4.2.1. Conditions Prompting Trade

Question 1

Push factors

Answer 1

Factors that drive a business to expand outside/ away from its domestic country
-Usually are threats

Question 2

Reasons driving a firm from its domestic reliance

Answer 2

-Saturated markets
-Competition

Question 3

Extending PLC

Answer 3

-As product nears decline phase, entering new international markets may represent viable extension strategy.
-In some cases entering a new market can prolong growth stage of life cycle.

Question 4

Pull factors

Answer 4

-factors encourage businesses to operate within markets that present significant growth opportunities abroad by internationally trading

Question 5

Factors attracting business into foreign markets

Answer 5

1. Economies of scale
2. Offshoring and Outsourcing
   3.Risk spreading

Question 6

Economies of scale

Answer 6

Economies of scale- boosted of production is concentrated in few locations globally. Reduction in unit costs boosting profit margins and revenues

Question 7

Possibility of offshoring and outsourcing

Answer 7

Possibility of offshoring and outsourcing-
-Reduce costs by offshoring: moving one or more businesses to foreign country usually for lower labour costs
-Outsourcing: another business to perform a task on your behalf

Question 8

Risk spreading

Answer 8

Risk spreading: entering more international markets to spread risk. If sales fail in one country, you can move to other markets where sales may remain stable.
If entry is successful the overall risk faced by business is reduced