4.2 Global Markets And Business Expansion Flashcards
Why do businesses increasingly want to target international markets?
- reduced independence
- access faster growing markets and demand
- achieve economies of scale
- better serve customers located overseas
- build brand value
What’s a domestic market?
Home market, if a business is based in the uk then the domestic market is the uk all other markets are international
Push factors?
- saturated domestic market
- low growth opportunities
- end of plc in domestic market
- need to diversify and reduce risk
Pull factors?
- attraction to new overseas markets in emerging economies
- opportunity to exploit EOS by expanding
- exploit comp adv in new markets
- ways to extend plc
- risk spreading
what is outsourcing?
a business function is contracted out to a third party business
benefits of outsourcing?
- improved focus on core business activities
- increased efficiency
- controlled costs
- increased reach
- greater comp advantage
drawbacks of outsourcing?
- possible slower service/delivery
- lack of flexibility
- management difficulties
- instability (over reliance)
what is offshoring?
moving operations overseas
benefits of offshoring?
- take advantage of lower min wage
- advantage of trade blocs
- tax benefits
- access to larger pool of labour
drawbacks of offshoring?
- communication issues
- cultural and social barriers
- time zone differences
- security
- loss of intellectual property
- external factors
what are the PILEE factors?
- political stability
- infrastructure
- levels and growth of disposable income
- ease of doing business
- exchange rates
what is political stability?
how secure a government is and how strong the political and regulatory framework supports the country economy
benefits of political stability?
- allows them to see how well protected their business would be
- identify areas which are high risk
- crime rates/ safety identified
drawbacks of political stability?
- only accounts for the governmental side of things
- political factors are variable and often change
what is infrastructure?
the physical systems that a country require to operate efficiently
benefits of using infrastructure as a way of assessing a country as a market?
- allows them to plan for any additional costs (transport)
- dependent on the product you sell
- transport will be fast
drawbacks of using infrastructure as a way of assessing a country as a market?
- may improve through time
- might be a developing country and is therefore unstable
benefits of using level of income as a way of assessing a country as a market?
- raise price if higher income
- skilled workers due to high employment
- high demand
drawbacks of using level of income as a way of assessing a country as a market?
- high competition
- inferior goods wont be demanded in high income countries
- high labour cost if wages are high
benefits of using exchange rates as a way of assessing a country as a market?
- Businesses moving to countries with stronger currencies can import raw materials and components for production at a lower price
drawbacks of using exchange rates as a way of assessing a country as a market?
- Exports from this country will be more expensive to customers abroad
- profit may be less than expected if currency is stronger than the pound
benefits of using ease of doing business as a way of assessing a country as a market?
- if legislation is lenient they are able to set up more easily
drawbacks of using ease of doing business as a way of assessing a country as a market?
- may have to change production process
- loss of intellectual property
- wasted time through set up process and communication challenges
What are the 9 ways of assessing a country as a production location?
- cost of production
- labor force
- skills and education of workforce
- infrastructure
- location in a trade bloc
- govt incentives
- ease of doing business
- raw materials
- likely return on investment
what is a merger?
where 2 businesses join to become one on a permanent basis
what is a joint venture?
2 businesses collaborate on a project it is a temporary merger and they remain separate legal entities
what are the reasons for mergers and joint ventures?
- spread risk over different countries
- enter new markets and trade blocs
- acquire new international brand names and patents
- securing resources and suppliers
- maintain global competitiveness
how can you improve global competitiveness - comp adv?
- cost leadership
- differentiation
what is the impact of SPICED?
- inflation domestically is likely to fall
- econ cycle may fall to a short run recession
- if exports are elastic demand will fall drastically
- production costs decease if imported
- increased international comp
what is the impact of WPIDEC?
- inflation may rise
- econ cycle will have a short term boom
- depends on elasticity of imports
- production costs increase if imported
- decreased international competition
what are the drawbacks of skilled workers?
- high labor costs
- increased training requirements
- harder to recruit
what are the benefits of skilled workers?
- improved productivity
- improved quality
ways to overcome skill shortages offered by the govt?
- encourage migration
- invest in vocational education
- tax incentives
- apprentices
ways to overcome skill shortages?
- raise wages in remuneration
- offer better training and other non financial incentives
- collaborate with other firms
- offshore activities with skill shortages
- outsource to specialist providers
