4.2

Question 1

what are push factors?

Answer 1

factors that push a business to expand outside of their domestic country

Question 2

push factors

Answer 2

Saturated Markets - when everyone that wants and can afford to buy something already has

Intense Competition -
In a competitive market, businesses need to find ways to differentiate themselves and gain a competitive edge, which can be achieved by exporting goods and services to new markets. businesses can reduce their reliance on a single market and diversify their revenue streams, thereby reducing their exposure to market volatility and competition

Question 3

what are pull factors

Answer 3

encourage businesses to operate within markets abroad by choice

Question 4

pull factors

Answer 4

economies of scale - businesses can buy raw materials and labor at lower prices than at domestic markets

spreading risk - businesses can diversify their customer base and reduce exposure to risks (economic, political, etc)

Question 5

what is offshoring

Answer 5

when a company moves part of the production process, or all of it, to another country

Question 6

advantages to offshoring

Answer 6

• lower labour costs may be available ( helps keep costs down and increase profitability )
• access to specialised suppliers
• economies of scale

Question 7

disadvantages of offshoring

Answer 7

• public and employee relations could suffer as domestic employees lose jobs
• increased costs in short term (relocation costs, new premises, training new staff)
• poor customer service ( language and customer service (indian it helpers) )

Question 8

what is outsourcing

Answer 8

occurs when a business hires an external organisation to complete certain tasks or business functions

Question 9

advantages of outsourcing

Answer 9

• Businesses can take advantage of specialist skills that another business has

-Cost effectiveness as businesses avoid having to spend money investing

• higher labour productivity

Question 10

stages of product lifecycle

Answer 10

Introduction , growth , maturity and decline

Question 11

factors to consider before entering new countries

Answer 11

• ease of doing business
  -infrastructure
• political stability
• exchange rates
  -levels of growth and disposable income

Question 12

infrastructure

Answer 12

Good infrastructure improves the production process and delivery of goods/services to the customer which reduces costs and increase sales

Question 13

Ease of doing business

Answer 13

If businesses face significant challenges setting up a business, this may lead to delays in operations and the business generating sales

Question 14

Levels of growth and disposable income

Answer 14

Selling products in a country with higher disposable income is likely to lead to more sales

Question 15

political stability

Answer 15

An economy with a stable economy and government is seen as a less risky investment for a business

Question 15

Exchange rates

Answer 15

An exchange rate is the price of one currency in terms of another
S - strong
P - pound
I - imports
C - cheaper
E - exports
D - deaerer

Question 16

what is a global merger

Answer 16

a permanent agreement between two businesses from two different countries to join together

Question 17

what is a joint venture

Answer 17

when two businesses join together to share their knowledge, resources and skills to form a separate business entity for a short period of time

Question 18

reasons for global mergers and joint ventures

Answer 18

• spreading risk
• entering new markers
• getting brand names and patents
• getting resources and supplies
• maintaining / increasing global competitiveness

Question 19

reasons for global mergers and joint ventures

spreading risks

Answer 19

spreads risks associated with changing economic conditions (if theres an economic downturn in one country, theyre still good)

Question 20

reasons for global mergers and joint ventures: entering new markets

Answer 20

• quicker than using organic growth
• forming a joint venture with a local business can help them gain knowledge and business of the local market

Question 21

reasons for global mergers and joint ventures

Acquiring national/international brand names/patents

Answer 21

The process of developing intellectual property can be a long and expensive process
Using a merger/acquisition is a method businesses can use to get access to intellectual property or a business with a strong reputation

Question 22

reasons for global mergers and joint ventures

Securing resources/supplies

Answer 22

Businesses can strategically merge or create a joint ventures with another business which has access to resources

This allows business to quickly gain access to resources which helps to speed up the production process

Businesses have to be aware of any ethical issues concerning the resources as this can damage the reputation of the business

Question 23

reasons for global mergers and joint ventures

Maintaining/increasing global competitiveness

Answer 23

By expanding, a business can benefit from economies of scale which leads to lower costs

Businesses can reduce prices which can increase sales, leading to a higher market share

Question 24

drawbacks of mergers and joint ventures

Answer 24

The initial costs of merging can be significantly high

• no guarantee a business will gain a return on their initial investment if it is not successful
• Diseconomies of scale can occur due to communication issues and a lack of control as the business

A culture clash between the two businesses can affect the quality of the business, leading to poor sales

When two businesses join together, redundancies can occur (This is likely to affect the morale of the remaining workers)

Question 25

advantages of currency appreciation

Answer 25

If businesses import raw materials and components from abroad, they will now be cheaper

This will help the business to reduce their costs and possibly increase their profit margin

Question 26

disadvantages of currency appreciation

Answer 26

• If businesses exports goods/services to foreign consumers, the goods will be more expensive for international customers

This may lead to a fall in sales as consumers now shift demand to domestic businesses

Question 27

advantages of currency depreciation

Answer 27

• If businesses export goods/services abroad they become more competitive because their products are cheaper to purchase
• In the domestic market there may be less competition from foreign firms as imports are now more expensive for domestic consumers to purchase

Question 28

disadvantages of currency depreciation

Answer 28

• If a business imports raw materials or components from abroad, they are now more expensive
• This leads to an increase in the costs for a business, which could then be passed onto consumers in the form of higher prices

Question 29

what is cost leadership

Answer 29

when a business becomes the lowest cost producer in their industry

Question 30

how can cost leadership be advantageous

Answer 30

Businesses can utilise this position as a cost leader to reduce their prices or keep their prices the same which results in an increase in profit margins

Question 31

what is differentiation

Answer 31

occurs when the business makes the characteristics of their products/services different to those of their competitors

Question 32

impact of skill shortages

Answer 32

• Cost leadership could be difficult to achieve if the workers lack skills as they may not be as productive
  This could increase unit costs due to factors such as waste
• Product differentiation is less likely to occur where workers lack the skills and expertise to produce highly differentiated products