4.2.1 Conditions that prompt trade

Question 1

Push factors

Answer 1

-When a business feels that it must expand internationally due to weakness or threats

Question 2

Push factors include

Answer 2

-Excessive competition
-Saturated domestic markets
-The need to extend the product life cycle

Question 3

Saturated markets

Answer 3

-Lack of growth opportunities domestically
-When all customers in the market have brought the product e.g washing machines
-Forces businesses to enter new geographical markets

Question 4

Competition

Answer 4

-New competitors threaten market share
-Smaller businesses forced to focus on foreign markets to survive

Question 5

Extending the product life cycle

Answer 5

-When a product reaches the decline stage domestically, can extend it by going abroad
-Cheaper than developing a new product

Question 6

Pull factors

Answer 6

Encourage businesses to operate within markets abroad which presents significant growth opportunities

Question 7

economies of scale

Answer 7

-Maximised when focus is concentrated on a few global locations

Question 8

Risk spreading

Answer 8

-Wider range of revenue sources
-Less dependent on the domestic market
-However, moving into markets abroad carries its own risk (market development)

Question 9

Outsourcing

Answer 9

When a firm contracts a specialist business to perform a business function on your behalf

Question 10

Offshoring

Answer 10

When a business decides to relocate elements of its operations overseas

Both offshoring & outsourcing:
-Reduce costs (EOS)
-Jobs lost domestically