4.2 - Global Markets Flashcards
Push factor
When businesses feel they have to expand internationally because of domestic market issues
Pull factor
When businesses are attracted by compelling opportunities to grow by expanding internationally
Examples of push factors
- Saturated markets
- Increased competition
Saturated market
When a market has high competition and little or no room for growth because most potential customers already have the product or service. This makes it harder for businesses to expand, gain market share, or increase sales
Examples of pull factors
- Economies of scale
- Risk spreading
Factors to consider when assessing a country as a market
- Levels and growth of disposable income
- Ease of doing business
- Infrastructure
- Political stability
- Exchange rate
Factors to consider when assessing a country as a production location
- Costs of production
- Skills and availability of the labour force
- Infrastructure
- Government incentives
- Political stability
Exchange rate
Value of one currency compared to another. It determines how much of one currency you can exchange for another
Ways exchange rates impact business activity
- Price of exports in international markets
- Cost of goods bought from overseas
- Revenue and profits earned overseas
- Converting cash receipts from customers overseas
Factors affecting exchange rates
- Interest rates
- Demand for exports
- Speculation
- Level of Foreign Direct Investment into the country
Factors affecting the significance of exchange rates on businesses
- How much they export to other economies
- Whether domestic businesses face strong competition from overseas firms in their markets
- How much a business relies on importing goods
- Price Elasticity of Demand for their products or services
Offshoring
When a business moves part of its operations to another country
Advantages of offshoring
- Lower costs
- Access to skilled labour
- Competitive advantage
Disadvantages of offshoring
- Cultural and language barriers
- Political and economic risks
- Job losses in the home country
Reshoring
When a business relocates activities from overseas back to the home country
Advantages of reshoring
- Better quality control
- Shorter lead times
- Lower transportation costs
Disadvantages of reshoring
- Potentially higher labour costs
- Skills shortages
- Time consuming and expensive
Ways to achieve differentiation
- Superior product quality
- Branding
- Wide distribution
- Sustained promotion
Joint venture
Business arrangement where two or more companies collaborate to undertake a specific project or business activity while remaining separate legal entities
Advantages of a joint venture
- Access to new markets
- Shared risks and costs
- Combined expertise and resources
Disadvantages of a joint venture
- Conflicts between partners
- Profit sharing
- Limited control
