Theme 4 Flashcards
(50 cards)
Growth rate of the UK economy compared to emerging
economies
UK has a lower growth rate than emerging economies. Emerging economies are growing due to growth of manufacturing sector. Businesses chose to manufacture in emerging economies due to lower labour costs and access to raw materials.
Emerging economies
A
Emerging economies are economies that have increasing growth rates but relatively low income per capita
– India, china, brazil
What is growth rate measured by
annual change in GDP
Implications of Economic growth on businesses
Potential for increased profits
Reduced costs of production
Increased trade opportunities
Increase in investment
Implications of Economic growth on individuals
Reduced unemployment,
Increased average incomes
Access to quality public services
Indicators of economic growth
GDP per cap
literacy
health
HDI
The link between business specialisation and competitive
advantage
If they can increase the value added on their goods/services, this can help to gain an edge over their competitors
FDI
An investment into a country involving an external or foreign company either investing in or purchasing the goods of a local economy.
+ and - of trade liberalisation
+ Allows businesses to increase market size
+ Reduce costs, source cheaper
- infant industries cant compete
-dumping
Reasons for increased globalisation
Political change
Reduced cost of transport and communication
FDI
MNCs
Migration
Growth of the global labour force
Structural change
Domestic subsidies
Payments given to domestic businesses to help lower costs of production
Government Legislation
laws to restrict certain imports to protect customers and businesses
Free Trade Areas
reduction of import tariffs and quotas on trade between member countries.
– NAFTA
Customs Unions
removing trade barriers but also establishing a common external tariff on imports from non-member countries
– EU
Monetary Unions
common currency shared by member countries.
– Eurozone
+ and - for regional trade agreements
+ increased trade
+ efficiency gains
+ economies of scale
- Complexity
-exclusion
-loss of sovereignty
WTO
Facilitating trade negotiations among member countries to reduce trade barriers
Push factors
factors that push a business to expand outside of their domestic country
Example of push factors
Saturated markets
Intense competition
Pull factors
encourage businesses to operate within markets abroad which present significant growth opportunities
Examples of pull factors
Benefiting from economies of scale
Spreading risk
Offshoring
moves part of the production process, or all of it, to another country
Reasons for offshoring
Lower labour costs
Access raw materials
Access skilled labour
Outsourcing
hires an external organisation to complete certain tasks or business functions
