9.3 Internationalisation Flashcards
What are the main methods of entering international markets?
Export.
Agents.
Overseas operations.
Joint venture/takeovers.
Why may a business choose to export their products internationally?
Keep entire profit margin.
Online promotion is cost effective.
Use existing systems.
Why may a business choose to sell their products through an agent? (E.g. travel)
They have specialist market knowledge and existing customers.
What are the drawbacks of using an agent?
Loss of profit margin - need commission.
Unlikely to be exclusive - selling other products as well and therefore lots of competition.
Why would a business choose to open an operation overseas?
Quickly gain insight in market.
Avoid tariffs and taxes.
Why would a business choose to partake in a joint venture or takeover abroad?
Risks are shared across you and partner.
Share expertise and market knowledge.
Why would a business want to expand internationally?
Access faster growing markets and demand.
Reduces dependence on domestic market - particularly if operating in high risk countries.
What is a tariff?
A tax that raises the price of imported products.
Define quota.
Quantitative limits on the level of imports allowed into a country in a given time period.
What are domestic subsidiaries?
Government aid for domestic businesses facing financial problems.
Give one example of a tariff.
Trump USA - 25% all goods from Canada and Mexico.
Give one example of a real life quota.
USA allows just over 2 million kilos of cocoa powder in a year.
Name 3 factors influencing the attractiveness of an international market.
How much the product will need adapting - may be less appealing if lots needed as will require a significant investment.
Economic conditions.
Ease of entry/barriers e.g. Brexit, wars.
Define multinational companies (MNC).
A business that has operations in more than one country.
Define globalisation.
Operating on an international scale.
Give 2 reasons why there is a growth in the number of MNCs.
Avoids protectionism against them.
Perceived need to supplement relatively weak demand.
Define protectionism.
Any attempt by a country to impose restrictions on trade in order to protect domestic businesses from overseas competition.
How do MNCs benefit a host country (3 ways)?
Employment and training to labour force.
Bringing in new competition - encourages domestic businesses to innovate.
Source of tax revenues.
What are the drawbacks of globalisation for a host country?
Domestic business may struggle to compete - due to lack of knowledge or resources.
Profits may be sent back to home country.
What is offshoring?
When production is moved overseas.
Define re-shoring.
When a business returns production to original country.
Why may a business choose offshoring?
Lower wages.
Lower taxes.
Less concern over ethical issues e.g. environment.
Why may a business re-shore their production?
Costs of offshoring - recalls due to bad quality waste company money.
Unique selling point.
Exchange rate fluctuations - becomes more cost efficient to move back.
Give an example of an industry who re-shored.
Banks moved call centres from India back to Uk as a USP - customers are able to properly understand customer support.
