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Question 1

Push factors (forcing business to consider selling abroad)

Answer 1

• High levels of domestic competition
• Saturated markets with only low growth opportunities

Question 2

Saturated markets as a push factor

Answer 2

A saturated domestic market
means that a business or group of businesses has sold a product to just about everyone who will buy
one

E.g Chinese smartphone manufacturers; Apple, Samsung, Huawei and LG all now sell to
overseas markets

Question 3

High competition in home market (push factor)

Answer 3

High levels of competition may force a business somewhere with less competition

For there example there is a buoyant market unusual food imports into other countries

Question 4

pull factors
(towards another country)

Answer 4

Factors that may attract a business to sell abroad

1. Significant opportunities to sell to overseas markets
2. Ability to spread risk across more markets
3. Ability to gain economies of scale

Question 5

Opportunities in overseas markets (pull)

Answer 5

Exporting is one way for a
business to increase sales and
this can contribute to increased
profits

A business selling in overseas
markets will be able to grow
faster than those limited to
domestic markets

Question 6

Ability to spread risk (pull)

Answer 6

By selling in other countries the
business is less vulnerable to
changes in the domestic economy

Different countries may have
different growth rates at any time,
selling in multiple countries can
give a balanced portfolio of growth

Question 7

ability to Gain EOS (pull)

Answer 7

Exporting is an excellent way to
drive production to a level that
delivers economies of scale,
particularly if the product or
service is standard across export
markets with little or no need for
adaptation.

Question 8

Offshoring

Answer 8

Offshoring is when a business
relocates some of its production
process to another country

This may be to cut costs in terms
of labour pay rates

Question 9

Outsourcing

Answer 9

This is where a business function,
such as payroll, is contracted out to
a third party business.

This third party business may or
may not be located abroad

Question 10

Outsourcing Examples

Answer 10

Production - This means sending some of the production to other companies to complete

Payroll - Payroll is the most common task that companies outsource to other businesses who specialise in this task. Services include weekly/monthly payroll
and will involve the completion of
the complex HMRC paperwork

purchasing - By outsourcing the IT function the business can obtain the
latest technology and suitably
skilled personnel

Delivery - Larger businesses might prefer to contract a major delivery firm rather than maintain their own
fleet.

Question 11

Assessment of a country as a market

Answer 11

1. levels and growth of disposable income
2. ease of doing business
3. infrastructure
4. political stability
5. exchange rate

Question 12

Disposable income -market

Answer 12

Disposable income is the amount
that a customer has to spend after
all their bills have been paid

This helps a business to see if the
citizens of the country will be able
to afford the products that they
want to sell there

Question 13

Ease of doing business-market

Answer 13

The ease of doing business index
is an index created by the World
Bank Group.

Higher rankings (a low number)
indicate better, usually simpler,
regulations for businesses and
stronger protections of property
rights e.g. patents

Question 14

Infrastructure - market assesment

Answer 14

Infrastructure can mean road,
rail and transport. Without this a
business cannot deliver to its
customers on time

Infrastructure can also mean
telecommunications, without
this a business cannot communicate with its suppliers and its customers

Question 15

political stability - market

Answer 15

The world bank has a series of
worldwide governance
indicators, one of which is the
political stability and absence of
violence and terrorism

if a county is politically unstable. Each new government may seek
to impose a series of laws which
will need to be adhered to e.g.
environment laws, employment
laws which could have an impact
on the business

An aggressive takeover of a
government, a coup could lead
to riots, protests and looting or a civil war

Question 16

Exchange rates - market

Answer 16

• Strong
• Pound
• Imports
• Cheaper
• Exports
• Dearer

Question 17

Assessment of a country as a production location

Answer 17

Costs of production

Skills and availability of labour
force

Infrastructure

Location in trade bloc

Government incentives

Ease of doing business

Political stability

Natural resources

Likely return on investment

Question 18

Cost of production

Answer 18

UK - minimum wage is high , production of goods are expensive , most raw materials are imported …

main cost of production is the wages of employees

Question 19

Skills and availability of labour - production

Answer 19

unemployment rates - A large unemployed population
means a large pool of candidates
for every position . this depends on the skill set required.

A business may need a skilled
labour force and one of the ways
to assess if a country has this is
to look at the global school
rankings

Comparative advantage is the idea
that some countries can make
products better than others.
This may be down to a range of
factors such as skills of the locals,
availability of raw materials etc.

Question 20

Infrastructure- production

Answer 20

A business will need to assess if the
country have adequate road, rail, sea and air transport systems so goods can be exported and imported easily

The business will also need to know if the country have suitable buildings and

The country have a reliable power system e.g. in Ethiopia power cuts are a daily occurrence

Question 21

Location in trade bloc - production

Answer 21

Some businesses may start production in a country as a way into a trade bloc.

For example Honda, Nissan and Toyota all have manufacturing plants in the UK to gain access to the lucrative rich and developed EU market for cars

Question 22

Government incentives - production

Answer 22

Tax incentives are given to
companies in the hope that foreign
investors will bring in capital to
support economic development
and create local employment

Question 23

Ease of doing business - production

Answer 23

World Bank – EODB graphic

EODB rank will help a business
to find out the time period
required to start a business and
the number of paperwork
obstacles to be overcome

EODB higher rank implies that
the business could start quickly
reducing start-up costs and this
may be a good reason to choose
a location

Location may however depend
on access to raw materials

The business may require high
skills and good infrastructure
rather than cheap labour which
may effect the decision of where
to produce

Question 24

natural resources

Answer 24

You may need raw materials from that country If you don’t locate there you may have to import which could be expensive This will push up the costs of your production this will reduce your profits

Question 25

Likely return on investment

Answer 25

If a business sets up production in another country this is expensive
* Moving factory
* Setting up new production
* Buying machinery
* Hiring staff
* Moving operations such as HR
* Hiring key staff such as managers with local knowledge (language)
* Investors will need to know that these expenses will be returned with
profits

Question 26

Joint venture defined

Answer 26

A joint venture is a commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities, this is only a temporary arrangement

(two business come together to collaborate on one project, but will still remain separate businesses)

Question 27

Merger defined

Answer 27

A merger is when two businesses come together and become one, on a permanent basis

Question 28

Spreading risk and joint ventures

Answer 28

Often a business might decide to enter into a joint venture to share the risk, perhaps with a business already trading in that country

Risk can also be reduced by entering into a more long term arrangement with a merger

Question 29

spreading risk and mergers

Answer 29

risk can also be reduced by entering into a more long term arrangement with a merger

e.g TATA bought Jaguar and Land Rover - this gave the company clout necessary to compete internationally

Question 30

Advantages of joint ventures

Answer 30

• Access to knowledge and resources such as capital , staff and technology
• Access to new markets or greater distribution reach
• shared exposure to risks, financial responsibility and workload

Question 31

Disadvantages of joint ventures (risk)

Answer 31

A large number of joint ventures fail because of the many risks involved and the complexity of integrating operations and work culture of two different companies

50% f joint ventures fail

Question 32

what Is brand acquisition

Answer 32

when a business buys or merges with another business

A business obtains another business to potentially acquire the brand name

Question 33

Global competitiveness

Answer 33

joint venture or merger may be essential for a business to remain competitive

Question 34

Exchange rates

Answer 34

Exchange rates are defined as the value of one currency in terms of
another

Question 35

SPICED

Answer 35

strong
pound
imports
cheaper
exports
dearer (more expensive)

Question 36

Appreciation and exports

Answer 36

If the £pound appreciates, gets
stronger against other currencies
then UK exports to other
countries will be more expensive

This may mean that the business
that exports, out of the UK, has
lower sales or may have to
reduce their prices in other
countries to keep demand levels
up

Question 37

Appreciation and imports

Answer 37

As the pound appreciates – gets
stronger – against other currencies
then imports to the UK will be
cheaper

Businesses that sell imports will
have lower costs, and therefore
may enjoy higher profits

Question 37

Depreciation and exports

Answer 37

If the £pound depreciates - gets
weaker against other currencies
it will make exports to those
countries cheaper

The business can decide to
either:
* Keep prices to other countries the
same and enjoy the higher profit
* Lower prices to other countries
and gain market share and more
revenue from extra sales

Question 38

Depreciation and imports

Answer 38

If a business imports while there
is depreciation it will make them imports dearer

If the imports are raw materials
to make other products in the
UK then these products will cost
more to make and be more
expensive for the consumer
which may affect demand, sales
revenue and profit

Question 39

Competitive advantage defined

Answer 39

having an edge over your competitors by offering consumers greater value either by means of low prices or providing greater benefits

Question 40

2 ways of achieving competitive advantage

Answer 40

low cost leadership

differentiation

Question 41

Low cost leadership

Answer 41

With this strategy a business will seek to produce the same quality
products as its competitors at a lower price

They may gain cost leadership due to;
* Good resources management
* Efficient production methods
* Waste minimisation
* EOS

Question 42

Differentiation

Answer 42

With this strategy a business will provide a unique product or give a unique service

differentiation factors
* Performance
* Style – TGI restaurants
* Design
* Consistency
* Durability
* Reliability – Eveready battery bunny
* Reparability