4.2.1 - Conditions That Prompt Trade Flashcards
Define Push Factors
Factors that force a business to leave the market in which they currently operate
Define Saturated Markets
When nearly all potential customers already have the product that a business sells
What Does Competition Suggest?
That a business will struggle to survive in markets where others have a competitive advantage
Define Pull Factors
Factors which attract a business to a new market, often a global one
How do Economies of Scale Act as a Pull Factor?
A business can benefit from operating in a global market because of the benefits of increasing scale (e.g. bulk buying power)
Define Risk Spreading
Where a business becomes less reliant on the unpredictability of just one market
Define Off-Shoring
When a business relocates production to another country
Why Might a Business Choose to Off-Shore its Production?
> Lower taxes
Access to a larger workforce
Cheaper workforce
Define Outsourcing
When a business contracts out production to another business
What’s an Advantage and Disadvantage of Outsourcing?
> Outsource business may be a specialist capable of improving efficiency or quality
> Loss of control could lead to a loss of quality or output
Name 3 Push Factors
> High competition
Saturated domestic market
Poor market development
Name 3 Pull Factors
> Economies of scale
Risk spreading opportunities
Low taxes/business incentives
How do Saturated Markets Act as a Push Factor?
Saturated markets create conditions in which sales are usually replacement ones and as such sales revenue is usually low or begins to fall
