9.3 assessing internationalisation

Question 1

what is free trade

Answer 1

when business can trade between countries with without barriers such as tariffs and quotas, eg the EU

Question 2

what is a customs union

Answer 2

when there is free trade between member counties but agreed tariffs on non-members

Question 3

what is outsourcing(off-shoring) and re-shoring

Answer 3

outsourcing is moving production abroad

re-shoring is moving production back to the home country of the business

Question 4

what is a multinational (MNCs)

Answer 4

an organisation that have production bases in more than one country

Question 5

why are MNCs welcomed by governments overseas

Answer 5

• bring skills and expertise
• bring employment
• bring investment
• increases investment
• increases the demand for local goods
• increase tax revenue

Question 6

what could MNCs be criticised for

Answer 6

• exploiting local resources
• keeping senior jobs for their staff and only employing local employees for low-level jobs
• keeping majority of profits for themselves with little investment in local area
• finding ways to avoid high level software taxes
• being involved in corruption to win contracts

Question 7

what are the influences on buying, selling and producing abroad

Answer 7

• pressure for growth- for example, from investors
• pressure for lower cost- managers may be forced to search globally for the lowest cost resources or production sites
• location- the need to be closer to overseas markets may affect locational decisions
• availability of suitable resources locally- for example, it may be necessary to source inputs overseas if if they are not available locally
• politics/economics- the political and economic situation may affect the ease with which business can be undertaken overseas

Question 8

what factors influence if different overseas decisions need to be made compared to local decisions

Answer 8

• the extent to which the local market differs in terms of customer requirements
• the cost of adapting the products to local needs
• the cost of benefits (economies of scale) from standardising products and selling the same products all around the world
• the ease of managing the business centrally from one location

Question 9

4 strategic options for Barlett and Ghoshal matrix

Answer 9

• international- low pressure for both global integration and local responsiveness
• multi-domestic- low pressure for global integration and high pressure for local responsiveness
• global- high pressure for global integration and low pressure for local responsiveness
• transnational- high pressure for both global integration an d local responsiveness

Question 10

impact of internationalisation on the functional areas of business

Answer 10

• market research activities, find out more about new markets
• R+D, develop or modify products for new market
• purchasing of supplies, businesses now have more suppliers all over the world
• production, produce overseas to benefit from lower costs
• marketing decisions, how to price, promote and disturb products
• HR, how and where to recruit