Edexcel A-level Business Theme 4

growth rate of UK economy compared to emerging economies

mature, slow growth

emerging economy

a market where there is a lot of growth but also a lot of risk

BRICS

Brazil, Russia, India, China, South Africa

MINT

Mexico, Indonesia, Nigeria, Turkey

GDP

volume of spending of final goods

indicators of growth

1. GDP

2. Literacy

3. Health

4. Human Development Index

scores to expect from research

between zero and one (0-1) the higher the figure the greater the level of development

human development index

a measure of living conditions using factors such as life expectancy, education, and income

international trade

the exchange of goods and services among nations

import

to bring into the country

export

to carry out of the country

division of labour

specialisation of workers on specific tasks in the production process

specialisation

businesses concentrate on what they are best at

competitive advantage

an advantage over competitors gained by offering greater customer value

link between business specialisation and competitive advantage

specialisation allows businesses to focus on specific areas of production, leading to increased efficiency, lower costs, and the ability to offer unique products or services that differentiate them from competitors which intern leads to competitive advantage

foreign direct investment (FDI)

a company invests into a country

impact of FDI

+ reduce unemployment

+ transfer skills/technology

- domestic investment

- complex bureaucratic procedures

FDI link to business growth

foreign Direct Investment (FDI) links to business growth by offering benefits like access to new markets, increased job opportunities, and access to knowledge and expertise from foreign investors

reduction of international trade barriers/trade liberalisation

lowering tariffs and other trade restrictions to facilitate international trade

political change

changes in laws, taxes, and regulations can affect a businesses operational costs, market access, and overall business strategy

reduced cost of transport and communication

lower production costs, improved customer service, and increased profitability

Increased significance of global TNCs

transnational corporations (TNCs), impact businesses by driving globalisation by establishing global production networks, encouraging trade, and creating jobs. TNCs also influence local markets through globalisation, adapting products to suit diverse needs and preferences investing in infrastructure, contribute to tax revenues, and often introduce new technologies.

increased investment flows (FDI)

increased investment flows, particularly Foreign Direct Investment (FDI) boost growth, creates jobs, and drives exports

migration within and between economies

surge in migration as people seek better economic and social opportunities

growth of global labour force

the growth of the global labour force significantly contributes to the increase of globalisation due to the influx of new workers into the global market, increasing global demand, and potentially lowering labor costs

structural change

structural change, particularly the shift from traditional sectors like agriculture to modern ones like manufacturing and services, is a major factor driving the increase in globalisation

private finance initiative (PFI)

investment by private sector organisations in public sector projects

protectionism

the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports

tariff

tax on imports

import quotas

a restriction placed on the amount of a product allowed to enter or leave a country

why are tariffs imposed

1. raise tax revenue

2. protectionism

3. environmental reasons

trade blocs

agreement between states, regions, or countries, to reduce barriers to trade between the participating regions

government legislation

laws made by the government

domestic subsidies

government financial assistance provided to local industries and businesses to help them compete with foreign imports

reasons for trading blocs

1. protecting economic interest

2. makes international trade harder

3. agreeing to trade with new tariffs

impact of trading blocs

+ free trade within bloc

+ free movement of labour

+ foster strong relationships

- expensive

- only part of one bloc

- loose ability to trade outside bloc

examples of trading blocs

1. EU

2. NAFTA

3. ASEAN

disposable income

amount that a consumer has to spend after all their bills have been paid

EU and the single market

allows EU citizens to study, live, shop, work, and retire in any EU country, and for businesses to operate across borders without tariffs or other trade barriers

ASEAN

Association of Southeast Asian Nations

NAFTA

a trade agreement between Canada, Mexico, and the United States that created a free-trade zone in North America

push factors

something that happens in an existing market that forces a business to look elsewhere for survival/success

saturated markets

volume of a product or service that has been maximised meaning the business has to look elsewhere to succeed/survive.

comepetition

high level of competition in the domestic market may force a business to sell abroad

pull factor

something that happens in another market that attracts a business towards it

examples of pull factors

1. ability to spread risk

2. opportunities in overseas markets

3. ability to gain economies of scale

economies of scale

cost advantages that businesses gain from increasing their scale of production

risk spreading

the distribution of risks across multiple entities or locations to minimise the impact of a single event

off-shoring

the relocation of business processes

impact of off-shoring

+ lower cost

+ different skills

+ closer to demand

- longer wait

- management

- communication

outsourcing

hiring workers in other countries to do a set of jobs

impact of outsourcing

+ improved focus on main business aims

+ improves efficiency

+ outsourced company will be more efficient at a lower cost

- lack of control

- difficult to manage

examples of outsourcing

1. HR

2. delivery

3. labour

extending the product life cycle by selling in multiple markets

expanding into new geographic areas to reach a wider audience and maintain product demand after it reaches maturity in its original market

assessment of a county as a market

levels and growth of disposable income

dependent on current economy

ease of doing business index

index created by the world bank group

infrastructure

basic physical and organisational structures and facilities e.g. buildings, roads, power, supplies and telecommunication)

political stability

1. government change

2. conflict

3. law and order

exchange rate

the value of one currency for the purpose of conversion to another

assessment of a country as a production location

cost of production

1. labour

2. producing goods

3. land cost

4. high levels of regulation

5. minimal natural resources

location in trading bloc

offers access to a larger, integrated market with reduced trade barriers leading to lower costs and higher profits

government incentives

finance provided to a business to help when incise business to locate in a particular area e.g. tax breaks, land subsidies and low corporation tax

ease of doing business

how smoothly a business can navigate regulations, infrastructure, and other factors that impact its ability to operate and produce goods or services

natural resources

raw materials supplied by nature

likely return on investment

businesses will choose countries with higher potential ROI to maximise profits and minimise financial risk

global school ranking

a business may need a skilled labour force and one of the ways to access this is through viewing the school rankings

expense of production in another country

1. moving operations

2. hiring staff

3. setting up new production

4. buying machinery

global merger

two businesses join together permanently

impact of global merger

+ access to skills and technology

+ strengthen position in international market

- communication

- permanent

reasons for global mergers

1. spreading risk

2. entering new markets/trade blocs

3. securing resources/suppliers

4. maintaining/increasing global competitiveness

5. securing resources

the impact of movements in exchange rates

a weaker currency makes imports more expensive, while stimulating exports by making them cheaper for overseas customers to buy

joint venture

join together for a temporary agreement/project

impact of joint venture

+ skills

+ reduce competition

+ access to materials

- uneven division of work and resources

- increased liability

takeover

a business takes control of a company by buying most of its shares

SPICED

Strong Pound Imports Cheaper Exports Dearer

appreciation

an increase in currency value

competitive advantage diagram

cost leadership

strategy to become the lowest-cost producer

impact of cost leadership

+ competitive advantage

+ wide range of consumers

+ wide range of consumers

- better quality elsewhere

- consumer perception

- limited product diversification

- thin profit margins

Porters generic matrix

limitations of Porters generic matrix

- not relevant in a dynamic market

- not useful in a crisis situation

- over simplifies market structure

- companies may have a vast product range and appeal to a large range of customers e.g. Tesco

globalisation

conducting business according to both local and global consideration

global marketing strategy

setting plans that aim to achieve a specific marketing objective

globalisation

the process by which businesses or other organisations develop international influence or start operating on an international scale

3 marketing approaches

1. ethnocentric

2. geocentric

3. polycentric

ethnocentric

little to no attempt to adapt their product or service to the country they aim to sell in

polycentric

adaption to product or service to meet the needs of the country they aim to sell in

geocentric

using a combination of ethnocentric and polycentric approach

ansoff matrix

examples of cultural diversity

1. values

2. demographics

3. history

features of global niche markets

1. Clear understanding of needs of the market segment

2. Focus on quality

3. Excellent customer service

4. Expertise in the product area

5. Prioritises profit rather than market share

innovation

application and adaption of the marketing mix to suit global niches

product: global niche products often place an emphasise on quality e.g. luxury cars, watches and perfume

price: the point of niche marketing is to change higher prices by providing a product not intended for the mass market

place: businesses serving niche market are often more carful when selecting distribution channels for their product. particularly if the company is an exclusive brand. networks of exclusive dealers are a common method of selling products to global customers

promotions: strategies to promote products to global niches are often bored around the brand name and reinforcing the exclusivity of the brand and need to be more targeted than in mass market promotion

features of global niche markets

1. focused customer base

2. often defined by specific needs interests, or values, which are not fully catered to by mainstream markets

culture/social factors

1. differing tastes

2. unintended meaning

3. cultural differences

4. language

5. appropriate branding and promotion

multinational corporation

businesses that is registered in one country but has manufacturing operations/aspects in a different country

transfer pricing

shorthand for multinational corporation shifting profits to tax havens to avoid tax in developed countries

ethics

moral principles that determine how business decisions are made. considered the right thing to do

examples of ethical practices

1. ethically sourced materials

2. staff treatment

3. fair pay

4. consideration of the community

5. recycling