4.2 Global Markets & Business Expansion

Question 1

What are push factors

Answer 1

factors that force a business to expand globally

Question 2

examples of push factors (3)

Answer 2

saturated market- when the demand for the g/s has peaked

intense competition
high costs

Question 3

what are pull factors

Answer 3

factors that attract a firm to operate globally

Question 4

examples of pull factors

Answer 4

economies of scale
spreading of risk

Question 5

what is offshoring

Answer 5

when a firm moves its production process abroad

Question 6

pros and cons of offshoring 3,3

Answer 6

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

Question 7

what is outsourcing

Answer 7

when a firm hires an external firm to do certain tasks

Question 8

pros and cons of outsourcing

Answer 8

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

Question 9

what is an extension strategy used for

Answer 9

used to extent the life cycle of a g/s

Question 10

5 factors to consider before entering a country as a market

Answer 10

ease of doing business
level of disposable income
infrastructure
exchange rate
political stability

Question 11

9 factors to consider before entering a country as a production location

Answer 11

cost of production
government incentive
ease of doing business
political stability
natural resources
ROI
location in trade bloc
infrastructure
skill and availability of labour

Question 12

what is a global merger

Answer 12

the combining of two firms in different countries

Question 13

what is a joint venture

Answer 13

when two firms come together on a specific project

Question 14

reasons for a joint venture/global merger 5

Answer 14

spreading of risk
entering new markets
getting brand names/patents
securing resources
global competitiveness

Question 15

pros and cons of global mergers/joint ventures 3,4

Answer 15

economies of scale
spreading risk
new markets

high initial costs
diseconomies of scale
culture clash
redundancies-> lower motivation

Question 16

pros and cons of a currency appreciation (SPICED) 2,1

Answer 16

imports are cheaper eg raw materials->higher profit margin OR lower prices

exports are more expensive->fall in sales

Question 17

pros and cons of a depreciation (WIDEC) 2,1

Answer 17

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

Question 18

what is cost leadership

Answer 18

when a firm is the lowest cost producer

Question 19

how to achieve cost leadership 4

Answer 19

increase productivity
better technology
outsourcing
offshoring

Question 20

what is differentiation

Answer 20

when a firm makes their g/s different to those of their competitors

Question 21

how to achieve differentiation 4

Answer 21

better design
strong branding
better quality
customer service