4.2 - global market + expansion Flashcards
international trade - push factors
-looks at business opportunity.
-the market is saturated so they expand out to emerging markets.
ex) starbucks is saturated in the USA, so they expand out to new countries.
-saturated market so lower chance of growth.
- high competition so they start selling internationally.
international trade - pull factors.
Pull factors means opportunities in
overseas markets.
-Exporting is one way for a business to increase sales and
this can contribute to increased
profits.
Types of economies of scale:
Marketing economies of scale; A business can spread the cost of one
advertising campaign across several countries or products
Bulk buying; A business can reduce the cost of raw materials by
getting discounts from suppliers for buying goods in bulk quantities
Technical economies of scale; A business can spread the high fixed
cost of buying large equipment over the production of more goods
Financial economies of scale; As a business grows they will be able to
negotiate better lending rates with banks, reduces fixed costs
Risk bearing; The larger the company becomes the more likely it is to
survive a downturn in the economy
Offshoring
Offshoring is when a business relocates some of its business process
to another country. This is usually manufacturing, or a supporting
process such as accounting.
offshoring benfits
to take advantage of lower
minimum wage levels in other
countries
to take advantage of trade blocs
or trade deals
to take advantage of tax and
other benefits offered by the
host nation
access to a larger talent pool
Outsourcing
Outsourcing is where a business function, such as payroll, is
contracted out to third-party businesses. These may, or may not, be
in another country.
outsourcing benefits
Outsourcing examples:
Marketing research
Accounting
Legal services
Call centres
Office cleaning
Website development
Benefits include:
Flexibility
Lower cost
Get experts
Allows business to focus on core
Disposable income
Disposable income is the amount
that a customer has to spend after
all their bills have been paid.
Ease of doing business
Importance of EODB when deciding which
markets to sell in.
Infrastructure
Infrastructure is the basic physical
and organisational structures and
facilities (e.g. buildings, roads,
power supplies) needed for the
operation of a society or business
Political stability
Political instability in a country
could be a major risk factor so
should be taken into consideration
when assessing a potential country
as a market for your products
Exchange rates
Strong
Pound
Imports
Cheaper
Exports
Dearer
Costs of production
-cost of production in the UK is expensive, in comparison to some other countries.
Skills and availability of labour
force
-having skilled workers in that field.
-ex)canada - maple syrup.
Location in a trade bloc
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
