Edexcel A Level Business - Theme 4 (copy)

Economic growth

Economic growth

An increase in a country's productive capacity

Emerging economies

The economies of developing countries where there is rapid growth, but also significant risk

Human Development Index (HDI)

A collection of statistics that are combined into an index, ranking countries according to their human development

Literacy rate

The percentage of adults (over 15) that can read and write

Purchasing Power Parity (PPP)

A measure of real growth the uses the price of purchasing a standardised basket of goods and services in order to compare prices across economies

Comparative advantage

The theory that a country should specialise in products and services that is can produce more efficiently than other countries

Competitive advantage

The idea that a business should specialise in any area (products, services, management, research etc.) where it can perform better than its competitors

Division of labour

Different workers specialising in different productive activities

Exports

Goods or services that a firm produces in its home market, but sells in a foreign market

Foreign Direct Investment (FDI)

Investing by setting up operations or buying assets in businesses in other country

Imports

Goods and services that are bought into one country from another

International trade

Exporting (selling abroad) and importing (buying from abroad)

Specialisation

A production strategy where a business focuses on a limited scope of products or services. This results in greater efficiency, allowing for goods and services to be produced at a lower cost per unit.

Tariffs

Taxes that are imposed on imports

Foreign Direct Investment (FDI)

Business investment undertaken by a firm in another country; building a factory, for example

Globalisation

The growing integration of the world's economies

Transnational or multinational companies

Companies that own or control production or service facilities outside the country in which they are based

World Trade Organisation (WTO)

An international organisation that promotes free trade by persuading countries to abolish tariffs and other barriers. It policies free trade agreements, settles trade disputes between governments and organises trade negotiations.

Administrative barriers

Rules and regulations (such as trading standards and strict specifications) that make it difficult for importers to penetrate an overseas market

Dumping

Where an overseas firm sells large quantities of a product below cost in the domestic market

Embargo

A complete ban on international trade - usually for political reasons

Import quota

A physical limit on the quantity of imports allows into a country

Infant industries

New industries that have yet to establish themselves

Protectionism

An approach used by a government to protect domestic producers

Subsidy

Financial support given to a domestic producer to help compete with overseas firms

Tariffs or customs duties

A tax on imports to make them more expensive

Trade barriers

Measures designed to restrict trade

Common market

A market where goods, labour and capital can move freely across the member states; tariffs are generally removed and non-tariff barriers eliminated, or at least reduced

Customs union

A union where member states remove all trade barriers between themselves and members adopt a common set of barriers against non-members

Economic and monetary union

An economic union that uses a common currency

Economic union

A type of trade bloc involving both a customs union and a common market

Free trade area (FTA)

A region where member states remove all trade barriers between themselves, but each member state nevertheless keeps different barriers against non-member states

Preferential trading area (PTA)

A type of trading block where certain types of products from participating countries receive a reduced tariff rate

Regional trade agreement (RTA)

Agreement made between two or more countries within a geographical region, which is designed to facilitate trade by bringing down barriers

Rules of origin

A system of allocating certificates whereby a defined amount of a product or service must be certified as being created within that region

Single market

A market where almost all trade barriers between members have been removed and common laws or policies aim to make the movement of goods and services, labour and capital between countries as easy as the movement within each country

Trading bloc

A group of countries that has signed a regional trade agreement to reduce or eliminate tariffs, quotas and other protectionist barriers between themselves

Economies of scale

Increasing the scale of production leads to a lower cost per unit of output, increasing size or speed increases efficiency and lowers costs

Labour productivity

The amount of goods and services produced by one hour of labour

Off-shoring

Shifting jobs to other countries

Outsourcing

Shifting jobs to other organisations

Product life cycle

The stages that many products go through; development, introduction, growth, maturity, decline

Pull factors

Factors that entice firms into new markets and are the opportunities that businesses can take advantage of when selling into overseas markets

Push factors

Factors in the existing market that encourage an organisation to seek international opportunities

Risk

The probability of a (bad) event happening multiplied by its (negative) impact

Saturation

The point when most of the customers who want to buy a product already have it, or there is limited remaining opportunity for growth in sales

Disposable income

The amount of money that a person has left over after they have paid their taxes, national insurance and other deductions

Exchange rate

The price of one currency against another

Infrastructure

The basic systems, facilities, services and capital equipment required for a country's economy to function, which might include its roads, communication systems and power services

Reshoring

Bringing production back home after using foreign production facilities for a period of time

Trade bloc

A group of countries situated in the same region that join together and enjoy trade free of tariffs, quotas and other forms of trade barrier

Franchising

Establishing a long-term co-operative relationship whereby one party, the franchisor, contracts with another, the franchisee, to run its business. Mcdonalds is a well-known example.

Intellectual property

A product that is a creation of the mind, such as an invention, literary work or artwork, that the law protects from unauthorised use by others. Types include patents, copyrights and trademarks.

Licensing

A contract with another firm to use its intellectual property or to produce its product or service in return for a fire

Barriers to entry

Factors that make it difficult for a company to enter an industry or type of business and compete effectively. These can include incumbents' high capital investment and strong economies of scale, restrictive government policies, and labour unions.

Competitive advantage

The advantage one company has over another, or several others, in the provision of a particular product or service.

Cost competitiveness

Through acquiring ever-increasing economies of scale, a company creates the cheapest product on the market

Cost leadership

A concept developed by economist Michael Porter, used in business strategy. It describes a way to establish the competitive advantage and essentially means the lowest cost of operation in the industry.

Differentation

Rather than focusing on costs, differentiation is when a firm selects certain attributes of its products or services and tries to match these with specific customers. The business may then try to command a higher price for creating this differentiated product.

Economic risk

Risk that future cash flows will change due to unexpected exchange rate changes

Global competitiveness

The extent to which a business or a geographical area such as a country, can compete succesfully against rivals

Skills shortages

Where potential employees do not have the skills demanded by employers

Economies of scale

Savings facilitated by an increased level of production

Globalisation

The process of businesses starting to operate internationally and develop international influence

Global marketing stratgey

The process of adjusting a company's marketing strategies to reflect conditions, consumer tastes and demand in other countries

Glocalisation

A combination of the words 'globalisation' and 'localisation'. It involves the development and sale of products to customers around the world which reflect specific local customs, tastes and traditions.

Localisation

Strategies that adjust products to fit with target customers

Global niche market

Customers who live in more than one country and have particular needs that are not met fully by the global mass market

Cultural audit

Study and examination of an organisation's cultural characteristics (such as its assumptions, norms, philosophy and values) to determine whether they hinder or support its vision and mission

Ethnocentrism

The tendency of people to view their own cultures, ethics and norms as superior. The evaluation of other cultures according to preconceptions originating in the standards and customers of one's own culture.

High-context culture

Cultures, including much of the Middle East, Asia, Africa and South America, that are relational, collectivist, initiative and contemplative. This means that people in these cultures emphasise interpersonal relationships. Developing trust is an important first step to any business transaction.

Low-context cultures

Cultures such as those of North America and much of Europe, that tend to say what they mean. A communication style that relies heavily on explicit and direct language.

Reverse engineering

A method of analysing a product's design by taking it apart

Transfer pricing

A system operated by MNCs. It is an attempt to avoid relatively high tax rates through the prices which one subsidiary charges another for components and finished goods.

Ethics

Moral rules or principles of behaviour that should guide members of a profession or organisation and make them deal honestly and fairly with each other and with their stakeholders

Institutional framework

The system of formal laws, regulations and procedures, and informal conventions customs and norms that shape activity and behaviour

Code of conduct

A set of rules outlining this proper practices of an organisation that contributes to the welfare of key stakeholders and respects the rights of all affected by its operations

Stakeholders

Groups or individuals who can affect or be affected by the actions of a business

Competition policy

Government policy that exists to promote competition and ensure that fires don't abuse their market power, do not attempt to fix prices or use pricing strategies to drive out competition, and do not collude against other producers or the consumer

Direct action

The use of demonstrations, protests, strikes or even sabotage to achieve a political or social goal

Naming and shaming

Publicising behaviour that is considered to be unethical as widely as possible and thereby threatening a business' reputation

Pressure groups

Generally voluntry organisations that operate at all levels of society, including international levels and aim to change other political or commerical decision-making

Tax avoidance

Using legal methods to reduce the amount of tax that a company pays

Tax evasion

Using illegal means to avoid paying taxes that are owed