4.2 Global Markets & Business Expansion Flashcards
What are push factors
factors that force a business to expand globally
examples of push factors (3)
saturated market- when the demand for the g/s has peaked
intense competition
high costs
what are pull factors
factors that attract a firm to operate globally
examples of pull factors
economies of scale
spreading of risk
what is offshoring
when a firm moves its production process abroad
pros and cons of offshoring 3,3
lower labour costs
access to specialised suppliers (better quality)
economies of scale
less employer/employee relations
increased short term costs of relocating, training new staff, buying new premises
potential poor customer service due to language/culture differences
what is outsourcing
when a firm hires an external firm to do certain tasks
pros and cons of outsourcing
can take advantage of specialised skills
cost effective as no money spent on new facility
higher labour productivity in other countries
damage to brand image
poor communication->increased costs
what is an extension strategy used for
used to extent the life cycle of a g/s
5 factors to consider before entering a country as a market
ease of doing business
level of disposable income
infrastructure
exchange rate
political stability
9 factors to consider before entering a country as a production location
cost of production
government incentive
ease of doing business
political stability
natural resources
ROI
location in trade bloc
infrastructure
skill and availability of labour
what is a global merger
the combining of two firms in different countries
what is a joint venture
when two firms come together on a specific project
reasons for a joint venture/global merger 5
spreading of risk
entering new markets
getting brand names/patents
securing resources
global competitiveness
pros and cons of global mergers/joint ventures 3,4
economies of scale
spreading risk
new markets
high initial costs
diseconomies of scale
culture clash
redundancies-> lower motivation
pros and cons of a currency appreciation (SPICED) 2,1
imports are cheaper eg raw materials->higher profit margin OR lower prices
exports are more expensive->fall in sales
pros and cons of a depreciation (WIDEC) 2,1
exports are cheaper->more competitive
imports more expensive so less competition from foreign firms
imports more expensive -> raw material prices rise->high prices or lower profit margin
what is cost leadership
when a firm is the lowest cost producer
how to achieve cost leadership 4
increase productivity
better technology
outsourcing
offshoring
what is differentiation
when a firm makes their g/s different to those of their competitors
how to achieve differentiation 4
better design
strong branding
better quality
customer service
