4.2.1 condidtions of prompt trade Flashcards
what is a push factor
are those that force a business to leave the market in which they currently operate to look for new income streams in the future
saturated markets occur when …
nearly all potential customers already have the product that a business sells, or a close substitute of it
what are pull factors
are those that attract a business to a global market
what are Economies of scale
occur because a business can benefit from operating in a global market by significantly reducing costs as the scale of the business increases
This may be through purchasing economies as its buying power increases and it negotiates cheaper unit costs through bulk buying
what is risk spreading
means that the business becomes less reliant on the vagaries of one or just a few markets. For example, the UK market might experience a shock such as Brexit that impacts on the sales of some businesses
By moving into different markets the business can negate such risks
describe off shoring
occurs when a business relocates production to another country
The key reason for this is cost minimisation as the production process can be undertaken at a reduced cost in comparison to the domestic economy
Closeness to market will reduce transport costs for businesses and might allow for easier access to consumers, particularly if operating in the country being targeted
describe outsourcing
occurs when a business contracts out production to another business. This might lead to a loss of quality control but can allow the business to match supply to meet demand
The outsource business might be a specialist, which is likely to lead to an improvement in the quality of the product
Extending the product life cycle by selling in multiple markets
One of the main reasons for operating in a global market is to extend the life cycle of a product
As the product being sold reaches the decline stage in a mature market the business can increase the product’s life by introducing it to other, mainly less mature, markets
This might require adapting the product to suit local tastes or a large promotional budget to raise awareness
However, if successful, this might extend the life of the product for a number of years
Each market is different so this will require local knowledge if it is to be successful
