4.2 global markets and expansion Flashcards
What are push factors ?
Factors that push a business to expand outside of their domestic country
What is a saturated market ?
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
What are two push factors
Saturated markets
Intense competition
What are pull factors?
Encourage businesses to operate within markets abroad presenting significant growth opportunities
What are two examples of some pull factors ?
- Economies of scale
- Spreading risk - diversify customer base and reduce exposure to risks associated with operating in one market.
What is offshoring ?
a company moves part of the production process, or all of it, to another country
What is a benefit of offshoring ?
- lower labour costs
- access to specialist suppliers abroad
- economies of scale
what is a disadvantage of offshoring ?
- 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
what is outsourcing ?
occurs when a business hires an external organisation to complete certain tasks or business functions
Benefits of outsourcing ?
- 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
Disadvantages of outsourcing ?
- the value of the two businesses may not be align damaging brand image and reputation
- poor communication
What is the product life cycle ?
the value of sales from the time a product is introduced into the market until it is no longer sold
What is the stages in the product life cycle ?
Development
Introduction
Growth
Maturity (+ extension strategy )
Decline
What factors do you assess when looking at production locations abroad?
Ease of doing business
Levels and growth of disposable income
Infrastructure
Exchange rates
Political stability
Costs of production
Skills available
Trading bloc
What is an exchange rate ?
price of one currency in terms of another
What is a global merger ?
Permanent agreement between two businesses from two different countries to join together
What is a joint venture ?
When two businesses join together to share their knowledge, resources and skills to form a separate business entity for a limited period of time
What are the reasons for mergers or joint ventures ?
- Spreading risk
- Entering new markets
- Acquire national/international brand names
- Securing resources/ supplies
- Maintaining global competitiveness
What is the benefits of global mergers and joint ventures?
- Economies of scale
- Diversifying risk
- Opportunity to enter new markets
What is the disadvantages of global mergers and joint ventures ?
- High initial costs
-Diseconomies of scale - Culture clash
- Redundancies of workers
What is global competitiveness?
Ability of a business to perform better than its rivals across markets in different countries
What is currency appreciation ?
An appreciation of the exchange rate means the value of a currency increases against another currency
What is the advantage and disadvantage of currency appreciation?
- 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
What is currency depreciation ?
The value of the currency decreases against another currency
