3.9.3 Flashcards
What are some factors driving the internationalisation of business?
Factors include cross-border mergers and acquisitions, organic growth overseas, moving production overseas, and increasing use of offshoring.
Why do businesses target and operate in international markets?
Key reasons include accessing demand in growing markets, reducing costs through cheaper labor, and gaining revenue and profit from emerging markets like China, India, and Brazil.
What is the main reason for a business to operate in emerging international markets?
The main reason is accessing demand in high-growth markets, driven by factors like rising consumer incomes and business investment in those markets.
How can businesses reduce costs by operating overseas?
Businesses can reduce costs by taking advantage of lower wages, particularly in emerging markets like India and China, where labor costs are much lower compared to developed countries.
What are the risks of exchange rate fluctuations when operating in international markets?
Businesses can be exposed to currency exchange rate risks, which can affect the cost of goods and services when exchanging money between different currencies.
What are some trade barriers that businesses may face when operating internationally?
Trade barriers include quotas, tariffs on imported goods, and government subsidies for domestic industries that make it difficult for foreign businesses to compete.
What is the difference between offshoring and outsourcing?
Offshoring is relocating business activities to a different country, whereas outsourcing involves transferring work to an external supplier.
What are some key reasons a business might decide to offshore?
Reasons include accessing lower manufacturing costs, better-skilled labor, using existing overseas capacity, avoiding trade barriers, and easier access to target international markets.
What are potential drawbacks to offshoring?
Drawbacks include longer lead times, poorer quality control, CSR challenges, higher management costs, exchange rate impact, and communication issues due to language and time zone differences.
What are the 5 main reasons for operating in international markets?
- Accessing demand in suitable markets
- Cost reduction
- Exchange rates
- Trade barriers
- Political stability
What are the methods of entering international markets?
What is exporting?
