External Influences: Emerging markets and the global environment — OCR A-Level Business

This topic explores how businesses are affected by the global economy and the opportunities and threats presented by emerging markets. Emerging markets are countries experiencing rapid economic growth and industrialisation, such as Brazil, Russia, India, China (BRICs), and other nations like Indonesia, Mexico, and Turkey. These markets offer significant potential for expansion due to rising incomes, growing middle classes, and increasing demand for goods and services. However, they also pose risks such as political instability, currency fluctuations, and cultural differences. Understanding these dynamics is crucial for businesses aiming to compete internationally.

The global environment encompasses factors like trade liberalisation, protectionism, exchange rates, and international economic organisations (e.g., WTO, IMF). Businesses must navigate these forces to succeed in foreign markets. For example, a UK firm exporting to India might benefit from lower tariffs due to trade agreements but face challenges from volatile exchange rates. This topic links to other areas of business strategy, such as marketing, operations, and finance, as international expansion requires adapting products, managing supply chains, and securing funding.

For OCR A-Level Business, this topic is assessed in both multiple-choice and essay questions. Students must be able to analyse the impact of globalisation on businesses, evaluate the attractiveness of emerging markets, and recommend strategies for entering these markets. A strong grasp of this topic demonstrates an understanding of how external factors shape business decisions and performance.

• →Emerging markets: Countries with rapid economic growth and industrialisation, offering high growth potential but also higher risk (e.g., political instability, corruption).
• →Globalisation: The increasing interconnectedness of economies, leading to greater trade, investment, and cultural exchange. Key drivers include technology, trade liberalisation, and multinational corporations.
• →Exchange rates: The value of one currency in terms of another. Fluctuations affect export prices, import costs, and profit margins for international businesses.
• →Trade barriers: Tariffs, quotas, and non-tariff barriers that restrict international trade. Protectionism can protect domestic industries but may lead to retaliation and higher prices.
• →Multinational corporations (MNCs): Large companies operating in multiple countries. They benefit from economies of scale, access to new markets, and lower production costs, but face challenges like cultural differences and regulatory compliance.

• Identification of key business functions: marketing, production, operations management, accounting and finance, customer service, sales, and support services.
• Evaluation of the impact and importance of these functions to various stakeholder groups.
• Understanding how these functions interact within a business context.

• 💡Use real-world business examples to illustrate how different functions work together.
• 💡Always consider the impact on stakeholders when evaluating the importance of a business function.
• 💡Be prepared to apply knowledge of these functions to the specific business context provided in the Resource Booklet.
• 💡Use real-world examples to illustrate your points. For instance, mention how McDonald's adapts its menu in India (no beef) to show cultural awareness, or how Nike benefits from low-cost manufacturing in Vietnam.
• 💡When evaluating, consider both short-term and long-term impacts. For example, entering an emerging market may offer high growth but require significant upfront investment and patience before profits materialise.
• 💡Link your answer to other topics like marketing (adapting the marketing mix) or operations (managing global supply chains). This shows a holistic understanding and can earn higher marks.

• Treating business functions as isolated silos rather than integrated components.
• Failing to link the functions to specific stakeholder impacts.
• Providing generic descriptions without evaluating the importance of the function to a specific business scenario.
• Misconception: Emerging markets are all the same. Correction: Each emerging market has unique cultural, political, and economic characteristics. For example, China's state-controlled economy differs greatly from India's democratic system.
• Misconception: Globalisation only benefits large businesses. Correction: Small businesses can also benefit through exporting, using digital platforms, or forming partnerships. However, they may face greater challenges due to limited resources.
• Misconception: Exchange rate risk is always bad. Correction: A weaker pound can benefit UK exporters by making their goods cheaper abroad, while a stronger pound benefits importers. The impact depends on the business's specific circumstances.