Unit 3 - International Business

hannah giblett
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hannah giblett
Created by hannah giblett over 5 years ago


Flashcards on Unit 3 - International Business , created by hannah giblett on 26/12/2015.

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Question Answer
EXAM SKILLS: 'Evaluate' Make a judgement based on weighing up the advantages and disadvantages. Reach a balanced conclusion TIP: Examples will help back up your argument.
Protectionism the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports that threaten to take away consumer demand.
Trading Blocs A state of reduced barriers between groups of countries
Trade Liberalisation The process of reducing barriers to trade so that economics can move gradually towards free trade i.e. No barriers
Push Factors - Saturated market - Competition from imports - Product heading towards decline in its maturity phase
Pull Factors - Potential for increased sales - Economies of scale - Spreading risk - Global sourcing - Better trade liberalisation - Expansion of trading blocs
Structure of a Product life cycle
Extension Strategy Aimed at extending the life of a product either by making small changes in it, finding new uses for it, or finding new markets.
Emerging economies Characterised by rapid economic growth. There are big increases in manufacturing output and rising standards of living. Some described as poor countries, whilst others are well on the way to becoming developed countries with modern economies.
Offshoring Locating production in a foreign country. The objective is to exploit cost savings, most often through lower wage rates.
IMF International Monetary Fund: Providing adequate finance for world trade.
World Bank World Bank: Lending to developing countries.
WTO World Trade Organisation: Supervising world trade and helping solve governmental disputes.
Free trade area groups of countries that trade completely freely with one another, with no trade barriers. Each country retains its own independent trade policies in relation to the rest of the world.
Common markets completely free trade internally and a single unified trade policy covering all member countries' trade with the rest of the world. As well as goods and services, there is also free movement of people and capital. Businesses in common markets can invest in any member country.
Trading blocs : Advantages - Easy access to other markets - No Tariffs -Economies of scale - Spreading Risk - Attracts FDI - More Competition, therefore greater efficiency
Trading blocs: Disadvantages - No protectionism (greater competition facing domestic industry) - Tariffs increasing the cost of imported raw materials - Difficult to reach agreements within the trading bloc - New regulations will not suit everyone
FDI when a business or a government invests in other countries' infrastructure, marketing and distribution
FDI : MEDCs High incomes and good infrastructure
FDI: LEDCs Low living standards, little manufacturing, large agricultural sector. Little infrastructure Little investment
BRICs Brazil, Russia, India, China. Four largest fast-growing economies. BRIC refers to fast economic growth. These are the "emerging economies".
Backward Innovation Developing, low cost products that will appeal to people with low income. 'stripped back' version of sophisticated manufactured products. -Responding to local needs in LEDCs -Can be used to create new markets
PPP Purchasing Power Parity: Adjusting monetary values to allow for differences in prices between countries. Adjusting makes for a realistic comparison.
INDIA - One of the worlds most populous countries - In future, the population will become younger - India can only benefit from this if it can improve educational standards - growth rate may not benefit everyone as there will be increased pressure of land and food resources
CHINA - Number one most populous country -Population growth has been slowed by the one-child policy - Population is anticipated to peak then slowly drop, which will reduce the number of workers available - ageing population will narrow the supply of labour.
Supply Chain management organising the sequence of processes that leads to the sale of the final product. e.g. Managers can locate the supplier with the greatest competitive advantage so that costs are minimised.
Some aspects to consider when deciding which countries to target - Legal Framework - Exchange Rates - Language and Culture - Infrastructure
Human Development Index Constructed by the UN. Provides a measure of development based on access to health care and education as well as national income (living standards). It therefore includes qualitative as well as quantitative aspects of development.
Ease of Doing Business Index Looks at a range of factors that make a business easier to start and run. Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
Commodities Raw materials or semi-manufactured products that are traded in bulk and are not recognisably originating from any particular business. E.g. Iron ore, Oil and Cotton
Infrastructure All transport and communication facilities as well as the provision of basic services such as energy and water supplies.
Specialisation When people or an economy make the most of their skills by concentrating on what they do best. Output per head rises when appropriately skilled people are in charge of production.
Absolute advantage An absolute advantage exists if the real cost of a product is lower in one country than another.
Comparative advantage The theory of comparative advantage states that if two countries each specialise in the product with the lowest opportunity cost, and then trade, real incomes will increase for both countries.
3 Stages of Comparative advantage - Identify the product with the lowest opportunity cost - Specialise in this area - Exchange surplus with another country in exchange for its lowest opportunity cost product.
Advantages of Specialisation - Increased output and efficiency - Economies of scale - Cheap production - Competitive advantage is enhanced - Export earnings increase - Competition drives lower price and drive innovation, benefitting consumers.
Disadvantages of Specialisation - Over reliance on one area of the economy - Comparative advantage can move elsewhere - Emerging economies rely heavily on one commodity product - Fluctuating commodity prices - Reliance on imports for other goods - structural unemployment due to over specialisation.
Stakeholders Anyone with an interest or a stake in a particular business. E.g. employees, suppliers, shareholders, pressure groups and government.
Corporate culture Corporate culture is the pervasive values, beliefs and attitudes that characterize a company and guide its practices. To some extent, a company's internal culture may be articulated in its mission statement or vision statement.
CSR Corporate Social Responsibility: Taking decisions in a way that takes into account all stakeholders interests. It is a form of corporate self-regulation integrated into a business model.
Ethical decision making following codes of practise that embody moral values. the objective is to do the right thing - taking into consideration the interests of everyone affected by the decision.
Drawbacks of behaving ethically - Higher Labour costs (fair wages and conditions improved) - Higher material costs - Change to existing methods of production and culture - Competitors winning, with low costs and low prices
Advantages of behaving ethically - Favourable media attention, increased brand loyalty and sales - Products can carry a premium price without damaging sales - More motivation at work - Can be profitable
Social and Cultural differences affect the patterns of consumption and the products favoured. But it will also affect the way people do business with one another.
The 4 Ps Promotion - has to appeal to local tastes and culture Price - May need to be lower Product - May need to adapt to local needs Place - Conventional avenues may not be available
Joint Venture A joint venture is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets.
Disadvantages of Joint ventures - Partner may not be suitable or reliable - communication problems may arise - cultural clashes may occur - management styles may clash - profits are shared
Advantages of Joint ventures - Risk spreading - Gaining local knowledge and expertise - Avoids social and cultural clashes - Can use existing supply chains and distribution networks - helps enter into new markets - Costs can be shared
Protectionism A term for government policies aimed at protecting the domestic economy from the effects of imports that might otherwise damage domestic industries and reduce employment
Trade Barriers Including anything that slows or prevents free trade from taking place E.g. Tariffs and Quotas
Tariffs A tax placed on imported goods which increase their price. The quantity consumed of the import will fall as consumers either do without, or purchase a domestic substitute instead. The effectiveness of the tariff depends on PED
Quotas physical limits on the level of specific imports in any one year.
Disadvantages of protectionism - Welfare loss - Reduced competition - reduces income in importing countries - can provoke retaliation
Globalisation the process through which an increasingly free flow of ideas, people, goods, services and capital leads to the integration of economies and societies.
Intellectual property rights the rights to own and to exploit ideas or inventions, or literary or other cultural works. Legal protection given to the owners or originatiors
Diversifying Selling more than one product, or the same product in more than one market.
Inorganic growth When a business expands by taking over or merging with another company. May allow for rationalisation/cost cutting and market expansion
Merger combining with another company on a collaborative basis
Takeover / Acquisition A situation where one company is buying another.
Horizontal integration Horizontal integration (also known as lateral integration) simply means a strategy to increase your market share by taking over a similar company.
Vertical integration Vertical integration is the process in which several steps in the production and/or distribution of a product or service are controlled by a single company or entity, in order to increase that company’s or entity’s power in the marketplace.
Reasons FOR Inorganic growth -Entering new markets -increased turnover and profitability -Economies of scale -Synergy -Balancing investments - Brands and patents
Economies of Scale reduction in average costs of production brought about by an increase in the size and scale of the business. E.g. Wholesale/Buying in bulk
Synergy Idea that after a merger or takeover, the performance of a combined enterprise will exceed that of its previously separate parts.
Glocalisation combining globalisation with localisation, to emphasise the idea that a global product or service is more likely to succeed if it is adapted to the specific requirement of local practices
Glocalisation: Ethnocentric Model An approach to marketing based on the tendency to look at the world primarily from the perspective of one's own culture.
Glocalisation: Geocentric approach Seeing the world as a potential market with both similarities and differences in domestic and foreign markets.
Glocalisation: Polycentric model An approach that considers each host country to be unique. Marketing strategies are tailored to these particular needs.
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