4.2 Global Markets and Business Expansion Flashcards
What factors are Driving and Prompting Trade
Expansion of Financial Capital Flows between countries
Increased FDI
Rising no. global brands
Increased specialisation of labour
Increased labour migration
Increased levels of connectivity through wifi and other networks
Different risks of expanding into global markets
Financial
Marketing
Political
Operational
Distance being a risk to business expansion
Difficult to establish quick and close trade contracts
Buyers and sellers rarely meet
Time lag between order and receipt of goods from foreign countries
Creates higher costs of transportation and greater risks
Different Language being a risk to business expansion
Advertisements and correspondence also are to be done in foreign languages.
A trader wishing to buy or sell goods abroad must know the foreign language or employ somebody who knows that language.
How risk in Transit is a risk to business expansion
Goods have to be transported over long distances and they’re exposed to perils of the sea
Many of these risks are covered by insurance but increases overall costs
Import and Export restrictions being a risk for business expansion
Tariffs
Importers required to fulfil several customs formalities and rules. Foreign trade policy, procedures, rules and regulations differ from county to country.
The study of foreign markets creating a risk for business expansion into global markets
Every market has its own characteristics, requirements, customs, measures and marketing methods. A study of foreign market is essential for success. Difficult to collect the up to date information about foreign markets
How frequent market changes can create risk for business expansion into global markets
Difficult to anticipate changes in demand and supply conditions.
Prices may change frequently.
Due to new entries, changes in buyers preferences, changes in import duties and freight rate, fluctuations in exchange rates etc.
How the intense competition may risk business expansion into global markets
Traders who want to sell goods abroad have to face severe competition from different countries. Considerable market research is necessary. Heavy expenditure on advertising and sales promotion may be necessary.
Advantages of International Expansion
Access to new customers
Lowering cost access to cheaper raw materials and labour led to considerable outsourcing and offshoring
Spread business risks
First mover advantage
Disadvantages of International Expansion
New preferences and tastes
Different cultures
Lack of Knowledge of the Market
Loss of control through outsourcing
As economies grow- pressure to increase pay
Spread business too thin
Different regulations and red tape
Factors to consider when assessing a country: Markets
Levels of growth and disposable income
Exchange rate
Ease of doing business
Infrastructure
Political Stability
Factors to consider when assessing a country: Production
Cost of production
Skills and availability of labour force
Location in trade bloc
Gov incentives
Natural resources
Likely ROI
Ease of doing business
Infrastructure
Political Stability
Ease of Doing business
Regulations and policies that are important for starting and growing business
Taxes, trading, contracts, permits and labour regulations
Political Stability
Changes in taxation and regulation that can impact business operations
More serious instability such as riots, civil war and terrorism can impact a business and may make them reluctant to invest in new capital or enter new markets
