4.2.1 Conditions That Prompt Trade

Question 1

Conditions that prompt trade

Answer 1

Range of factors entice business to seek trading opportunities with other countries

Question 2

Push factors

Answer 2

Adverse situations that force a business to loom for opportunities in international markets
Market saturation
Competition
Shareholder pressure

Question 3

Market saturation

Answer 3

As domestic markets become saturated + growth slows, businesses will look for international markets with high growth potential

Question 4

Competition

Answer 4

Domestic competition can make competing at home unprofitable

Question 5

Shareholder pressure

Answer 5

Pressure for return on investment can cause businesses to seek new opps for growth

Question 6

Pull factors

Answer 6

OPPs for business to take advantage of of lower production costs ore new growing market places
Acquiring brands + intellectual property
Economies of scale
Cost savings

Question 7

Acquiring brands + intellectual property

Answer 7

Foreign businesses may own intangible assets that r difficult to develop/replicate so buying is desirable option

Question 8

Economies of scale

Answer 8

There r significant cost savings to increase scale of operations. Risk spreading economies can also be gained from operating in different international markets

Question 9

Cost savings

Answer 9

In some developing countries, certain costs (labour/tax) r cheaper than in uk

Question 10

2 approached to becoming a multinational cooperation

Answer 10

Off-shoring + outsourcing

Question 11

Off-shoring

Answer 11

Moving manufacturing/service industries to a part of the world with lower productions costs

Question 12

Off shoring advantages

Answer 12

Access to skilled workforce
Access to raw materials
Lower wage rates

Question 13

Off shoring disadvantages

Answer 13

Damage to business rep
As economies develop, production costs increase
Cultural + language barriers

Question 14

Outsourcing

Answer 14

Moving a business function to a specialist external provider in another country

Question 15

Outsourcing advantages

Answer 15

Allows business to upgrade
Takes ad of countries comparative ad
Access to specialist facilities + knowledge

Question 16

Outsourcing disadvantages

Answer 16

Reliance on 3rd parties
Cultural + language barriers
Businesses r less flexible if tied into a contract with a specialist provider

Question 17

Extending product life cycle

Answer 17

Moving into international markets gives business opportunities to extend life cycle for products that have reached maturity