4.2 global markets and expansion

Question 1

What are push factors ?

Answer 1

Factors that push a business to expand outside of their domestic country

Question 2

What is a saturated market ?

Answer 2

Saturated markets occur when the demand for goods and services has reached a peak and it becomes challenging for businesses to grow and expand within the local market

Question 3

What are two push factors

Answer 3

Saturated markets

Intense competition

Question 4

What are pull factors?

Answer 4

Encourage businesses to operate within markets abroad presenting significant growth opportunities

Question 5

What are two examples of some pull factors ?

Answer 5

1. Economies of scale
2. Spreading risk - diversify customer base and reduce exposure to risks associated with operating in one market.

Question 6

What is offshoring ?

Answer 6

a company moves part of the production process, or all of it, to another country

Question 7

What is a benefit of offshoring ?

Answer 7

• lower labour costs
• access to specialist suppliers abroad
• economies of scale

Question 8

what is a disadvantage of offshoring ?

Answer 8

• employer and employee relations may suffer due to relocation
• loss of domestic workers losing jobs
• increased short term costs
• poor customer service due to language and cultural differences

Question 9

what is outsourcing ?

Answer 9

occurs when a business hires an external organisation to complete certain tasks or business functions

Question 10

Benefits of outsourcing ?

Answer 10

• take advantage of specialists skills that another business has
• cost effectiveness as businesses avoid having to spend money investing in facilities abroad
• benefit from higher labour productivity

Question 11

Disadvantages of outsourcing ?

Answer 11

• the value of the two businesses may not be align damaging brand image and reputation
• poor communication

Question 12

What is the product life cycle ?

Answer 12

the value of sales from the time a product is introduced into the market until it is no longer sold

Question 13

What is the stages in the product life cycle ?

Answer 13

Development
Introduction
Growth
Maturity (+ extension strategy )
Decline

Question 14

What factors do you assess when looking at production locations abroad?

Answer 14

Ease of doing business
Levels and growth of disposable income
Infrastructure
Exchange rates
Political stability
Costs of production
Skills available
Trading bloc

Question 15

What is an exchange rate ?

Answer 15

price of one currency in terms of another

Question 16

What is a global merger ?

Answer 16

Permanent agreement between two businesses from two different countries to join together

Question 17

What is a joint venture ?

Answer 17

When two businesses join together to share their knowledge, resources and skills to form a separate business entity for a limited period of time

Question 18

What are the reasons for mergers or joint ventures ?

Answer 18

1. Spreading risk
2. Entering new markets
3. Acquire national/international brand names
4. Securing resources/ supplies
5. Maintaining global competitiveness

Question 19

What is the benefits of global mergers and joint ventures?

Answer 19

• Economies of scale
• Diversifying risk
• Opportunity to enter new markets

Question 20

What is the disadvantages of global mergers and joint ventures ?

Answer 20

• High initial costs
  -Diseconomies of scale
• Culture clash
• Redundancies of workers

Question 21

What is global competitiveness?

Answer 21

Ability of a business to perform better than its rivals across markets in different countries

Question 22

What is currency appreciation ?

Answer 22

An appreciation of the exchange rate means the value of a currency increases against another currency

Question 23

What is the advantage and disadvantage of currency appreciation?

Answer 23

• If businesses import raw materials and components from abroad they will be cheaper
• If businesses export goods/services to foreign customers the goods will be more expensive for international customers

Question 24

What is currency depreciation ?

Answer 24

The value of the currency decreases against another currency

Question 25

What is the advantage of a depreciation ?

Answer 25

• If businesses export goods abroad they become more competitive because their products are cheaper to purchase
• less foreign competition for domestic businesses as imports are now expensive

Question 26

What is the disadvantage of depreciation ?

Answer 26

• if businesses import raw materials or components from abroad they are now more expensive

Question 27

What are the two factors that provide a competitive advantage ?

Answer 27

Cost leadership - when a business becomes the lowest cost producer

Differentiation - business makes the characteristics of their products/services to those of competitors

Question 28

How do you achieve cost leadership ?

Answer 28

• Increasing productivity of workforce
• Using machinery and technology efficiently
• Outsourcing
• Offsourcing

Question 29

How do you differentiate ?

Answer 29

• Developing a strong brand
• Better design
• Better quality
• Customer service

Question 30

What is the impact of skills shortages ?

Answer 30

• Affect ability to gain a competitive advantage
• May not be as productive
• Workers lack skill and expertise