other brands merge and collaberate, a merger may let them be ahead and remain competitive
- Securing resources and suppliers = buy the supplier
- Gaining access to intellectual property = copyrights, trademarks etc
- Acquiring national and international patents = buy the company that own the patent or pay a liscencing fee to use their inventio
- Acquiring national and international brands = buying a brand is much quicker than investing time and money in marketing and brand development
- Entering new markets
72
What is Global Competitiveness
| Global Competitiveness
The extent to which a business or geographical area can compete sucessfully against rivalry
73
What will appreciation do for exports
| Global Competitiveness
- Make them more expensive and will have impact on competitiveness of exporting firms
74
The significance of changes in the exchange rates on business
| Global Competitiveness
- Elasticity of demand = demand for some products changes more than others with changes in price casued by exchange rate fluctuations
- Economic growth in other countries
75
What is Localisation?
| Marketing
- strategies that adjust products to fit with target customers
76
What is Globalisation?
| Marketing
- The process of businesses starting to operate internationally and develop internatonal influence
77
What is Glocalisation?
| Marketing
- Mix of globalisation and localisation.
- Invlolves development and sale of products to cystomers around the world which reflect specific local customs, tastes and traditions
78
What are the different marketing approaches
| Marketing
- Ethnocentric
- Polycentric
- Geocentric
79
What is polycentric?
| Marketing
- Adapt product to local markets that they plan to sell in
- Products should sell well as they are tailored to specific area
80
What is ethnocentric?
| Marketing
- Assume products selling well in domestic market will sell well in global market
- Make no attempt to adapt product for each market
81
What is geocentric
| Marketing
- Combination of polycentric and ethnocentric
- Slight adaptments to suit each international market
