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Theme 4 business

Daniel Beckett Business/Economics English 136 cards

Cards in this deck (136)

  1. 1What is FDI?Investing by setting up operations or buying assets in businesses in another country.
  2. 2What is an example of FDI?When a firm takes an equity stake of more than 10% in a foreign enterprise.
  3. 3Why 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.
  4. 4What 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.
  5. 5What 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.
  6. 6What is a strategic alliance?Where firms crate contracts to share resources, e.g. patents or copyrights or cultural understanding.
  7. 7How 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.
  8. 8How 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.
  9. 9How 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.
  10. 10How 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.
  11. 11How 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.
  12. 12How 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.
  13. 13How 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.
  14. 14How 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.
  15. 15What 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.
  16. 16What 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.
  17. 17What 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.
  18. 18What 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.
  19. 19What 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
  20. 20What 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.
  21. 21What 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.
  22. 22What is protectionism?An approach used by the government to protect domestic producers.
  23. 23Why 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
  24. 24What are infant industries?New industries that have yet to establish themselves
  25. 25What is "dumping"?Where foreign producers sell goods below cost in a domestic market.
  26. 26What is "embargo"?A complete man on international trade - usually for political reasons.
  27. 27What 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.
  28. 28What are administrative barriers?Rules and regulations (such as trading standards and strict specifications) that make it difficult for importers to penetrate an overseas market.
  29. 29What is a subsidy?Financial support given by a domestic producer to help compete with overseas firms.
  30. 30What 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.
  31. 31What 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.
  32. 32What are 6 conditions that prompt trade?- Extending product life cycle
    - Selling product innovations in multiple markets
    - Global sourcing
    - Limited growth in domestic markets
    -new and bigger markets
    -lower costs
  33. 33THE IMPACT OF MNCSTHE IMPACT OF MNCS
  34. 34Name 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.
  35. 35Expand 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.)
  36. 36Why might access to new markets be desirable?It can an extension strategy to extend the product life cycle, however this can go wrong.
  37. 37What 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.
  38. 38Explain tariff'staxes that are imposed on imports to make them more expense
  39. 39Explain import quotaa physical limit on the quantity of imports allowed into a country
  40. 40Define economic growthan increase in a counties productive capacity
  41. 41Define Purchasing Power Paritya measure of real growth that uses the price of purchasing a standardised basket of goods and services to compare prices across economies
  42. 42Define Human Development Indexa collection of statistics that are combined into an index, ranking countries according to their human development
  43. 43Explain and give examples of the types of consumer, income levels and the types of industry in an emerging economythe average income is increasing so the consumer can spend more on imports and domestic goods. they produce the most manufactured goods that are globally consumed
  44. 44Explain and give examples of the types of consumer, income levels and the types of industry in an developing economyvery large primary sector, incomes are mostly very low, labour intensive as capital equipment is very expensive
  45. 45Explain and give examples of the types of consumer, income levels and the types of industry in an developed economyhave a high standard of living, most consumer are skilled and will be employed in manufacturing
  46. 46Define BRICsnumber of countries that were developing quickly where Brazil, Russia, India and China
  47. 47Define GDPa common measure of national income, output and employment
  48. 48Define Visible imports and exportsinclude manufactured products for example raw materials and natural resources.
  49. 49Define Invisible imports and exportsincludes all kinds of services, for example the best architects sell their services all over the world
  50. 50Explain division of labourinvolves organising employees so that individuals specialise in one part of the production process as they become quicker and more proficient at specific tasks
  51. 51Explain competitive advantagethe idea that a business should specialise in any area where it can perform better that its competitors
  52. 52What is trade liberalisationthe process of limiting and reducing barriers to trade so that the economies involved move closer to free trade
  53. 53what is WTO and what is its aimWTO is and international trade agreement that has kept tariffs and quotas at a low level for many years
  54. 54what is Global Competitivenessthe extent to which a business or a geographical area such as a country, can compete successfully against rivals
  55. 55define outsourcingshifting all or part of the production to another business in order to reduce costs
  56. 56define offshoringlocating all or part of the production process in a foreign economy usually where production costs are low
  57. 57economies of scaleincreasing the scale of production leads to a lower cost per unit of output,
  58. 58what is saturationthe point when most of the consumers who want to buy a product already have it, or there is a limited remaining opportunity for growth in sales
  59. 59barrier to entryfactors that make it difficult for a company to enter an industry or type of business
  60. 60define ethicsmoral rules or principles of behaviour that should guide members of a organisation and make them deal honestly and fairly with each other and with their stakeholders
  61. 61competition policygovernment policy that that exists to promote competition and ensure that firms do not abuse their market power
  62. 62pressure groupsare generally voluntary organisations that operate on all levels of society and aim to change either political or commercial decision making
  63. 63evaluate the importance of ethics to modern businessethics is importan
  64. 64Benefits of FDIhas a high potential for making profit, maintains control over subsidiaries,
  65. 65draw backs of FDIlowers comparative advantage, high transportation costs as well as logistic costs, faces trade barriers
  66. 66what is the multiplier effectextra income leads to more spending, which creates more income, and so on. The multiplier effect refers to the increase in final income arising from more spending
  67. 67comparative advantagethe theory that a country should specialise in products and services that it can produce more efficiently than other counties
  68. 68example of comparative advantagePortugal can produce and manufacture wine and cloth quicker than England can
  69. 69what are the benefits of a country specialisingallows a country to product the good at a low cost, fewer resources are used which makes the country more efficient.
  70. 70what is protectionisma way in which the government may control imports so that domestic producers face less competition, reduced imports enables them to charge more even if the quality is low
  71. 71why do countries use protectionist measuresto protect their own industries from foreign competition and use it to slow down the process of trade
  72. 72standard of livingthe level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in a country
  73. 73income inequalityA measurement of the distribution of income that highlights the gap between individuals or households making most of the income in a given country
  74. 74balance of paymentsis a record of all transactions associated with imports an exports and all international capital movement
  75. 75what other factors need to be considered when judging the standard of livingdistribution of wealth, changes in quality of life and goods and unpaid work
  76. 76what is global labour marketwhich workers find paying work, employers find willing workers, and wage rates are determined on a global scale
  77. 77what are the advantages to a firm with global labour markethelps to drive global demand, keeps costs down and encourages businesses to expand and boost the number of businesses globally
  78. 78what is a structural change in an economyis an economic condition that occurs when an industry or market changes how it functions or operates
  79. 79what is a trading bloca group of counties that has signed a regional trade agreement to reduce or eliminate tariffs between themselves
  80. 80examples of trade blocsNAFTA, EU, ASEAN
  81. 81advantages of been in a trade blocresources easier ad cheaper to source, lowers costs, gives countries a comparative advantage, improves capital flow, can benefit from economies of scale
  82. 82what are the implications for UK firms of the withdrawal from the EU single marketUK firms will have to make new agreements with countries to lower the tariffs as once outside the single market it makes it harder for them to trade increase the cost of imports and exports as UK firms can be charged high taxes on goods
  83. 83How has NAFTA affected Mexico and the USAUSA have benefited from NAFTA as the prices for agricultural products has lowered. however Mexico has had some downfalls as the overall economic growth insignificantly increases the real wages has declined and unemployment has increased
  84. 84advantages of off-shoringreduces costs
    hire workers with particular skills
  85. 85disadvantages of off-shoringculture clash, damage reputation of the firm and economic risk
  86. 86advantages of out sourcingreduces costs, specialised areas of the business
  87. 87disadvantages of outsourcingpoor communication issues, and can be expensive to a business
  88. 88pull factors for a firm to trade internationallyseek economies of scale, spread the risk, lower the cost
  89. 89push factors for a firm to trade internationallyin a saturated market, high competition in the market may force a company to sell abroad
  90. 90how would a movement in exchange rates have a impact in the global competitiveness of a businessif there was a depreciation in the value of the pound, price inelastic products a decrease in price would only see a relatively small increase in demand. however if he product is price elastic the decrease in price would see a larger increase in demand
  91. 91how would a cost competitiveness have impact in the global competitiveness of a businessthis is where a firm achieves economies of scale and allows the firm to deliver the same product as its competitors but at a lower cost which allows the firm to make more profit
  92. 92how would differentiation have an impact on the global competiveness of a businessthe firm focuses more on the design of the product to meet consumer needs than the costs, so they can charge a higher price for the product to increase profits as well as competiveness
  93. 93define ethnocentric modelan approach whereby the business approaches the world primarily from the perspective of its own culture. it assumes that what was a success in the domestic market will be a success in other economies
  94. 94define polycentric approachan approach that considers each host country to be unique and develops its own individual business and marketing strategies to suit the particular needs
  95. 95define the geocentric approachsees the whole world as a potential market but with both similarities and differences in the domestic and foreign markets
  96. 96implications on the price when entering an overseas marketsome market prices will need to be low to attract consumers for example McDonalds moving to India had to have some lower priced items on there menu so that consumers could afford to buy the product
  97. 97implications of the product when entering an overseas marketthe product may have to change to suit local tastes, for example Nike when producing the sports range in china had to change the sizes of the product to suit the country
  98. 98implications of the promotion when entering an overseas marketit has to be tailored to suit the consumers and meets there tastes and interests, for example coca- cola had to sell there product in the traditional way to encourage consumer to buy the products in India, so placed the coke bottles on display in a disorganised way
  99. 99implications of place when entering an overseas market nthe developing countries may not have he infrastructure to accommodate the company so they have to build it themselves which can increase the costs
  100. 100what is a global niche marketare smaller more specialised parts of a global market where consumers in more than one country have particular needs that aren't met by the global mass market
  101. 101advantages of global niche marketprices are higher than in mass market as the demand is more price inelastic, can be distributed directly to the consumer
  102. 102disadvantages of global niche marketsproducts sell in relatively low quantities so profits need to be high to make it worth while. the small size may stop them from seeking economies of scale
  103. 103example of culture differences when trading internationallyin Asian cultures, a person is expected to shake hands when entering a room with both hands and when meeting or saying goodbye the person needs to nod there head slightly to show a sign of respect
  104. 104example of different taste when trading internationallyin some countries Coca-Cola have to place water in the coke to make it dilute for the consumer as they believe it tastes better to them
  105. 105example of unintended meaning when trading internationallyusing the thumbs up gesture is considered offensive by countries such as Greece or in the middle east
  106. 106example of inappropriate translation when trading internationallycoors breweries translated its slogan, 'turn it loose' into Spanish, where it mean 'having diarrhoea'
  107. 107example of inappropriate branding when trading internationallywhen Coca-Cola took their brand name to china it was sometimes translated to 'bite the wax tadpole'
  108. 108what are the implications of a firm getting the wrong promotional messageit will give them a bad brand reputation and hard for them to build a brand loyalty so will see a decrease or no sales and profits will fall as it costs to promote but if they are promoting the wrong message the sales wont pick up
  109. 109positive impacts of multinationals on host countrycreates a positive multiplier effect as the MNC has to set up so have to employ workers so increase in spending, means more jobs are available, smaller businesses may have the resources available for the MNC to use which increase their profits. can develop the economy and infrastructure.
  110. 110negative impacts of multinationals on host countryloss of culture, smaller local business become less competitive and may have to close down, destroy the environment when setting up the MNC. loss of jobs, may exploit worker and give them low wage rates, may employ skilled work force from other countries as host country doesn't have the skills required
  111. 111advantages of been a multinationalgain access to new markets, can seek economics of scale which lowers costs, can control resources, may be able to take advantage of government and get around trade barriers, much easier to co-ordinate a business
  112. 112To what extent can MNC be controlledthough the competition law so it is used to promote competition and ensure that markets operate as efficiently as possible. government use taxation policy to raise the revenue to run their countries. pressure groups they can publicise undesirable behaviour and thereby threatening to damage the companies reputation
  113. 113define economies of scalethe reduction in the average costs which is caused by the businesses output increasing
  114. 114advantages of economies of scalelowers average costs, increases profits, makes a firm more efficient
  115. 115define diseconomies of scalerising long-run average costs as a business expands beyond its minimum efficient scale
  116. 116why does diseconomies of scale occurcommunication becomes poor as the firm size increases, control of firm is very demanding as it gets larger, motivation may suffer as employee one of thousands so poor relations between management and workforce
  117. 117spreading risk over different countries is a reason for a merger/takeover, define and explain the advantages and disadvantageswhen a firm moves into other countries to have less likely risk of economic down fall
    advantages- allows a firm to grow, less likely to fail.
    disadvantages- may have to change the culture and nature of the business to meet the needs of the consumer
  118. 118entering new markets and trading bloc is a reason for a merger/takeover, define and explain the advantages and disadvantageswhen a firm sets up in a new market and also staying its original county.
    advantages allows a company to grow
    disadvantages- growth is slow and may find it hard to gain access into the market
  119. 119acquiring national and international brand names is a reason for a merger/takeover, define and explain the advantages and disadvantageswhen a business wants to become a global player in the market.
    advantages- likely to be strong brand loyalty and recognition
    disadvantages- limits competition and high risk and cost of launching the new product
  120. 120securing resources is a reason for a merger/takeover, define and explain the advantages and disadvantagesto have a constant supply of the products parts
    advantages- allows a firm to have a reliable supply of the parts
    disadvantages- it will take a long time to develop a relationship with the supplier
  121. 121maintaining global competitiveness is a reason for a merger/takeover, define and explain the advantages and disadvantagesallows the company to maintain itself globally
    advantages- provides bigger markets, can seek economies of scale and save on costs
    disadvantages- limits the competition
  122. 122give an explanation on how the levels and growth of disposable income can influence a company's decision to enter a particular marketvery low incomes suggest limited for imports, but many businesses will be seeking to target consumers in the growing middle class and the surplus disposable income allows them to improve their lifestyle
  123. 123give an explanation on how ease of doing business can influence a company's decision to enter a particular marketany business planning to invest abroad will need to look at the countries regulations. Emerging economies tend to make it setting up a business harder than developed economies do. there may be other issues like the culture differences and language barriers
  124. 124give an explanation on how infrastructure can influence a company's decision to enter a particular marketit depends on the type of business but if the infrastructure can cause problems when distributing the products when exporting and may add to the companies costs if the infrastructure is poor
  125. 125give an explanation on how political stability can influence a company's decision to enter a particular marketgovernments that resent the presence of foreign businesses in their economies occasionally talk about nationalising them. there is more corruption in some economies than in others but its is mainly because of businesses that this problem occurs
  126. 126give an explanation on how exchange rates can influence a company's decision to enter a particular marketnew exchange rates will make exporting goods will make their products cheaper to buy, so the firm can either reduce prices or keep them the same so profits are higher, or could do both reduce prices by less than the rate of the depreciation
  127. 127give an explanation of a county as a production location and explain how costs of production can influence a company's decision to enter a particular marketto keep costs of production down firms are producing in emerging economies where the wage rates are lower however may have to keep moving to other countries as that countries wage rate rises
  128. 128give an explanation of a county as a production location and explain how skills and availability of workforce can influence a company's decision to enter a particular marketthe firm needs to find somewhere that it is easy to recruit labour with appropriate skills for the technologies that will be used. however staff training may need to occur is the skills of the labour are inefficient
  129. 129give an explanation of a county as a production location and explain how infrastructure can influence a company's decision to enter a particular marketthe firm needs to be confident that orders will be delivered and manufactured on time however if the locations has unreliable energy supplies and poor internet connection then the firm will be at a disadvantage
  130. 130give an explanation of a county as a production location and explain how locating within trading blocs can influence a company's decision to enter a particular markettrade blocs have few if any tariff barriers so there can be opportunities for offshore production, this could give a firm a competitive advantages over other firms
  131. 131give an explanation of a county as a production location and explain how government incentives can influence a company's decision to enter a particular marketmany companies move their headquarters to a low taxation location and then arrange complex royalty payments which siphon profits off of the economy where they were earning
  132. 132give an explanation of a county as a production location and explain how easy of doing business can influence a company's decision to enter a particular marketinvestors are likely to look at the numbers of days to set up a business and the local legal requirements and regulations
  133. 133give an explanation of a county as a production location and explain how political stability can influence a company's decision to enter a particular marketeconomies that look unsettled but have abundant resources can attract investors,
  134. 134give an explanation of a county as a production location and explain how natural resources can influence a company's decision to enter a particular marketsome businesses that extract natural resources in developing countries are not careful to protect local people from the problems they create and the MNC needs to make sure that the location will not be life threatening to their employees
  135. 135give an explanation of a county as a production location and explain how likely return on investment can influence a company's decision to enter a particular marketthe profit generated by investment. it isn't easy to calculate and many risks involved. the choice of location can be crucial and research must be done however this adds to the costs. there is also other factors to consider
  136. 136—

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Business/Economics Flashcards on Theme 4 business, created by Daniel Beckett on 20/03/2017.
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Daniel Beckett
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  • Created by Jessica Ridley · Jan 9, 2017
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