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Unit 4- Global Marketing (IAL) revision notes 2021 (business studies)
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Business Unit - 44.3.1 Globalisation
1. Growing Economies
a) Characteristics of developed, developing and emerging economies:
There is a vast difference between the welfare and prosperity of people around the world.
People experience a comfortable existence in only a minority of countries. They have access
to good healthcare, education, housing and high quality food. They may also have spare
income to spend on non-essential items such as holidays, entertainment and leisure
activities. On the other hand, there is a vast majority of people struggling to gain enough
food, accommodation and clean water.
❖ Developed economies: Most people experience a good standard of living. They live
with the following characteristics:
● High income levels: In developed economies, the average income level is relatively
high.
● High literacy rate: The majority of people in developed countries can read and write.
● High life expectancy: People in developed countries expect to live for over 60 years.
● Good infrastructure: The majority of people in developed countries have access to
schools, colleges, healthcare and varying degrees of welfare support.
● High industrialized: Developed economies tend not to rely on the primary sector and
rely more heavily on the tertiary sector.
● Low levels of unemployment: Most people in developed countries can find work.
There are laws to protect employees from being exploited and working conditions are
generally safe.
❖ Developing economies: There are more than 200 developing or less-developed
countries in the world.
● Low income levels: Income levels in developing countries are low or lower middle.
● Low literacy rate: In some developing countries there are not enough resources to
educate the entire population.
● Low life expectancy: People in developing countries are not expected to live as long
as those in developed countries.
● Poor infrastructure: Developing countries have a lack of roads, railway networks,
schools, hospitals and production facilities, such as factories.
● Reliance on the primary sector: Many developing countries rely on the primary sector
for employment, exports and income.
● High Unemployment: There tend to be few employment opportunities in developing
countries. This means that levels of unemployment are often very high.
● High population growth: Many developing nations have high rates of population
growth.
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, ❖ Emerging economies: An emerging economy could be defined as one with rapid
economic growth. Investors like emerging markets since they are likely to grow more
quickly than more mature markets. Therefore, a business should be able to increase
profit and dividends. There are two different groups of emerging economies. BRICS
(Brazil, Russia, India, China & South Africa) and MINT (Mexico, Indonesia, Nigeria &
Turkey).
Emerging markets are likely to increase average incomes, this allows the customers
to spend more, on both imports and domestically produced goods and services. This
gives them increased market power which allows businesses to compete
internationally.
b) Growing economic power of Asia, Africa and other parts of the world:
Most of the BRICS and MINT countries have experienced strong growth over the past few
years. This growth is increasing the overall economic power of many of the countries in Asia,
Africa and other parts of the world.
The strength of manufacturing in Asia looks set to continue in the near future:
1. China has very efficient suppliers and excellent infrastructure, allowing for further
cost-effective growth.
2. It has access to lower-cost labour through South East Asia, including Myanmar and
the Philippines.
3. Chinese and other Asian consumers are spending more each year. This increases
demand and reinforces local production and distribution.
Other emerging markets, such as Central and South America and Africa, are creating big
international companies that increasingly, are challenging the dominance of firms from
developed regions. However, because of China’s dominance in manufacturing, these other
regions may be less likely to follow this route to development. They may find new ways to
grow and develop in the near future.
According to the World Bank, the largest economies in the world include the USA, Japan,
Germany, and the UK.
c) Implications of economic growth for individuals and businesses.
Consumers in emerging markets may be buying more goods and services, both from
domestic and companies and from those in more developed economies. This may make the
emerging markets even more attractive to new businesses in the market.
❖ Trade opportunities: As the economy grows, consumption may also be growing.
This is good for firms looking to invest or sell their product and services.
So with growth it is likely that Disposable Income is also rising (Individuals having
more money to spend) increasing overall demand for goods and services. Demand is
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, likely to become elastic, providing greater opportunities for increased revenues and
profit. These goods and services can be produced domestically or imported from
abroad.
● Individuals would benefit from increased international trade. They may be
able to buy cheaper goods from overseas where production costs are lower.
● Increasing international trade also brings more choice for consumers. There
is likely to be a large variety in quality, designs and products range.
❖ Employment patterns: In addition to looking at growth rates, a business might want
to assess the employment patterns across an economy. Employment is one of the
most important indicators of the health of an economy.
The employment rate gives an idea of the jobs that are being gained or lost across
an economy. The level of unemployment can reveal a lot about an economy. If
people are unemployed they may not have much money to spend or save, therefore
a business could realize that it is not a good time to export in that particular
geographical area.
Developed countries tend to have lower levels of unemployment. Emerging
economies are seeing unemployment rates fall as jobs are created quite quickly.
d) Indicators of growth.
A business needs to be able to recognise where an economy is likely to grow to find trade
opportunities or investments.
❖ Gross domestic product (GDP) per capita: This is a measure of economic activity.
It includes all of the goods and services produced in a year, divided by the number of
people in the country. However, a business is interested in the trend or direction in
GDP per capita.
❖ Human development index: It combines statistics on life expectancy, education and
income for any particular country into a single rankable value.
● Life expectancy: This is an average number of years a person can expect to
live. It is an important indicator of the health of a nation as well as the quality
of its healthcare and social systems.
● Mean years of schooling: These help to assess the average amount of
education a 25-years-old person might have had. However, it does not
consider the nature or quality of that education.
● Gross National Income per capita (GNI): This calculation illustrates the
relative wealth of the population.
2. International trade and business growth.
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, What is international trade ?
It creates opportunities for business growth, increases competition and provides more
consumer choice. In more detail:
- Allows countries to obtain goods that cannot be produced domestically.
- Allows countries to obtain goods that can be bought more cheaply from overseas.
- Helps to improve customers' choices.
- Provides opportunities for countries to sell off surplus commodities.
There are two different types of trade:
● Visible trade:Involves trade in physical goods.
● Invisible trade: Involves trade in service.
a) Exports and imports.
Businesses that trade internationally export and import goods and services. Exports and
imports generate revenue for businesses in different countries.
Exports Imports
The easiest mode of entry into the Imports are the goods and services that are
international market is through exporting. A brought into one country from another.
firm continues to produce in its home
market but exports some of what it makes Many countries try to limit the importation of
to a foreing market. goods by placing trade barriers in the way.
These barriers often involve tariffs, which
Exporting has become easier due to trade are taxes that are imposed on imports.
liberalisation. This has reduced tariffs and
quotas that may otherwise have limited A firm can export or import directly. It can
overseas sales. sell and distribute its own products, usually
by hiring someone to be its local agent.
Exporting often involves physical goods but However, it can also operate indirectly. It
may also include services or invisible can get another person or firm to prepare
exports. documents and take on all of the
responsibility for selling and distributing the
Most developed economies in the world rely products for them.
on the sale of invisible items to generate
export earnings. This is because in most However, this does not mean that exporting
developed countries, production is and importing are totally rik free.
dominated by the tertiary sector.
b) Implications of increasing specialisation by countries and businesses.
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