4.2.1 conditions that prompt trade

Question 1

offshoring

Answer 1

occurs when a business relocates part of its business operations overseas

• relocating factories from costly countries to cheaper economies to improve profit margins
• lower cost of production usually passed onto consumer

-act of basing some of a business’s processes or services overseas so as to take adv of lower costs

Question 2

outsourcing

Answer 2

where a business function is contracted to a third party

• moving internal operations to a third party e.g. outsourcing cleaning to a cleaning business
• usually jobs outsourced to specialists

-giving responsibility for a business process to an outside company

Question 3

international trade

Answer 3

the exchange of products between countries

Question 4

why do businesses want to target international trade markets ?

Answer 4

• reduce dependance on domestic markets
• access faster growing markets and demand
• achieve EOS
• better service to customer located overseas
• build brand value, particularly global brands

Question 5

factors contributing to trade internationally

Answer 5

1. push factors (force)

2. pull factors (opportunity)

Question 6

push factor

Answer 6

businesses feel they have to expand internationally because of domestic/home market issues
e.g. saturated domestic markets, intense competition

Question 7

pull factor

Answer 7

business are attracted by compelling opportunities to grow by expanding internationally
e.g. EOS, outsourcing, offshoring, risk spreading/diversification

EOS: extending business overseas = opportunity to increase output & access EOS reducing unit costs, might involve offshoring production to lower-cost economies

Question 8

conditions that prompt trade

Answer 8

SCOORE
saturated market
competition 
offshoring and outsourcing 
risk spreading 
economies of scales

significant = risk spreading operation in more places if one fails = other branches to fall back on & help build business back up

Question 9

Push factors examples

Answer 9

Saturated domestic markets 
Large growth opportunities 
End of product life cycle at home (push out of domestic market) 
Need to diversify 
Need to reduce risk

Question 10

Pull factors examples

Answer 10

Attract to new overseas markets in emerging economies
Opportunity to gain EOS by expanding overseas
Opportunity to exploit competitive adavnatages in new markets
Ways to extend product life cycle

Question 11

Product life cycle

Answer 11

Both push and pull factor
Maturity/saturation= prompt trade (pushed into competition)
Introduction prompt trade (pulled into to diversify risk)
Decline (pushed out to expand abroad prompts trade)

Extension strategy to sell abroad
Uk product can be in decline but if release in another country reach launch stage = extends lifecycle of product and brand
E.g. Kit Kat , nestle in maturity but dropped to dr kind and expanding abroad to Japan

Question 12

How can product life cycle help prompt trade

Answer 12

Push business to expand abroad due to saturated market and intense competition they may be facing in maturity

Can also be pulled by wanting to diversify risk in introduction phase

Pushed during the decline phase as extension strategy

Question 13

economies of scale

Answer 13

where average costs per unit falls as output increases

Question 14

saturated market

Answer 14

when a market is not generating new demand for a exisiting product or service

Question 15

competition

Answer 15

rivalry between a business and another business who offers a similar product or service to a similar market

Question 16

S C O O R E

Answer 16

saturated market 
competition 
offshoring 
outsourcing 
risk diversify 
economies of scale

Question 17

product life cycle stages

Answer 17

1. development
2. introduction
3. growth
4. maturity
5. decline