4.2 Global Markets and Business Expansion Flashcards
What push factors might drive a firm away from its domestic market?
Saturated markets.
Competition.
What pull factors might attract a firm to a new foreign market?
Economies of scale.
Risk spreading.
What is offshoring?
Relocation of a business process from one country to another.
What is outsourcing?
One company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally.
What factors are involved in the assessment of a country as a market?
Levels of growth of disposable income.
Ease of doing business.
Quality of infrastructure.
Political stability.
Exchange rates.
What factors determine the ease of doing business in a country?
Days required to start a business.
Days wait for a construction permit.
Days required to get electricity.
Total tax rate as a percentage of profit.
Days required to import an item.
Days required to enforce a contract.
What issues encompass political stability?
Policy instability.
Tax regulations.
Labour regulations.
Government bureaucracy.
Corruption.
How do exchange rates affect a country as a market?
The volatility of exchange rates matter as stable exchange rates make future planning more reliable.
What nine factors determine the attractiveness of a country as a production location?
Cost of production
Skills and availability of labour force
Infrastructure
Location in a trading bloc
Government incentives
Ease of doing business
Political stability
Natural resources
Likely return on investment
What is a joint venture?
A formal agreement between two separate business to work together for a fixed time on a specific project.
What are the five reasons for global mergers / joint ventures?
Spreading risk
Entering new markets/trade blocs
Acquiring national/international brand names/patents
Securing resources and supplies
Maintaining/increasing global competitiveness
What are the two routes to competitive advantage according to Porter?
Cost leadership
Differentiation
What are the likely benefits of competitive advantage?
Dominating domestic markets with minimal penetration from imports.
Ease of entry and strong competitiveness in foreign markets because of global brand recognition.
In which three main scenarios will movements in exchange rates affect business competitiveness?
Companies reliant on export markets.
Companies whose domestic market is subject to competition from imports.
Companies that need to import significant quantities of raw materials or components.
What are the impacts of a high exchange rate?
Stronger pound
Harder to sell abroad
Stiffer competition from imports
Reduced costs
