4.1

• The growth rate of a country is measured by the annual change in its gross domestic product (GDP)
• Emerging economies are economies that have increasing growth rates but relatively low income per head (per capita)

  • E.g. India, China and Brazil are considered to be emerging economies (BRIC)
• UK growth tends to be lower than emerging economies

  • A key factor why emerging economies are growing at a faster rate than the UK economy is because of the growth of the manufacturing sector
• • The UK economy has seen a decline in the manufacturing sector as businesses choose to manufacture in emerging economies due to lower labour costs and access to raw materials
• • China is the world’s largest manufacturing economy and exporter of goods
• Globalisation is the economic integration of different countries through increasing freedoms in the cross-border movement of people, goods/services, technology & finance
• The past twenty years has been characterised by rapid globalisation and the growing economic power of less economically developed countries
• The integration of global economies has impacted national cultures, spread ideas, and speeded up industrialisation in developing nations
• • Emerging economic powers of countries within Asia, Africa and other parts of the world include
  • BRICS: Brazil, Russia, India, China and South Africa
  • MINT: Mexico, Indonesia, Nigeria and Turkey
• • Emerging economies have a growing middle class with increasing incomes which allows their citizens to spend more on domestic goods and imported goods from abroad
  • This increases the profitability of international firms who sell their goods and services in these emerging economies 
• Impact of economic growth on business

  • Potential for increased profits as businesses enter new markets and gain more customers
  • Customers are likely to have income elastic  demand leading to increased sales and revenues/profits 
• Impacts of economic growth on businesses

  • Reduced costs of production as businesses can benefit from lower labour costs and cheaper raw materials in emerging economies 
• Impacts of economic growth on businesses

  • Increased trade opportunities as demand for goods and services increases
• Impacts of economic growth on businesses

  • Increase in investment because as the economy grows, businesses want to expand so they are more likely to invest
  • There may also be an increase in foreign direct investment (FDI) as businesses want to benefit from growing economies
• Impact of economic growth on individuals

  • Increase in investment because as the economy grows, businesses want to expand so they are more likely to invest
  • There may also be an increase in foreign direct investment (FDI) as businesses want to benefit from growing economies
• Impact of economic growth on individuals

  • Increased average incomes as individuals now have rising incomes due to employment which increases the standard of living 
• Impact of economic growth on individuals

  • Access to quality public services as more tax revenue is generated. The government can improve the quantity and quality of public services
• Four key indicators of growth: GDP per capita, Literacy, Health, and HDI. A business will consider these indicators when deciding where to invest for future expansion.
• Indicators of growth - GDP per capita

  • GDP per capita is calculated by taking the total output (GDP) of a country and dividing it by the number of people in that country
  • High GDP per capita is associated with a high standard of living
  • It is important to look at the GDP per capita over a period of time to see whether there has been an improvement
  • GDP per capita can also be a useful indicator to compare the growth in two countries
• Indicator of growth -Health 

  • The health of a countries’ citizens is important to businesses who want to invest in emerging economies as this will have an impact on the quality of the workforce 
  • Key indicators to consider are average life expectancy, infant mortality rate , access to healthcare and access to clean water
• Indicator of growth - Literacy

  • Literacy refers to the percentage of adults within an economy who can read and write
  • According to the OECD’s 2016 International Adult literacy survey, the differences in average skill levels among OECD countries explain 55% of the differences in economic growth
  • Information about literacy rates is important as this will determine the quality of the workforce and also the customers they will be selling to
• Indicator of growth - Human Development Index

  • Human Development Index (HDI)  combines the factors of life expectancy, education and income to determine the quality of development of citizens within a country
  • Specifically, HDI looks at; life expectancy , mean years of schooling and gross national income per capita (GNI)
  • It was created by the United Nations and is measured between 0-1 (1 being the highest)
  • The problem with using HDI as a measure of development is that
  • It does not account for inequalities within a country
  • There is a lack of reliable data in some countries
• Imports are goods and services bought by people and businesses in one country from another country

  • In 2022, the UK’s biggest import was cars valued at approximately £3.25 billion
• • Exports are goods and services sold by domestic businesses to people or businesses in other countries
  • In 2022, China’s biggest export was smartphone manufacturing valued at approximately $21.4 billion
• • Exports generate extra revenue for businesses selling their goods abroad
• • Imports result in money leaving the country which generates extra revenue for foreign businesses
• Specialisation occurs when a country/business decides to focus on producing a particular good/service

  • Businesses specialise when they focus on a specific goods/services e.g. Apple focus on the production of technological products and services
  • Countries can also specialise on a narrow range of goods and services e.g. Ghana specialises in cocoa and gold 
• Specialisation can increase the quantity and quality of goods and services. This has many benefits including; 

  • Lower unit costs due to Economies of scale  as costs are spread over a large output 
  • Lower unit costs allow the business to lower prices for consumers leading to more sales
  • If businesses do not lower their selling price, then due to the lower costs they are able to to increase their profit margins
  • Any excess output can be sold abroad as exports 
• • When businesses specialise, it can also help them to gain a competitive advantage
  • If they can increase the value added on their goods/services, this can help to gain an edge over their competitors
  • An example of a competitive advantage includes having access to local markets, resources and materials that competitors do not have access to
• Foreign Direct Investment (FDI) is investment by foreign firms which results in more than 10% share of ownership of domestic firms
• • Businesses typically grow through FDI as mergers, takeovers, partnerships or joint ventures are created with a foreign business in order to enter new markets
  • E.g. EE was formed in 2012 as a joint venture between the French company Orange and the German company T-Mobile, allowing greater share of the UK market 
• • Countries benefit from FDI as this can lead to
  • Increased economic growth as there is an inflow of money into the country
  • Increased job opportunities as businesses expand operations
  • Access to knowledge and expertise from foreign investors
• • Inward FDI occurs when a foreign business invests in the local economy
  • E.g. In 2017, Kenya opened the Kenya Standard Gauge Railway line built by Chinese investors 
• • Outward FDI occurs when a domestic business expands its operations to a foreign country
  • E.g. Dyson has moved its manufacturing from the UK to Malaysia, China and the Philippines 
• Trade liberalisation is the removal or reduction of barriers to trade between different countries
• Drawbacks of Trade Liberalisation

  • Domestic firms, in particular, Infant industries may not be able to compete against international firms
  • Some industries may be subject to dumping as businesses abroad may sell excess products at unfairly low prices
• Benefits of Trade Liberalisation

  • Increased international trade allows businesses to increase their market size
  • This leads to increased output and countries can benefit from economies of scale 
  • Freer trade helps businesses to reduce costs as imported raw materials and components can be sourced more cheaply
• A factor contributing to increased globalisation - Political change

  • Changes in the government of a country can influence the country's attitude to trade
  • E.g. China joined the World Trade organisation in 2001 which led to a significant increase in exports
• A factor contributing to increased globalisation - Reduced cost of transport and communication

  • Economies of scale due to innovation in containerisation on large ships has reduced business costs
  • Technological advancements due to the internet/mobile technology have improved made it easier for buyers and sellers to connect with one another 
• A factor contributing to increased globalisation - Increased significance of transnational companies

  • A transnational company is a business that operates in more than one country
  • They will have their headquarters in one country but have other branches in other countries
  • E.g. Nike has its headquarters in Oregon, United States. As of 2022, they have 1046 retail stores throughout the world
  • With increasing numbers of transnational companies operating globally, there is an increased pressure by countries to engage in free trade