Business Unit 3

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  • Created on: 23-05-16 10:45
Why do firms want to extend the product life cycle?
They want to increase revenue from sales and keep the product alive. EXP: VW Beetle sold in South America.
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How do firms extend the product life cycle?
- Marketing - Lower prices
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Why do firms trade internationally?
More consumers to sell to (gain more market share), oppurtunity for large market growth.
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Backwards innovation
Selling older products in developing countries. Such as selling wind up radios across Africa.
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Advantages of trade liberalization
Free trade, relationships improved
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Disadvantages of trade liberalization
Large competition, decrease income for the economy
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Advantages of a trading bloc
Free trade, increases imports and exports, increases foreign direct investment
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Disadvantages of a trading bloc
Expensive to be a part of, distortion of trade
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What are the implications for firms of opening up new markets?
May be risky as it may not be able to compete, yet it does spread risks.
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What is the role of the WTO
The only global international organization dealing with the rules of trade between nations. The goal is to help producers of goods and services, exporters, and importers conduct their business.
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Evaluate the WTO’s effectiveness and limitations
Pros Promotes free-er trade, raises world output. Cons Industrialized countries benefit more than poorer countries, doesn't allow the participation of developing countries.
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What is the infant industry agreement?
An economic rationale for trade protectionism.States that developing countries are justified to put tariffs on imports if they are seeking to develop new industries.
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What are the problems for a UK firm exporting to India and China?
High tariffs for Chinese and Indian consumers so less sales will be made.
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How do China’s manufacturing exports threaten UK firms?
They are able to produce goods at a very competitive price (cheap labour and subsidised electricity)beating UK businesses, putting them at threat of being put out of business.
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The impact on the rise of Indian call centre.
Less jobs available in the UK for call centres as the have been outsourced. Although many are returning back to UK consumers dislike them.
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How is China using its wealth to invest overseas?
They are offering loans to countries such as USA to pay off their debts which will result in interest for the country.
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How do pay and working conditions vary in different countries?
Minimum wage varies around the world with developed countries being very high, whereas underdeveloped countries have a much lower or non existent minimum wage.
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How do different countries have different cultures and tastes?
Different people from different families were raised differently to prefer certain things. For instance Indian families are raised into having very flavoursome foods with different spices, whereas in Japan families are raised into eating lots of fish
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What are the purposes of tariffs?
The government benefits by collecting tax revenues.Tariffs are used to restrict trade, as they increase the price of imported goods and services, making them more expensive to consumers, benefiting local businesses.
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What are the purposes of quotas?
Quotas result in domestic and foreign producers benefiting by receiving higher prices.
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What are the adv and dis of global strategy?
Adv: You are open to a lot more potential customers. Dis: Lots of market research needs to be done. The expansion may be a flop and a waste of money and time.
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What are the adv and dis of global localisation?
Adv: More likely to succeed in that market as you understand the wants and needs. Dis: Lots of research will be needed. More costs for production as more different products will be produced instead of just the one.
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What are the adv and dis of expansion internationally through merger?
Adv: A quick method of growth/market share. It is cheaper than a takeover Dis: You aren’t achieving potential profits. A clash in culture between the two businesses.
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What are the adv and dis of expansion internationally through takeover?
Adv: Achieving full profits. You have full control over the business. Quick method of growth/market share. Dis: It would be very costly to takeover another business.
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What is a foreign distributor?
An agent who sells directly for a supplier and maintains an inventory of the supplier's products. A foreign distributor buys the manufacturer's product for resale to middlemen or final buyers.
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What is a local agent?
A person or firm authorized to act as agent for one or more property insurance companies in a particular community and usually paid by commission.
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What benefits can multinationals bring to countries?
Can provide a lot of jobs for their economies, creating a positive multiplier effect. They can help put a country on the map for certain jobs.
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How might multinational exploit countries?
They may abuse countries who have a low minimum wage or none to produce their goods at the cheapest costs. They can also bully countries into allowing them to do what they want, as they may threaten to leave and move elsewhere.
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Evaluate the multinationals impact on living standards
Living standards will increase as they will have more disposable income, although this depends if the multinational is ethical and pays the workers fairly.
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Evaluate the multinationals impact on employment
Employment will increase as they will provide more jobs to that country, although it may not always be a large amount of jobs.
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Evaluate the multinationals impact on the economy
The economy will grow as the multinational will result in a positive multiplier effect. Although if they exploit the country with paying very little wages, it would have a very little impact.
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What is specialization?
Where a business or area focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency. A concentration of productive resources in a particular area of the economy based on comparative.
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What is a comparative advantage?
An advantage a business has that enables it to perform better than its rivals.
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What is a stakeholder friendly firm?
A firm which considers all the shareholders and takes them into consideration when making business decisions, making everyone happy.
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What is a shareholder friendly firm?
A firm which only considers the shareholders and making most profits for them. They do not take into consideration other stakeholders when making decisions, but primary on profits.
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What are potential conflicts between different stakeholders?
Owners generally seek high profits and so may be reluctant to see the business pay high wages to staff.
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How do pay and working conditions vary in different countries?
Minimum wage varies around the world with developed countries being very high, whereas underdeveloped countries have a much lower or non existent minimum wage.
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How do different countries have different cultures and tastes?
Different people from different families were raised differently to prefer certain things. For instance Indian families are raised into having very flavorsome foods with different spices.
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What is a tariff?
A tax on the imports of goods and services.
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What is a quota?
A government-imposed trade restriction that limits the quantity of a particular product or service that can be exported or imported during a particular time period.
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What is a foreign distributor?
An agent who sells directly for a supplier and maintains an inventory of the supplier's products. A foreign distributor buys the manufacturer's product for resale to middlemen or final buyers.
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What is a local agent?
A person or firm authorized to act as agent for one or more property insurance companies in a particular community and usually paid by commission.
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What is a trade bloc?
A type of intergovernmental agreement where regional barriers to trade, (tariffs and non-tariff barriers) are reduced or eliminated among the participating states.
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What is globalization?
The growing intergration and interdependence of nations, both in business/economic and social terms.
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Can multinationals be controlled?
They can be controlled by laws/legislations which prevent them doing what they want. Pressure groups also help control multinationals by making consumers aware of their unethical behavior.
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What firms use unsustainable resource and create degradation of the local environment?
In Egypt they grow potatoes using a non renewable water sources.
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How do multinationals influence foreign governments?
Multinationals can threaten a country's government by suggesting they would move elsewhere if they didn’t get their way, meaning a huge increase in unemployment and a negative multiplier effect.
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What is global localisation?
A product or service that is developed and distributed globally, but is distributed/changed to accommodate the user or consumer in a local market.
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What is global strategy?
When a business brands its goods or services the same throughout the world.
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Other cards in this set

Card 2

Front

- Marketing - Lower prices

Back

How do firms extend the product life cycle?

Card 3

Front

More consumers to sell to (gain more market share), oppurtunity for large market growth.

Back

Preview of the back of card 3

Card 4

Front

Selling older products in developing countries. Such as selling wind up radios across Africa.

Back

Preview of the back of card 4

Card 5

Front

Free trade, relationships improved

Back

Preview of the back of card 5
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