4.2.1 - Conditions that prompt trade Flashcards
1
Q
What are push factors
A
- There are some PUSH factors which may force a business to consider selling abroad;
- High levels of domestic competition
- Saturated markets with only low growth opportunities
2
Q
How is saturated products a push factor
A
- A saturated domestic market means that a business or group of businesses has sold a product to just about everyone who will buy one
- While R&D is taking place the business needs to continue to trade and to grow and so will look for new markets for the products abroad
3
Q
How is high competition in home market a push factor
A
- High levels of competition in the home markets mean that a business will look abroad to where there may be less competition and lucrative market opportunities to trade
- An example is the food and drink market in the UK is very competitive but there is a very buoyant market for unusual food imports to other countries
4
Q
What are pull factors
A
- There are some PULL factors which may force a business to consider selling abroad;
1. Significant opportunities to sell to overseas markets
2. Ability to spread risk across more markets
3. Ability to gain economies of scale
5
Q
How are opportunities in overseas markets a pull factor
A
- Exporting is one way for a business to increase sales and this can contribute to increased profits
- An export opportunity may arise when demand increases for your product in other countries
- A business selling in overseas markets will be able to grow faster than those limited to domestic markets
6
Q
How is ability to spread risk a pull factor
A
- A key benefit of exporting to other nations is that it allows the business to spread the risk
- By selling in other countries the business is less vulnerable to changes in the domestic economy
- Different countries may have different growth rates at any time, selling in multiple countries can give a balanced portfolio of growth
7
Q
how is ability to gain economies of scale a pull factor
A
- Exporting is an excellent way to drive production to a level that delivers economies of scale, particularly if the product or service is standard across export markets with little or no need for adaptation.
- Achieving greater economies of scale will allow the business to become more cost-competitive
8
Q
What is offshoring
A
- Offshoring is when a business relocates some of its production process to another country
- This may be to cut costs in terms of labour pay rates
- This may also be to take advantage of trade blocs or trade deals
9
Q
What is outsourcing
A
- This is where a business function, such as payroll, is contracted out to a third party business.
- This third party business may or may not be located abroad
- May be marketing research, legal work, accountancy or even human resources functions can be carried out by outsourced companies
- The most common example is a call centre in India
10
Q
What is production outsourcing
A
- This means sending some of the production to other companies to complete
- Some motor manufacturers now outsource not only parts but complete assemblies – steering, transmissions, engines, interior assemblies.
11
Q
What is payroll outsourcing
A
- Payroll is the most common task that companies outsource to other businesses who specialise in this task
- Services include
weekly/monthly/quarterly payroll and will involve the completion of the complex HMRC paperwork - Payroll includes the payment of taxes and NI contributions which can be beyond the skills of many self employed business owners
12
Q
What is purchasing outsourcing
A
- Purchasing and maintaining information systems
- Hiring and evaluating IT staff and training users can be very costly and time consuming for SMEs
- By outsourcing the IT function the business can obtain the latest technology and suitably skilled personnel
13
Q
What is delivery outsourcing
A
- Larger businesses might prefer to contract a major delivery firm rather than maintain their own fleet.
- Either way, the business can hire the expertise to keep delivery problems and decisions off their desk
14
Q
What would be the advantages of moving a call centre to india
A
- India is a hub of talent. It has skilled call centre professionals who can provide businesses with efficient services at fraction of the UK cost.
- Indian call centres utilise the best of technology, software and infrastructure.
- The time zone difference between western countries and India makes it possible for companies to offer customers quality services on a 24x7 basis.
- A vast majority of the Indian population speaks English. They also have workers who can speak other foreign languages like French, German, Spanish.
- India also has a growing pool of technical talent, making it an ideal location to outsource call centre services to.
- India’s highly advanced satellite-based telecommunication network helps in highspeed transfer of voice and data from all over the world.
- The Indian government is very supportive of the IT industry and does all it can to nurture it.
15
Q
What are the disadvantages of moving a call center to India
A
- One of the biggest disadvantages of outsourcing is the risk of losing sensitive data and the loss of confidentiality.
- Losing management control of business functions mean that businesses may no longer be able to control operations as well as if the were in domestic markets.
- Problems with quality can arise if the outsourcing provider doesn’t have proper processes and/ or is inexperienced in working in an outsourcing relationship.
- Since the outsourcing provider may work with other customers, they might not give 100% time and attention to a single company. This may result in delays and inaccuracies in the work output.
- Hidden costs and legal problems may arise if the outsourcing terms and conditions are not clearly defined.
- Not understanding the culture of the outsourcing provider and the location where the business outsources to may lead to poor communication and lower productivity.
