4.2 Global Markets and business expansion Flashcards

1
Q

What are the forces encouraging businesses to operate in other countries

A

-pull factors -> reasons attracting a business to a new foreign market

-push factors -> reasons driving a firm away from its domestic market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Name 3 reasons why a firm may want to leave its domestic market (push factors)

A

-saturated markets
-competition
-extending product life cycle

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Why may saturated markets push businesses out of its domestic market

A

-> in this market customers who want the product already have it -> limited opportunity for growth in sales -> new market for existing product -> market development

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Why might competition push businesses out of its domestic market

A

competition in domestic markets -> decreases sales -> due to ^ availability of substitutes -> companies leaving the market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Why might extending its product life cycle lead to a firm leaving its domestic market

A

-as product nears its decline phase -> entering new international markets -> extends/ prolongs life cycle

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Name 3 factors attracting a business into foreign markets (pull factors)

A

-economies of scale
-possibility of offshoring, outsourcing
-risk spreading

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How does economies of scale attract businesses to foreign markets

A

-> entering foreign markets -> ^ scale of production -> lower unit costs -> FC spread across all units -> ^ profit margins

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How does offshoring and outsourcing attract businesses into foreign markets

A

-lower costs -> in labour, land, services aborad -> lower overall costs

e.g. may be -> directly investing in facilities abroad (offshoring)
outsourcing production to low labour cost locations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is offshoring

A

moving 1 or more business functions -> foreign country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is outsourcing

A

contracting another business to perform a business function on your behalf

-> e.g. usually production performed by business in lower cost country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How does risk spreading attract businesses into foreign markets

A

selling in one country = risky if the product fails

-> entering more international markets -> spreads risk -> reduces business failure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Name the 6 ways businesses judge whether or not a country is right for them to start selling in (market attractiveness)

A

-levels and growth of disposable incomes
-ease of doing business
-quality of infrastructure
-political stability
exchange rates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is disposable income

A

money a household has available to spend from income after income tax has been deducted

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How does level and growth of disposable income determine whether a market is attractive to a business

A

disposable income -> refelection of standards of living in a country

->so businesses need to ensure consumers have sufficient DI to spend -> must be growing -> afford to buy products now & future

->low disposable incomes -> unattractive for luxuries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How does ease of doing business determine whether a company chooses to set up in a certain country

A

-> if firm faces problems in market -> likely to discourage foreign firms -> delay on sales -> ^ costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How does the quality of infrastructure determine whether a company chooses to set up in a certain country

A

-> developing countries -> unreliable, underdeveloped transport, infrastructure -> delay in delivering -> ^ costs -> unattractive to businesses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How does political stability determine whether a company chooses to set up in a certain country

A

country with calm political situation -> reduces uncertainty before entering market

-tax regulations
-corruption

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How do exchange rates determine whether a company chooses to set up in a certain country

A

fluctuating exchange rates -> uncertainty

-will be considered when deciding to enter new market

-strong pound -> if investing into country -> assets should be purchase when strong pound

-

19
Q

Name the 8 factors in which are taken into consideration when judging if a country is suitable to manufacture products

A

-costs of production

-skill & availability of workforce

-infrastructure

-location in a trading bloc

-government incentives

-ease of doing business

-political stabiility

-likely return on investment

20
Q

Why is political stability assessed when assessing a country as a production location

A

-political unstability -> uncertainity -> financial loss

21
Q

Why are government incentives assessed when assessing a country as a production location

A

governments try to attract FDI -> brings income & employment

-can do this by offering tax breaks, interest free loans, cheap land, labour better rates

22
Q

Why is locating in a trading bloc assessed when assessing a country as a production location

A

-> some firms enter countries to avoid trade barriers -> allows them

23
Q

Meaning of labour intensive

A

business process that relies more on ppl than machinery

24
Q

Meaning of capital intensive

A

business process that relies on machinery more than ppl

25
Q

skills and labour force

A

-uk is seen to have a highly skilled labour force -> but there’s often shortage of skilled workers

-can be resolved by locating in other countries -> utilising skills there

-but often involves traiing workers

26
Q

infrastructure

A

-

27
Q

location in a trading bloc

A

-locating in a trade bloc (EU, NAFTA, ASEAN) -> allows easier access to markets within those countries -> lower export taxes

-increase want for a business to set up production inside trade bloc

-

28
Q

government incentives

A

-national & local governments can provide incentives (grants)

-maybe to try ^ employment in deprived areas

-attracts businesses to the area

29
Q

-ease of doing business

A

how responsive governments are to demands of business

-govs may not want business to compete with domestic businesses -> making it difficult for company to set up

30
Q

political stability

A

-corruption has been seen to be a major influence on whether large foreign businesses are allowed to set up in some countries

31
Q

natural resources

A

-countries that have lots of natural resources -> gas, oil, minerals

-sensible to set up production here -> gain access to these resources

-

32
Q

likely return on investment

A

-look at:

-days to start a business

-days to get electricity

-days to enforce a contract

-days to import an item

33
Q

What is a merger

A

when 2 firms agree to come together to create a new busines

34
Q

what is a takeover

A

when 1 business buys interest in another business

35
Q

what is a joint venture

A

formal agreement between 2 seperate businesses to work together for fixed time on specific porject

36
Q

Name 5 reasons why large international companies seek to work together

A

-spreading risk

-entering new markets/ trade blocs

-acquiring national/ international brand names

-securing resources & supplies

-maintaining/ increasing competitiveness

37
Q

-spreading risk

A

-by operating in a number of countries -> business reduces risk

-countries are in diff stages of business cycle -> if 1 country -> recession another may be undergoing growth

-profits in one area can sustain business elsewhere

-> overcome short downturns

38
Q

-entering new markets

A

-saturated markets & heavy competition in domestic market -> less opportunities for business

-> new market development -> developing countries can provide future opportunities for revenue

-. gaining access to trade blocs -> allows business to develop ability for free movement of capital

39
Q

acquiring national/ international brand names

A

-taking over variety of brand names, patents allows business to market its products in many diff countries

-global advertising -> business getting more advertising at lower unit costs

40
Q

securing resources/ supplies

A

-supply chaain management is enhanced if business operates in country where it secures its resources

-do this by producing in country where resources originate

-reduces costs

-decreases shock to supplies as business has its own source

41
Q

maintaining/ increasing global competitiveness

A

`-^ global presence -> allows business to enter markets more effectively

-> ^ customer service

-> products can be adapted for local needs -> glocalisation

-> supply chain management -> easier, cheaper when sourced in geographic area

42
Q

`Meaning of global compeititveness

A

ability of business to succeed against domestic rivals & foreign competitors in international markets

43
Q

Name 2 benefits of a business competing on a global scale

A

-dominating its domestic markets with minimal penetration from imports

-ease of entry, strong global competitiveness in foreign markets -> strong brand recognition

44
Q

porter and global competitiveness

A

-> competitiveness achieved through cost leadership

-> firms with lowest costs -> undercut rivals prices

or

-> competitiveness achieved through diffeentiation

->good for wealthier markets where cust less bothered abt price