9.3 Internationalisation

Question 1

What are the main methods of entering international markets?

Answer 1

Export.
Agents.
Overseas operations.
Joint venture/takeovers.

Question 2

Why may a business choose to export their products internationally?

Answer 2

Keep entire profit margin.
Online promotion is cost effective.
Use existing systems.

Question 3

Why may a business choose to sell their products through an agent? (E.g. travel)

Answer 3

They have specialist market knowledge and existing customers.

Question 4

What are the drawbacks of using an agent?

Answer 4

Loss of profit margin - need commission.
Unlikely to be exclusive - selling other products as well and therefore lots of competition.

Question 5

Why would a business choose to open an operation overseas?

Answer 5

Quickly gain insight in market.
Avoid tariffs and taxes.

Question 6

Why would a business choose to partake in a joint venture or takeover abroad?

Answer 6

Risks are shared across you and partner.
Share expertise and market knowledge.

Question 7

Why would a business want to expand internationally?

Answer 7

Access faster growing markets and demand.
Reduces dependence on domestic market - particularly if operating in high risk countries.

Question 8

What is a tariff?

Answer 8

A tax that raises the price of imported products.

Question 9

Define quota.

Answer 9

Quantitative limits on the level of imports allowed into a country in a given time period.

Question 10

What are domestic subsidiaries?

Answer 10

Government aid for domestic businesses facing financial problems.

Question 11

Give one example of a tariff.

Answer 11

USA charges 100% on Chinese EVs.

Question 12

Give one example of a real life quota.

Answer 12

USA allows just over 2 million kilos of cocoa powder in a year.

Question 13

Name 3 factors influencing the attractiveness of an international market.

Answer 13

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.

Question 14

Define multinational companies (MNC).

Answer 14

A business that has operations in more than one country.

Question 15

Define globalisation.

Answer 15

Operating on an international scale.

Question 16

Give 2 reasons why there is a growth in the number of MNCs.

Answer 16

Avoids protectionism against them.
Perceived need to supplement relatively weak demand.

Question 17

Define protectionism.

Answer 17

Any attempt by a country to impose restrictions on trade in order to protect domestic businesses from overseas competition.

Question 18

How do MNCs benefit a host country (3 ways)?

Answer 18

Employment and training to labour force.
Bringing in new competition - encourages domestic businesses to innovate.
Source of tax revenues.

Question 19

What are the drawbacks of globalisation for a host country?

Answer 19

Domestic business may struggle to compete - due to lack of knowledge or resources.
Profits may be sent back to home country.

Question 20

What is offshoring?

Answer 20

When production is moved overseas.

Question 21

Define re-shoring.

Answer 21

When a business returns production to original country.

Question 22

Why may a business choose offshoring?

Answer 22

Lower wages.
Lower taxes.
Less concern over ethical issues e.g. environment.

Question 23

Why may a business re-shore their production?

Answer 23

Costs of offshoring - recalls due to bad quality waste company money.
Unique selling point.
Exchange rate fluctuations - becomes more cost efficient to move back.

Question 24

Give an example of an industry who re-shored.

Answer 24

Banks moved call centres from India back to Uk as a USP - customers are able to properly understand customer support.