4.2 - global markets and business expansion Flashcards
push factors
- factors that encourage an organisation to seek international opportunities
- examples = competition, saturated markets, risk spreading, economies of scale
pull factors
- entice firms into new markets
- examples = new/bigger markets, lower cost of transportation, organisational skills
outsourcing
moving an entire business function or project to a specialist external provider
offshoring
relocation of a business’ activities from the home country to an international location
re-shoring
production brought back to home country
labour productivity
the number of goods and services produced by one hour of labour
product life cycle
development
introduction
growth
maturity
decline
factors to consider when assessing a country as a market
- disposable income = amount of money people have left over after they’ve paid their taxes, national insurance and deductions
- ease of doing business
- infrastructure
- political stability
- exchange rate
factors to consider when locating production abroad
- costs of production
- location in a trade bloc
- infrastructure
- skills and availability of labour
- government incentives
- political stability
- ease of doing business
- natural resources
joint venture
a commercial enterprise undertaken jointly by two or more parties that otherwise retain their distinct identities, but remain separate businesses
merger
combination of two previously separate firms which is achieved by forming a completely new business into which the two original firms are integrated
takeover
- involves one business acquiring control of another business
- most common form of external growth
spreading risk with a joint venture
moving production or sales into another country can be very complex and risky for a single business to go into alone
spreading risk with a merger or takeover
risk reduced by entering into a long-term arrangement with a merger or takeover
advantages of joint ventures
- access to knowledge and resources e.g. capital, staff, and technology
- access to new opportunities e.g. new markets, greater distribution
- shared exposure to risks, financial responsibility, and workload
disadvantages of joint ventures
- 50% fail because of the risks involved and the complexity of integrating operations and work culture of two different companies
- coping with different cultures, management styles, and working relationships
- shared gains (often 50/50)
why might a business form a joint venture to acquire a patent?
because they may want to become a global player in the international market
how do joint ventures/mergers help secure access to natural resources and supplies?
business in one country may need resources that are only found in another country so they may enter into a joint venture to secure access to resources
how does merging/creating a joint venture with a foreign business in a foreign market help maintain global competitiveness?
local partner may be able to provide critical market data, local knowledge of the domestic market, and information on customer tastes and trends which will help the parent business maintain competitive advantage
exchange rates
value of one currency in terms of another country’s currency
SPICED
Strong Pound Imports Cheaper Exports Dearer
impact on a UK business of an appreciation in sterling against other currencies
- importer = imports become cheaper, lower costs, higher profits
- exporter = exports become more expensive, lower sales, reduced prices
impact on a UK business of a depreciation in sterling against other currencies
- importer = imports become more expensive, higher costs, expensive for consumers, affect demand, sales revenue, and profit
ways exchange rates impact business activity
- the price of exports in international markets
- cost of goods brought from overseas
- revenues and profits earned overseas
- converting cash receipts from customers overseas
