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Business > 4.2 > Flashcards

4.2 Flashcards

1
Q

Reasons for remaining in the UK

A
  • Reduction of transportation to domestic consumers
  • Close to customers (USP)
  • Quality
  • Heritage
  • Customer service
  • Lack trade bloc
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2
Q

Reasons for manufacturing in other countries

A
  • Reduce labour/production costs
  • Access to raw materials
  • Increase market share
  • Falling domestic demand
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3
Q

Push factors

A

Factors that encourage businesses to leave the UK
- Saturated domestic markets
- Low growth opportunities
- End of product life cycle (domestically)
- Need to diversify
- Government policies that encourage trade

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4
Q

Pull factors

A

Factors that encourage businesses to enter new markets
- Attraction to new overseas markets in emerging economies
- Opportunity to gain economies of scale by expanding overseas
- Untapped markets
- ways to extend product life cycle

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5
Q

Offshoring

A

Work done overseas
- take advantage of low labour costs in manufacturing, cost efficiencies and supply chains

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6
Q

Outsourcing

A

Someone does the work for them
- tasks carried out by businesses contracted by third party
- may/may not be abroad
- marketing research & call centres for example

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7
Q

Factors affecting country as a market

A
  • Levels and growth of disposable income
  • Exchange rate
  • Ease of doing business
  • Political stability
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8
Q

Factors affecting country as a production location

A
  • Costs of production
  • Skills and labour force availability
  • Location in trade bloc
  • Government incentives
  • Natural resources
  • Likely return on investment
  • Ease of doing business
  • infrastructure
  • Political stability
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9
Q

Ease of doing business

A
  • Looks at regulations and policies important for starting and growing a business
  • Issues such as taxing, trading, contracts, permits & labour regulations
  • Important to attract more firms, reduce costs and encourage faster growth.
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10
Q

Competitive advantage

A

Having something that other businesses can’t replicate

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11
Q

Factors influencing competitiveness

A
  • Brand name
  • Product reliability
  • Quality and design
  • lower labour costs
  • investment in tech
  • R & D
  • lower prices - value of currency
  • customer service
  • global supply chains
  • economies of scale
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12
Q

2 strategies to build competitive advantage

A

1) Cost leadership - produce same quality as comp at lower price, due to good resource management, efficient production methods, waste minimisation. E.g. Aldi

2) Differentiation - provide unique product/service. E.g. performance, style, design, consistency. Can charge premium prices. E.g. Rolex

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13
Q

Economic factors that influence global competitiveness

A
  • Movement in the exchange rates
  • Labour skill shortages
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14
Q

How can devaluation make uk businesses more competitive?

A
  • exports cheaper
  • domestic customers switch to domestic companies
  • international buyers raise demand
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15
Q

How can devaluation make uk businesses less competitive?

A
  • less incentive to cut costs and become more efficient, causes increased costs
  • less sales from uk customers
  • imports expensive ~(push inflation)
  • less attractive to foreign workers, have to increase wages
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16
Q

Financial risks of international trade

A
  • Difficulty in transportation and
    communication
  • Risk in Transit
  • Import and export restrictions
  • Problems in payments
  • Frequent Market Changes
  • Investment for longer period
  • Intense Competition
17
Q

Marketing risks of international trade

A
  • Different language
  • Study of foreign markets
  • Frequent Market Changes
  • Intense Competition
18
Q

Political risks of international trade

A
  • Import and export restrictions
  • Problems in payments
19
Q

Operational risks of international trade

A
  • Distance
  • Different language
  • Difficulty in transportation and
    communication
  • Risk in transit
  • Study of foreign markets
  • Intense Competition
20
Q

Advantages of international expansion

A

-Access to new customers
-Lowering costs-Access to
cheaper raw materials and
labour have led to considerable
outsourcing and offshoring.
-Spread business risk by
competing in multiple markets
so risk is spread out among
many economies and
customers.
-First mover advantage

21
Q

Disadvantages of international expansion

A

-New preferences and tastes
-Different cultures
-Lack of knowledge of the
market
-Loss of control through
outsourcing
-As economies grow- pressure to
increase pay
-Spread business to thin
-Different regulation and red
tape

22
Q

Merger

A

A merger is a deal to unite two existing companies into one new company.

23
Q

Joint venture

A

A joint venture is a arrangement in which two or more businesses agree to create a new business that they own in partnership

24
Q

Reasons for Mergers/Joint Ventures

A

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

25
Q

Why do businesses spread risk over different countries

A

Can help businesses to strengthen their businesses position during economic downturn

26
Q

Political Stability

A

-Businesses prefer to operate in political systems that
are stable
-Changes in business taxation and regulations can
impact business operations
-More serious instability such as riots, civil war and
terrorism can impact on business and it may make
them reluctant to invest in new capital or enter new
markets.

27
Q

Infrastructure

A

-An adequate road, rail, sea and
air transport systems so goods
can be exported and imported
easily
-Buildings and premises where
the goods could be
manufactured
-Reliable power system

28
Q

Disposable Income

A

-Disposable income is defined as
the total amount of
household income that’s available
for spending and saving after
paying income taxes.
-If disposable income increases,
households have more money to either save or spend, which
naturally leads to a growth in
consumption.

29
Q

Position in a Trading Bloc

A

-A trade bloc is a type of government agreement, where barriers to trade (tariffs and others) are reduced or eliminated among the participating states.
-Positioning within a country that is part of a trade blocs gains many benefits to firms
-Firms will be attracted to countries within trading blocs as costs and administration will be lower

30
Q

Financial Considerations

A

-Natural resources in the country will lower production
costs
-Government incentives such as lower taxes can attract
foreign companies
-Likely return on investment will impact on the
willingness of firms to invest

31
Q

Skills and Availability of Workforce

A

Business will be interested in countries that have:
-Low unit labour costs
-High productivity
-Skills and levels of education
-Size of the workforce and any shortages there may be in
key areas

Business (20 decks)

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