Theme 4 business

• Growth rate of a country 


  measured by annual change in GDP
• Emerging economies


  increasing growth rate but low income per capita. Examples China and India.
• Globalisation

  Economic integration of different countries. Through increasing freedom in cross border movement of people, goods/services, technology and finance
• Countries with emerging economic power

  BRICS= Brazil, Russia, India, Canada, South Africa

  MINT= Mexico, Indonesia, Nigeria, Turkey
• 2 indicators to asses the economic growth of emerging economies (businesses consider this when investing)

  1. GDP per capita = total output GDP of a country/ number of people in that country. High GDP per capita associated with high standard of living.
  2. Health= impacts the quality of the workforce. Indicated by life expectancy, infant mortality rate, access to healthcare and clean water
• Another 2 indicators to asses the economic growth of emerging economies (businesses consider this when investing

  1. Literacy= percentage of adults who can read and write. Can determine the quality of workforce and type of customers they are selling to.
  2. Human Development Index (HDI)= combine life expectancy, mean year of schooling and gross national income per capita (GNI). Created by United Nations measured between 0-1( 1 being highest). Disadvantage- Doesn't account for inequality within countries, lacks reliable data in some countries
• The impact of economic growth for business

  • Potential increased profit- new market and customers
  • Customers likely to have income elastic demand - increase sales and profit
  • Reduced cost of production
  • Increased trade opportunities
  • Increase in FDI
• The impact of Economic growth for individuals

  • Reduce unemployment
  • increase average incomes- more spending
  • Access to quality public service
• Imports

  Goods and services bought by people and businesses in one country from another country. Money leaving country, extra revenue for foreign businesses.
• Exports

  Goods and services sold by domestic businesses to people and business other countries. Money coming into the country, extra revenue.
• Specialisation

  When a country/ business decides to focus on producing a particular good/ service
• Foreign Direct Investment (FDI)= foreign firm investing in a domestic firm for more than 10% ownership or a foreign firm setting production in another country.
• Trade liberalisation

  Reduction or removal of barriers to trade between different countries
• Protectionism

  Government seeks to protect domestic industries from foreign competition
• Tariff

  Tax placed om imported good from other countries. Increases prices on imported goods which helps to shift demand from foreign business to domestic business. Domestic companies pay the tariff.
• Import Quotas

  Is a government imposed limit on the amount of a particular product allowed into a country
• Other Trade Barriers

  Government legislation= imposed laws to restrict certain imports

  Domestic subsides= payment to domestic markets to help lower cost of production.
• Trading bloc

  A group of countries that form an agreement to reduce or eliminate protectionist measures between each other.
• 3 largest trading blocs

  EU (European countries),ASEAN (southeast Asian). NAFTA now called USMCA ( Canada, Mexico, United States)
• Customs union

  A free trade area with common external tariffs for countries outside the trade bloc. Example is ASEAN
• Single market

  A group of countries that allow for free movement of labour ( workers). Example is EU.
• monetary union

  A single currency or currencies which are used within the nations. Example EU with Euros.
• Free trade area

  A group of countries that agree to remove tariffs, quotas and other barriers. Example ASEAN.
• Global marketing strategy


  Process of planning, producing, placing and promoting a business's product or service to the global market
• Glocalization 


  A strategy where businesses aim to reach customers globally and also take into consideration the needs of the local market
• Marketing approaches

  When a business expands its operations to other countries or regions
• Ethnocentric approach 


  Goods/services are sold without adaptation (assumes what was a success story in own market can be replicated)
• Geocentric approach

  Maintain and promote global brand name, but tailor product to local markets
• Polycentric approach

  Businesses adapt their marketing strategy by tailoring their product to the local market. Company treat each country as a unique market and develops a customised marketing mix for each market.
• Advantages of the ethnocentric approach

  .Businesses can benefit from economies of scale as the product is standardised and produced on a large scale

  .Costs are also lower as there is no investment into product development to adapt products for different markets
• Disadvantages of ethnocentric approach

  .The business could potentially lose sales as the product is not tailored to the needs and wants of markets overseas

  This approach can lead to cultural insensitivity and may not resonate with local customers in other countries
• Advantages of Polycentric approach

  .Sales are likely to increase as the product is tailored to meet the needs of customers

  .This helps to develop brand loyalty in overseas markets
• Disadvantages of polycentric approach

  .Product development to adapt the product may increase average unit costs

  .There will also be additional costs in market research to find out about the market.
• Advantages of Geocentric approach

  .Sales are likely to increase as the product is tailored to meet the numbers of customer
• Advantages of Geocentric approach

  .sales are likely to increase as the product is tailored to meet the need of customers

  . This helps to develop brand loyalty in overseas markets
• Disadvantages of Geocentric Approach

  .There will be costs associated with the product development and menu changes required to meet the needs of the local market
• Emerging economies with power : features 


  .growing middle class that have increasing income. Can spend more on domestic and imported goods.

  .increasing market power over western economies

  .Foreign firms that sell good and services in these economies and domestic can increase profitability..
• Economic growth= change in the quantity of goods and services produced in a country yearly.
• Impact of economic growth for business

  • Potential increased profits- new markets, more customers. the customers have income elastic demand-demand highly responsive to change in income. Positive able to spend more on luxury goods, increased sales, revenue, profits
  • Production costs are low: labour low costs, cheaper raw material
  • increase trade opportunities: demand for products increase
  • increased investment: FDI. economy grows business want to invest to expand
• Impact of economic growth for individuals

  • Reduced unemployment= more demand, more labour to increase out
  • Increase average income = rising income because of employment. Increase standard of living
  • Access to quality public services= more tax revenue, government can invest in improving quantity and quality of public services.