9.3 Assessing internationalisation

Question 1

Advantages of internationalisation

Answer 1

• Gives businesses access to a larger market of customers which can increase sales revenue and profit
• Can reduce a business’ risk in case demand in the home market declines rapidly following a change in tastes and fashions

Question 2

What is exporting

Answer 2

Allows a business to access international markets by selling products abroad

Question 3

What is licensing

Answer 3

Allows a business to access international markets by providing overseas businesses with a license to sell and produce its products in that country

Question 4

What are alliances

Answer 4

Allows a business to access international markets through working in partnership together to share risk

Question 5

What is direct investment

Answer 5

Allows a business to access international markets through investing in facilities, such as a production centre, abroad

Question 6

The factors affecting a business when choosing an international market to enter

Answer 6

• Size of the local market (growth rate and size must be considered as a large or growing market will be more attractive)
• Political stability and culture in which the international market is located (can affect the complexity of entering the market)
• Local competition (affects the likelihood of a foreign business being able to access the market with success)

Question 7

Why does a business source its raw materials from overseas suppliers

Answer 7

May be cheaper than raw material bought from the home market

Question 8

What is off shoring

Answer 8

Involves a business moving part of its production process to an overseas manufacturer

Question 9

Advantage of off shoring

Answer 9

Can reduce costs which allows a business to lower its selling price or increase profit

Question 10

Disadvantage of offs horing

Answer 10

Can lead to quality problems if overseas producers do not uphold the same quality standards as the business which outsources

Question 11

What is re-shoring

Answer 11

Involves a business bringing its production processes back to the original country

Question 12

Advantage of re-shoring

Answer 12

Can increase quality as production can be monitored more closely which can build a business’ reputation

Question 13

Disadvantage of re-shoring

Answer 13

Can increase costs which means business may need to increase its selling price or accept reduce profit

Question 14

Multinational organisations

Answer 14

Businesses can target overseas market by becoming a multinational organisation - it is a business which has production facilities in more than one country

Question 15

Influences on the decision to enter an international market

Answer 15

• Quality
• Cost reduction

Question 16

Factors influencing the management of an international business

Answer 16

• Cultural differences (trading may involve dealing with different cultures)
• Legal differences (dealing with different laws when trading)
• Markets and customer demands (demands for different products or services, or adapted products and services)

Question 17

Bartlett and Ghoshal’s Model

Answer 17

Proposes four strategies to support international businesses

Question 18

Bartlett and Ghoshal’s measures

Answer 18

Pressure for local responsiveness (the requirement to adapt a product according to location) and pressure for reducing costs to decide the most appropriate strategy for a business to pursue

Question 19

Global Organisation

Answer 19

Low local responsiveness, High global integration

Question 20

Transnational Organisation

Answer 20

High Local responsiveness, High global integration

Question 21

International Organisation

Answer 21

Low Local responsiveness, Low global integration

Question 22

Multidomestic Organisation

Answer 22

High Local responsiveness, Low global integration

Question 23

Local responsiveness

Answer 23

If customer requirements differ significantly in different countries, local responsiveness pressure is high

Question 24

Cost reduction

Answer 24

If the business competes based on its efficiency and therefore requires, e.g, economies of scale, to operate competitively, there is a pressure for cost reduction