4.2 global markets and business expansion

Question 1

what are push factors?

Answer 1

factors in the market that encourage an organisation to seek international opportunities, like saturated markets and competition

Question 2

what are saturated markets and how are they a push factor?

Answer 2

a saturated market is a market where most producers who would buy a particular product already have it, and there is limited opportunity for growth.

it is a push factor because it would encourage businesses to find a new market that isn’t saturated

Question 3

how is competition a push factor?

Answer 3

high competition in a business would drive businesses away from the market as the competitors can charge lower prices for higher quality, putting pressure on the business

Question 4

what are pull factors?

Answer 4

factors that entice firms into new markets, these are opportunities a business can take advantage of when selling into overseas markets, like economies of scale and risk spreading

Question 5

how is economies of scale a pull factor?

Answer 5

if moving into a larger market, the production would increase, leading to lower costs per unit of output (economies of scale)

Question 6

what is risk spreading and how is it a pull factor?

Answer 6

by expanding into other countries and markets, a business may be able to limit the risks that it faces, like how over dependence on one marker may leave a firm vulnerable in the short term if that market faces an economic challenge, like a recession, but by expanding into new markets, the risk is lowered

Question 7

what is off-shoring? why would a business want to off-shore?

Answer 7

shifting jobs to other countries with lower costs, for example, the relocation of call centres from the UK to India. a firm would off-shore to:
- reduce costs
- hire more skilled workers

Question 8

what are 3 limitations of off-shoring?

Answer 8

lots of jobs are lost in the home country, which could damage a firms reputation

there are also language/cultural differences

reduce efficiency/quality

Question 9

what is outsourcing? why would a business outsource?

Answer 9

the movement of a business function/project to a specialist external provider. a firm would outsource to:
- reduce costs
- specialise areas of the business to improve speed and quality

Question 10

what are limitations of outsourcing?

Answer 10

• reliance on third parties can leave a firm vulnerable due to external factors like them moving away or shutting down
• poor communication issues can be disruptive and expensive tot the business

Question 11

what is the difference between off-shoring and outsourcing?

Answer 11

offshoring is shifting jobs to another country and outsourcing is shifting jobs to other organisations

Question 12

how is labour productivity a pull factor?

Answer 12

labour productivity is the amount of goods and services produced by one hour of labour. the higher the productivity, the lower the labour costs, and people may go to a market where there are more skilled workers to increase the output per hour

Question 13

how can a business extend the product life cycle by selling in multiple markets?

Answer 13

when a product has reached the decline stage in one market, a firm could choose to move their products into other markets to reduce costs, or it could explore selling to new markets, so the product could be in the maturity stage in one market and in the introductory stage elsewhere like reviving the product

Question 14

spreading the risk over different countries or regions (reasons for global mergers)

Answer 14

a business can enter a new market in attempt to avoid the risk there is of the current market

Question 15

entering new markets and trade blocs (reasons for global mergers)

Answer 15

businesses may want to merge with firms in other markets

Question 16

acquiring national and international brand names and patents (reasons for global mergers)

Answer 16

by purchasing a business or a product with a brand name, a business would be able to build their brand recognition and become a global player in the International market

Question 17

gaining access to intellectual property (reasons for global mergers)

Answer 17

it is often easier to gain access to an intellectual property (invention, artwork etc) by a joint venture agreement, as it would avoid the barriers of copyrights, trademarks or patents

Question 18

securing resources or supplies (reasons for global mergers)

Answer 18

businesses may want to join a venture to secure resources or supplies that are scarce or hard to acquire

Question 19

maintaining or increasing global competitiveness (reasons for global mergers)

Answer 19

merging can provide bigger markets and cost savings, which would in turn make the business more competitive in terms of pricing power over customers and suppliers

Question 20

how does exchange rate fluctuation impact global competitiveness?

Answer 20

a depreciation in exchange rate would make exports cheaper, so exports can benefit , but an appreciation would make exports more expensive and will have an impact on the competitiveness of exporting firms

Question 21

how would changes in the exchange rate impact elasticity of demand?

Answer 21

if there is a depreciation in the value of the pound, it will have an impact on price elasticity of demand

if the demand is elastic, it will have more of an impact

Question 22

how would fixed contracts impact exchange rates?

Answer 22

temporary changes in the exchange rate will have a smaller impact if they have a fixed contract. they often help to decrease the uncertainty around exchange rate fluctuations

Question 23

how can a competitive advantage be achieved?

Answer 23

through cost competitiveness and differentiation

Question 24

skill shortages and their impact on international competitiveness

Answer 24

businesses that have access to skilled low cost labour are at a competitive advantage over other businesses