9.3d - Influences on Buying, Selling and Producing Abroad

Question 1

Why would a firm buy products from abroad?

Answer 1

• Only place it can get inputs from

- Can be bought at a lower cost

Question 2

How can a firm ensure success of buying products from abroad?

Answer 2

• Find reliable, good quality suppliers

- Pay necessary tariffs and quotas

Question 3

Advantage of selling products abroad:

Answer 3

• Wider target market
• Market development
• Economies of scale

Question 4

How can a firm ensure the success of selling products abroad?

Answer 4

Geographic segmentation

Question 5

Advantages of producing products abroad:

Answer 5

• Lower labour costs
• More efficient to make product where inputs are bought/where it will be sold
• Avoid tariffs and quotas
• Cost of land is cheaper
• Absorb more local knowledge

Question 6

How can a firm ensure the success of producing products abroad?

Answer 6

• Being aware of laws and cultures

- There is a suitable infrastructure in place

Question 7

What is the key reason for operating internationally?

Answer 7

The pressure to reduce costs

Question 8

Bartlett and Ghoshal’s strategies definition

Answer 8

A model that considers what strategies a business should follow depending on the balance it strikes between the level of pressure for cost reduction and the level of pressure for local responsiveness

Question 9

What are the four strategies suggested by Bartlett and Ghoshal?

Answer 9

• Global
• Transnational
• International
• Multi-domestic

Question 10

Features of the ‘global’ strategy:

Answer 10

• High pressure to reduce costs, low pressure for local responsiveness
• Aims to be a cost leader
• Mass produced standardised products

Question 11

Advantages of the ‘global’ strategy:

Answer 11

• Focus on efficiency

- Movement on experience curve

Question 12

Disadvantages of the ‘global’ strategy:

Answer 12

• Not responding to local needs

- Not good when selling B2C

Question 13

Features of the ‘transnational’ strategy:

Answer 13

• High pressure to reduce costs, high pressure for local responsiveness
• Benchmarking
• Good communication
• Large MNC

Question 14

Advantages of the ‘transnational’ strategy:

Answer 14

• Economies of scale and scope
• Movement down experience curve
• Customise products to meet local demand
• Benchmarking

Question 15

Disadvantages of the ‘transnational’ strategy:

Answer 15

It is difficult to implement

Question 16

Features of the ‘international’ strategy:

Answer 16

• Low pressure to reduce costs, low pressure for local responsiveness
• Business managed from home country
• Centralised

Question 17

Advantages of the ‘international’ strategy:

Answer 17

• Mass production

- Maintains control

Question 18

Disadvantages of the ‘international’ strategy:

Answer 18

• No understanding of local market

- No benefit from experience curve

Question 19

Features of the ‘multi-domestic’ strategy:

Answer 19

• Low pressure to reduce cost, high pressure for local responsiveness
• Transfers successful domestic strategy into local markets
• Decentralised

Question 20

Advantages of the ‘multi-domestic’ strategy:

Answer 20

• Customised to suit local markets

- Set specific objectives

Question 21

Disadvantages of the ‘multi-domestic’ strategy:

Answer 21

• No benefit from economies of scale
• High costs
• Lack of control

Question 22

When does low pressure for local responsiveness occur?

Answer 22

When the demands of markets in other countries are similar to the demands of the home market

Question 23

The competitive nature of internationalism means that a business will eventually have to adapt to which approach to survive?

Answer 23

• Global

- Transnational

Question 24

A multi-domestic strategy may work unless what?

Answer 24

It faces competition which is trying to compete on price (will have to move towards a transnational policy if so)

Question 25

Advantages of MNC’s for developing countries:

Answer 25

• Employment opportunities
• Increased standard of living through better pay
• Inward investment on building infrastructure
• Economic growth
• Pay taxes

Question 26

Disadvantages of MNC’s for developing countries:

Answer 26

• Low wages
• Poor working conditions
• Products don’t meet EU safety standards
• Use large quantities of unsustainable natural resources
• Government may overlook unlawful behaviour because they rely on the tax income

Question 27

Transfer pricing definition

Answer 27

When a MNC buys and sells products between parts of the company based in different countries to make profits appear to belong in a country with low tax rates to reduce the tax that they pay

Question 28

What has the EU ruled in regard to employment laws for MNC’s?

Answer 28

The EU has standardised employment laws to ensure that MNC’s within the EU have to meet minimum standards wherever they are