4.2.2 Assessment of a country as a market

Question 1

factors affecting the suitability of a country as a market?:

Answer 1

1. levels and growth of disposable income = higher = more suitable= more consumer spending = boost economy
2. ease of doing business = easier = more trade = increase consumer choice = larger market
3. infrastructure = higher levels = increase in trade levels as easier to travel/communicate with potential buyers = larger overall market
4. political stability = not = less consumer confidence = discourage consumption - less likely to invest in markets = suspicious of corruption in government
5. exchange rate = poor = other countries won’t want their products and goods = limit trade - not suitable as a small market

Question 2

level and growth of disposable income impacting suitability of market

Answer 2

GDP per capita good measure for relative levels of disposable income in different international markets

• businesses wanting to expand internationally may identify countries with fast growing income per capita as a key factor
• rising disposable income associated with growth of a ‘middle class’ money to spend on products/services
• seen as a rising star and perfect for a strategy of market development

Question 3

disposable income

Answer 3

total income an individual has available to spend after paying income taxes and any other statutory payments

Question 4

ease of doing business

Answer 4

how accessible markets are for a business

e. g. excessive bureaucracy
e. g. regulatory framework
e. g. government support

-barriers to entry

Question 5

bureaucracy

Answer 5

implies a complex structure with multiple layers and procedure that make decision making slow

-bureaucracies can render systems formal and rigid which is desirable in context where following safety procedures is critical

Question 6

infrastructure

Answer 6

refers to facilities that support every day economic activity e.g. roads, phone lines and gas pipes

• have adequate road/rail/sea/air transport systems = goods exported and imported easily
• have suitable buildings/premises where goods could be manufactured
• have reliable power system

Question 7

political stability

Answer 7

• increased in some areas of world whilst declining in others
• poor governance = difficult to trade successfully
• corruption is sometimes rife = major element in being able to do business
• civil wars, create unrest & reduce business confidence in investing time and effort in doing trade with that country

Question 8

exchange rate

Answer 8

value of 1 currency in relation to another
- have a significant impact on profits of a business operating in foreign markets

• if exchange rate of £ appreciates = make product more expensive in foreign countries (spiced)
• any profit made in foreign country from providing goods or service = worth less whee its repatriated (sent back) to UK as business will have to turn foreign currency into £ = impact negatively on profits of business

Question 9

SPICED

Answer 9

Strong 
Pound 
Imports
Cheap 
Exports 
Dear

Question 10

importers

Answer 10

like a high currency value = makes foreign goods cheaper relative to them

Question 11

exporters

Answer 11

enjoy a low currency value as it increases demand for their goods relative to competitors in other countries

Question 12

export

Answer 12

send goods/services to another country for sale

Question 13

import

Answer 13

brings goods/services into a country from abroad for sale

Question 14

invisible export/import

Answer 14

doesnt involve transfer of goods/tangible object e.g. service sectors, banking, advertising, insurance etc

Question 15

visible export/import

Answer 15

any good ( raw materials and finished manufactures) that can be seen/recorded as it crosses boundaries between countries