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Business > 4.1.1 Global emerging economies > Flashcards

4.1.1 Global emerging economies Flashcards

1
Q

Globalisation

A

the process of making the world economy more independent

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2
Q

Emerging economy

A

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

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3
Q

Features of emerging economies

A
  • 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
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4
Q

MINT countries

A

Mexico, Indonesia, Nigeria, Turkey

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5
Q

Opportunities posed by emerging markets for UK businesses

A
  • 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
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6
Q

Threats posed by emerging markets for UK businesses

A
  • 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
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7
Q

What factors will make sure that emerging countries continue growth?

A
  • 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
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8
Q

How does economic growth create trade and employment opportunities?

A
  • 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
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9
Q

Changing employment patterns

A
  • 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
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10
Q

Benefits of entering an emerging economy

A
  • access to large markets
  • first mover advantage
  • increased demand for western products
  • establishing a brand
  • growth rate
  • brand/corporate image
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11
Q

Problems of entering an emerging economy

A
  • investment needed
  • cultural differences
  • time lags
  • limited protection
  • local competitors
  • political issues
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12
Q

Implications of economic growth for businesses

A
  • 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
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13
Q

Implications of economic growth for an individual

A
  • 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

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14
Q

How can an individual prepare for entering a foreign market?

A
  • learn a foreign language

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

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15
Q

Indicators of growth

A

rise in gdp
gdp per capita
health
literacy

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16
Q

What is gdp?

A
  • 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
17
Q

Limitations of Gdp

A
  • 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
18
Q

What is gdp per capita?

A
  • 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
19
Q

Limitations of gdp per capita

A
  • 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
20
Q

Health

A

uses life expectancy

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

21
Q

Human development index HDI

A

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

22
Q

HDI limitations

A
  • 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
23
Q

4.1.2 International trade

A

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
24
Q

Why are some countries better at producing than others?

A
  • 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
25
Q

Comparative advantage and gains from trade

A
  • 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
26
Q

Specialisation

A
  • 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
27
Q

Impact of specialisation

A
  • 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
28
Q

What are the possible gains from specialisation?

A
  • 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
29
Q

Benefits of international trade

A
  • 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
30
Q

Potential drawbacks of international trade

A
  • 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
31
Q

Impact of exports and imports on UK economy

A
  • low prices due to more competitive marketing
  • transferrable skills
  • more skilled workers
  • more job opportunities - more employment
32
Q

What is FDI?

A

Investment from one country to another

-establishing operations or acquiring tangible assets, including stakes in other businesses

33
Q

Positives of FDI for businesses

A
  • 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
34
Q

Positives of FDI for host country

A
  • 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
35
Q

What is inward fdi?

A

a foreign company invests in the UK

36
Q

What is outward fdi?

A

a UK company invests into another foreign country v

37
Q

What are some strategies to attract fdi?

A
  • 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

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