Edexcel-Conditions that prompt trade 4.2 Flashcards
Push factors
Factors that push a country to expand outside their domestic country.
What can saturated markets and intense competition lead to?
Access new markets
Diversify customer base
Gain a competitive advantage
Adverse conditions
Cause a business to look at opportunities in countries abroad.
Saturated market
Demand for goods and services has reached its peak and there is no opportunity to expand in the environment.
What may a business do in a saturated market?
Explore opportunities in a global market
Help sustain profit and growth
What might businesses do when in intense competition?
Differentiate and gain a competitive advantage.
Explore new markets
Expand customer base
What can exporting goods do?
Reduce businesses reliance on one market.
Diversify revenue
Reduce exposure to competition
pull factors
Encourage businesses to operate within a market abroad to present growth opportunities.
When does economies of scale happen?
Business expands its production into new market.
How does economies of scale help a business?
Able to purchase raw materials and labour at lower prices than domestic markets.
How can businesses spread risk?
Diversify their customer base.
What does spreading risk do for businesses ?
Reduce exposure to risks associated with operating in a single market.
What risks happen?
Risks that impact operations and profitability.
Offshoring
Moves production process to another country.
Who’s offshoring carried out by?
The same business
Offshoring reasons
Lower labour costs
Access raw materials
Access skilled labour
Offshoring advantages
Lower labour costs
Access to specialised suppliers
Economies of scale
Offshoring disadvantages
Employer/employee relationships may suffer.
increased costs in a short time
cultural differences can lead to poor customer service.
outsourcing
occurs when business hires external organisation to complete task or business function.
outsourcing reasons
reduced costs
allows businesses to focus on core competencies
easier to comply with rules and regulations.
outsourcing advantages
businesses can take advantage of specialist skills.
cost effective
higher labour productivity
outsourcing disadvantages
damage to brand image if business values don’t align.
product life cycle
represents value of sales from time product is introduced to no longer sold.
product life cycle stages
Introduction
Growth
Maturity
Decline
Extension strategy
methods used to lengthen life cycle of a product.
Extension strategy example
Business sell to an international market.
