HNC/HND Unit 1 2011-12
Global Factors
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You are required to produce a presentation
which addresses the following:
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Discuss the significance of international trade
to UK organisations.
• Analyse the impact on organisations operating
in the UK of the growing economic, social and
political influence of the BRIC countries as well as
other global factors such as global warming, third
world poverty and global financial stability.
• Evaluate the impact to UK based organisations
of two policies of the European Union one of which
must be the existence of the Eurozone.
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To be able to explore the importance and value of
international trade to UK organisations
To be able to analyse the impact on organisations
operating in the UK of the growing economic,
social and political influence of the BRIC countries
as well as other global factors such as global
warming, third world poverty and global financial
stability.
To be able to evaluate the impact to UK based
organisations of two policies of the European Union
one of which must be the existence of the
Eurozone.
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Absolute advantage
◦ A nation has an absolute advantage in producing a good
when it produces more with the same fixed resources
than any other country
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Comparative advantage
◦ The advantage in the production of a product of one
nation over another when that product can be produced
at a lower opportunity cost
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Opportunity Cost
◦ The products that must be sacrificed to facilitate
production of a given product
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International Trade is the exchange of goods
and services between countries
◦ Case study: Open Hospitality
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Import is the purchase of a good or service
made in another country
Export is the sales of a nationally made good
or service to another country
◦ Case study: Lila Paws
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Allows the availability of a much wider range of
products and services than those available in one
country
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Allows nations to exploit their natural resources
more effectively
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Allows more effective use of resources such as
technology.
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Essentially an extension of reasons for national
trade
◦ Case study: Tesco
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Market Development
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New market segments
Reduce risk and dependency on one market
Saturation of domestic market
Case study: GR Wright & Sons
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Product Development
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Economies of scale
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Increase Product Life Cycle
◦ Source products overseas
◦ Raw materials
◦ National market too small
◦ Improve productivity
◦ Case study: Fab & Fix
◦ Scaled launch of products in different markets
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Definition: The balance of payments is a
record of one country’s trade dealings with
the rest of the world
2 main areas
◦ Current account- trade in goods(visible trade) and
services (invisible trade)
◦ Transactions in assets and liabilities
 Direct investment, shares & other assets
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Why do you think nations still put barriers to
trade?
◦ Protect jobs
◦ Some countries may engage in unfair trade
practices
◦ “The national interest”. National security, strategic
industries
◦ Safeguard infant industries
◦ Improve balance of payments/trade
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Tariffs
◦ Surcharges on the price of imports
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Quotas
◦ Restrictions on quantities
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Exchange controls
◦ Limit access to foreign currency to purchase imports
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Export subsidies
◦ Payments made to encourage exports
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World Trade Organisation
◦ Created in 1995 and succeeded the General
agreement on tariffs and trade (GATT)
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Administrates trade agreements
Acts as forum for trade negotiations
Settles trade disputes
Reviews national trade policies
Assists developing countries in trade policy issues
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Free Trade Areas
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Customs Unions
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Common market
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Economic Union
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NAFTA
APEC
COMESA
EEA
◦ Unification of customs and trade policies
◦ Mercosur
◦ Free movement of labour and capital
◦ European Union
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For the last 100 years, USA and the EU have held
the most economic power globally, followed by
Japan and other South East Asian countries.
Countries that have been growing substantially in
economic terms are known as the BRIC countries:
Introducing Brazil – Brazil’s economic power
Introducing India – India’s economic power
Introducing Russia – Russia’s economic power
Introducing China – China’s economic power
Economic power leads to political power. Check it
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Population size
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GDP and Export rates
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Purchasing power parity (PPP)
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Foreign investment
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State ownership of firms
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Barriers to market entry (duty, competition, etc.)
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Analyse the impact on organisations
operating in the UK of the growing
economic, social and political influence of
the BRIC countries as well as other global
factors such as global warming, third world
poverty and global financial stability.
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Consider the impact to organisations in the
UK of one of the following:
◦ Global warming
◦ Third world poverty
◦ Global financial (in)stability
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Evaluate the impact to UK based
organisations of two policies of the
European Union one of which must be the
existence of the Eurozone
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European Monetary Union
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Free Movement of Labour within the EC
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Common Agricultural Policy
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Environmental Policy
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Transport Policy
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BBC News Global Economy
◦ http://www.bbc.co.uk/news/special_reports/global
_economy/