Conditions that prompt trade 4.2.1 Flashcards
What are conditions that prompt trade?
Things that make a firm want to operate in a different country.
What are the push factors?
Factors that force a business to leave the market in which they currently operate.
What are 2 push factors?
- Saturated markets
- Competition
What is a saturated market?
When nearly all potential customers already have the product that a business sells.
What does competition suggest?
That a business will struggle to survive in markets where others have a competitive advantage
What are pull factors?
Factors which attract a business to a new market, often a global one.
What are 2 pull factors?
- Economies of scale
- Risk spreading
How do Economies of Scale Act as a Pull Factor?
A business can benefit from operating in a global market because of the benefits of increasing scale (e.g. bulk buying power).
What is risk spreading?
Where a business becomes less reliant on the unpredictability of just one market.
What is offshoring?
When a business relocates production to another country.
Why Might a Business Choose to Off-Shore its Production?
- Lower taxes
- Access to a larger workforce
- Cheaper workforce
What is outsourcing?
When a business contracts out production to another business.
What’s an Advantage and Disadvantage of Outsourcing?
- Outsource business may be a specialist capable of improving efficiency or quality.
- Loss of control could lead to a loss of quality or output.
What is labour productivity?
Cheaper labour is often a pull factor to businesses, and its more about each worker costing less per unit of output that they produce. This is known as labour productivity.
What are the 5 stages of the product life cycle?
- Development
- Introduction
- Growth
- Maturity
- Decline
