Conditions That Promot Trade Flashcards
1
Q
Evidence that businesses are becoming increasingly international
A
- trade to GDP ratios are increasing for most countries
- expansion of financial capital flows between countries
- rising number of global brands
2
Q
Why international markets are targeted
A
- reducing dependence on domestic market
- accessing faster growing markets and demand
- achieving EOS
- better serving customers located overseas
- building brand value
3
Q
Push factor
A
Where businesses feel they have to expand internationally because of domestic/ home market issues
4
Q
Pull factors
A
When businesses are attracted by compelling opportunities to grow by expanding internationally
5
Q
Key push factors that prompt trade
A
- Saturated markets
- increased competition
6
Q
Push factor: saturated markets
A
- a feature of markets where sale growth has stalled or is falling
- difficult for firms to grow revenues other than by taking market share form competitors
- market often characterised by a lack of product innovation
- strategic response is often to look for growth opportunities for the same product in overseas markets
7
Q
Push factor: increased competition
A
- domestic firms may be faced with new market entrants who take market share
- result is lower revenues in the domestic market- creating the incentive to pursue revenues elsewhere
8
Q
Two key pull factors promoting trade
A
- EOS
- Risk spreading
9
Q
Pull factor: EOS
A
- extending a business’ operations overseas provides an opportunity to increase output and access EOS, thereby reducing unit costs
- this might involve offshoring production to lower cost economies
10
Q
Pull factor: Risk spreading
A
- Ansoff matrix suggests that moving into new markets (overseas) involves greater risk (market development)
- however, trading internationally can spread the activities and revenues of a business over a wider range of markets, making the business less dependent on domestic demand
