7333954
Description
Flashcards by Jessica Ridley, updated more than 1 year ago
|
Created by Jessica Ridley
over 7 years ago
|
|
| Question | Answer |
| What is FDI? | Investing by setting up operations or buying assets in businesses in another country. |
| What is an example of FDI? | When a firm takes an equity stake of more than 10% in a foreign enterprise. |
| Why would a firm prefer FDI over exporting or licensing? | - Managers want to keep tight control over operations in the other country or countries. The businesses may want to maintain a common culture or communications system. - A firm wants to protect its intellectual property, e.g. patents or copyrights. - It needs to be close to its customers. - It products incur high transportation and logistics costs. - It faces trade barriers or political opposition. |
| What is horizontal FDI? | Producing the same products or services as done at home, e.g. the takeover of the British Bank TSB by the Spanish bank Sabadell. |
| What is vertical FDI? | Where one firm is seeking to acquire materials or support for its own products or services. E.g. when a firm opens a call centre in another country to deliver customer or staffing support. |
| What is a strategic alliance? | Where firms crate contracts to share resources, e.g. patents or copyrights or cultural understanding. |
| How does FDI link to globalisation? | Uk businesses want to invest in projects overseas, this is helpful in contributing to the development as it spends business activity, job creation and wealth all over the globe. It is also allows firms to penetrate markets where trade barriers exist. |
| How does FDI link with increases in income? | Flows of FDI should result in high levels of GDP for the host nation. The extra output and employment should increase economic growth and raise the living standards for people in the host country. |
| How does FDI link with increases in tax revenue? | The profits made by MNCS are taxed by the host nation, which increases tax revenue. This money can be spent on improving government services, e.g. healthcare, education or housing. |
| How does FDI link with an increase in employment? | FDI can create jobs for the host national. This reduces the unemployment rate and saves money that would otherwise be for benefits. Firms in the host country may also get a boost because there will be an increase in local suppliers. |
| How does FDI link to reducing national debt? | Reduced national debt has a positive impact on a country's finances. It sends out a message to the result of the world that it is more financially stable, so interest payments might be reduced and the country should find it easier to borrow in the future. |
| How does FDI link to balance of payments? | Initially, the flow of FDI when a project is being established will improve the balance of payments because money will flow into the host nation's account. |
| How does FDI link to balance of payments? | Once a facility is "up and running" there may be a further boost to the balance of payments, because if any of the output from a new factory is sold abroad, there will be a further flow of money into the balance of payments. |
| How does FDI link to balance of payments? | - FDI allows less developed countries to boost sales of goods overseas. - If MNCS buy resources from overseas, it will have a negative effect of the balance of payment, because there will be a flow of money outsides of the country. |
| What are some advantages of a business operating in a single market? | - Market and consumer base will expand. - Free trade - cheaper because no tariffs, lower costs means a lower price which could increase demand. - UK firms can also get cheaper raw materials tariff free. - External tariffs protects the EU and the UK firms from competition from places like China. - Cheaper labour and greater pool of skilled workers. |
| What are some advantages to workers and citizens of the UK being part of the single market? | - Cheaper products thanks to no tariffs. - More jobs generated due to an increase in FDI. - Also have a greater choice of goods because of no tariffs. - EU legislations protects workers rights, e.g. discrimination, max working week and minimum wage. |
| What are some advantages to the economy of operating in a single market? | - Due to increased FDI, the economy can become stronger - the multiplier effect. - Exporting goods strengths the economy due to balance of payments. - More tax being paid. - Increased competition. |
| What is globalisation? | Economies coming together as one to form a world economy. Some firms and brands can be sold throughout the world, e.g. McDonalds. |
| What is allowing globalisation? | - Technology and improvements in transport. - Communication, e.g. Skype. - Internet access. - Growth of trading blocs, e.g. EU, NAFTA, ASEAN - Growth of countries like China |
| What are the benefits of globalisation? | - Greater choice of goods - Greater potential form growth for developing economies - Firms can expand and reap EoS - Greater employment opportunities - Cheaper goods - Transfer of technology to develop economies. |
| What are the limitations of globalisation? | - Increase gap between the rich and poor. - Dominance of global trade by the rich northern hemisphere countires, e.g. UK, Germany - Lack of opportunities for the poor to have access to markets. - Exploitation of workers (depends on the multi-national) - Loss of cultural identity - Large MNCS putting small traditional businesses out of power - Exploitation of non-renewable resources. |
| What is protectionism? | An approach used by the government to protect domestic producers. |
| Why do some governments feel the need to enforce protectionism? | - Protect jobs - Protect infant industries - Prevent dumping - Raise revenue - Prevent the entry of harmful or undesirable goods - Improve the balance of payments |
| What are infant industries? | New industries that have yet to establish themselves |
| What is "dumping"? | Where foreign producers sell goods below cost in a domestic market. |
| What are tariff barriers? | A tax on imports to make them more expensive. |
| What are trade barriers? | Measures designed to restrict trade. |
| What are import quotas? | A physical limit on the quantity of imports allowed into a country, |
| What is "embargo"? | A complete man on international trade - usually for political reasons. |
| What are some problems with trade barriers? | - Countries may retaliate when barriers are impose, e.g. introducing tariffs. - Tariffs may be ineffective if demand for imports is price inelastic. |
| What are administrative barriers? | Rules and regulations (such as trading standards and strict specifications) that make it difficult for importers to penetrate an overseas market. |
| What is a subsidy? | Financial support given by a domestic producer to help compete with overseas firms. |
| What are some opportunities for businesses operating in a trading bloc? | - Free regional trade. - The market should increase. - Producers should benefit from EoS as the volume of trade increases. - Resources may be easier to source and labour easier to recruit. - As trade increases, it may result in greater competition and so more efficiently in the market. |
| What are some limitations for a firm operating in a trading blocs? | - Some of the benefits may be distributed unequally. - For smaller organisations, opening up competition and the large market may result in more competitors. - Benefits may be small if there are limits on the goods and services that are traded. |
| What are 4 conditions that prompt trade? | - Extending product life cycle - Selling product innovations in multiple markets - Global sourcing - Limited growth in domestic markets |
| THE IMPACT OF MNCS | THE IMPACT OF MNCS |
| Name 5 reasons as to how and why MNCs have grown. | - Access to new markets. - Reducing costs. - Controlling resources. - Taking advantage of governments and getting around trade barriers. - Travel and technologies. |
| Expand on access to new markets. | If the domestic market is saturated, they must seek growth and profits in new markets overseas (especially if incomes are high.) |
| Why might access to new markets be desirable? | It can an extension strategy to extend the product life cycle, however this can go wrong. |
| What is an example of this going wrong? | Some big tobacco companies lobbied the Pakistani government not to put health warning on packets. This activity was unethical and so tarnished their brand and CSR. |
Want to create your own Flashcards for free with GoConqr? Learn more.