(4.2)

Question 1

What is the definition of push factors?

Answer 1

Negative factors within the uk that push a uk business to look overseas

Question 2

What are 6 push factors?

Answer 2

• Saturated domestic markets
• Competition
• Low growth opportunities
• End of the product lifecycle at home
• Need to diversify
• Need to reduce risk

Question 3

What is the definition of pull factors?

Answer 3

Positive factors overseas that entice a uk business to look outside the uk

Question 4

What are the 5 pull factors?

Answer 4

• Risk spreading
• Opportunity to gain EoS by expanding overseas
• Attraction to new overseas markets in emerging economies eg Brazil
• Opportunity to exploit competitive advantages in new markets
• Ways to expand the product lifecycle

Question 5

Why may a business off-shore?

Answer 5

A business could:

• Reduced cost
• Hire workers with particular skills

Question 6

What is offshoring?

Answer 6

The moving of operations of a business to another country with lower costs

Eg Apple moving their manufacturing operations to china

Question 7

What are the potential risks associated with offshoring?

Answer 7

• Language difficulties
• The process may increase management costs
• Reduce efficiency or quality

Question 8

What is outsourcing?

Answer 8

This is where a business function, such as payroll, is contracted out to a specialist external provider

Question 9

Why outsource?

Answer 9

• Reduce costs
• Specialise areas of the business ie focus on core areas
• Comply with rules or regulations

Question 10

What are the 5 factors to consider when assessing a countries market when looking to expand internationally?

Answer 10

Levels and growth of disposable income - Do customers have enough money for the product
Ease of doing business - Problems can cause delays in sales, increase costs
Infrastructure - eg communication and transport
Political Stability -
Exchange Rates - depending on the exchange rates it can make importing/ exporting expensive or cheaper

Question 11

What are 9 factors to consider when assessing a country as a production location?

Answer 11

Costs of production - eg low wages, material costs, land

Skills and availability of labour force - the workers must be skilled otherwise training could be costly

Infrastructure - Eg roads, broadband, transport, education

Location in trade bloc - to avoid trade barrios such as tariffs and quotas

Government incentives - Eg tax breaks, lower rates of company tax, interest free loan, cheap land

Ease of doing business - Problems can cause delays in sales, increase costs

Political stability - Eg dangerous to work there for employees/ civilians

Natural resources - Some businesses requires lots of natural resources

Likely return on investment -

Question 12

What are the 5 reasons for global mergers or joint ventures?

Answer 12

Spreading risk over different countries/regions -
Entering new markets/trade blocs -
Acquiring national/international brand names/patents -
Securing resources/supplies -
Maintaining/increasing global competitiveness -

Question 13

What is global competitiveness and how can it be done?

Answer 13

The ability of a business to perform better than its rivals across markets in different countries

Measures a business’s ability to compete both at home and abroad against foreign firms

Through

• Cost competitiveness
• Differentiation

Question 14

What is the benefits of global competitiveness for MNCs?

Answer 14

• Larger economies of scale from global operations:: Cost competitive
• Global sourcing of materials : Best quality materials/most cost effective
• MCs can diversify risk : Reduce dependence on one revenue stream :. Increase
resilience to economic shocks
• Brand strength :. Price inelastic demand with better reputation

Question 15

How might a business use the product life cycle (Consider the Offshoring)?

Answer 15

If a product has reached its declined stage in one market it may be in the introduction stage in another therefore a business may move operations to another market (country) in order to reduce cost/expand market share etc

Question 16

What is the impact of changes in exchange rate on a business?

Answer 16

Cheaper import costs and more expensive exports if the pound became strong.

Eg for appreciation:
• Imports become cheaper :. Lower raw material costs for businesses :. Lower cost per
unit. Able to lower prices whilst maintaining profit margins : Increased sales volume and revenue … More globally competitive
• Exports more expensive: Foreign buyers need more of their currency to purchase
goods : Deterrent for value conscious customers :. Lower sales :. Less globally
competitive

Question 17

What is the impact of skill shortages on international competitiveness?

Answer 17

Advantages:
• Access to cheap and/or high skilled labour gives firms a competitive advantage
• Cheap labour. Lower total cost per unit :. Lower prices whilst maintaining profit
margins: Higher sales and increased global competitiveness
• High skilled labour:. More efficient and higher quality products :. Lower cost per unit with
increased output via HR economies of scale and can now command higher price due to quality :. Increased sales and profit

Disadvantages:
• Due to a lower supply of high skilled labour, firms may have to pay higher salaries to
attract them to work for them which increases the financial burden on the business and
cost per unit
• A business may be forced to employ low skilled labour who are inefficient (wasteful) and
less productive. This would cost per unit to rise (D.O.S) and higher prices wouldn’t warrant
higher sales due to a lack of customer satisfaction

Question 18

What is a joint venture?

Answer 18

Involves two separate businesses collaborating to achieve a shared goal

Question 19

What are the barriers to entry for global mergers and joint ventures?

Answer 19

Low brand awareness
Cultural and language difference
Knowledge of the market
Additional cost through exporting