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Business > Fully Confident Paper 1 > Flashcards

Fully Confident Paper 1 Flashcards

1
Q

What is a market?

A

A place where buyers and sellers come together to buy and sell goods/ services in return for money

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2
Q

What is marketing?

A

The process of identifying, anticipating and satisfying customers needs and wants profitably

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3
Q

What is a mass and niche market and there characteristics?

A

Mass : A large market where the most popular products are targeted

  • Sells goods to all consumers and markets them in the same way
  • Large number of customers
  • Businesses can exploit economies of scale

Niche - A smaller market within a larger market

  • Markets in a different way to mass marketing
  • Sells to small customer group
  • Easier to focus on the needs of the customers
  • Can charge premium prices if competition is low
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4
Q

What is the difference between risk and uncertainty?

A

Risk - When the potential outcomes from a decision are known

Uncertainty - When none of the outcomes are known in advanced

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5
Q

How does competition impact customers?

A

Customers generally benefit from competition. They may have a wider range of products to choose from.

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6
Q

How does competition impact Businesses?

A
  • Provide lower prices
  • Provide better marketing
  • Businesses start to listen to customers
  • Forces the business to produce higher quality goods/ services
  • A business may becomes less wasteful
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7
Q

What are the different types of markets?

A

Consumer Goods Market - Eg food, clothes, magazines
Market for services - Eg services for individuals
The housing market - Eg buying and selling property
Commodity Markets - Eg where raw materials are traded (oil, copper, coffee)
Financial Markets - Eg where currencies and financial products are traded (stock market)

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8
Q

What should a business do to adapt in a (dynamic) market?

A
  • Be flexible in the the way they operate
  • Carry out market research
  • Invest in new product development
  • Make continuous improvements
  • Develop a niche
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9
Q

What is a dynamic market?

A

Markets that experience rapid or continuous changes

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10
Q

What is the formula for market share?

A

(sales of a business / Total sales in the market) * 100

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11
Q

What is market research?

A

The process of gathering, presenting and analysing information about the market and consumption of goods and services

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12
Q

What is primary and secondary research and the advantages and disadvantages?

A

Primary - Research collected first hand
+Up to date and reliable
+Better if you want to collect qualitative data

  • Time consuming
  • Difficult to conduct a large sample size

Secondary - Research that already exists
+Fast
+Often better if you want to collect quantitative data

  • Can be expensive
  • Not always up to date or tailored to the business
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13
Q

What is product orientated and the advantages and disadvantages?

A

When the product is the businesses main priority. They develop products based on what they’re good and and not what the customers want.

+Allows the business to focus on the products quality
+Economies of scales can develop more easily

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14
Q

What is market orientation and the advantages and disadvantages?

A

When the customer is the businesses main priority. They develop products based on what customers want.

+Increased customer satisfaction and loyalty
+Increased sales revenue

  • Lack of innovation as the business would be focused on reacting to market trends
  • Customers desires can change rapidly
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15
Q

What is a brand?

A

Characteristics that allows consumers to identify the goods and services of a business

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16
Q

What is a brand used for?

A
  • Differentiate their product
  • Create Customer Loyalty
  • Develop an image
  • Help with product recognition
  • Charge premium prices
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17
Q

What is online retailing and the advantages and disadvantages for both businesses and customers?

A

Having businesses transactions online through buying and selling goods/services

Businesses
\+Lower overheads
\+Reach a wider market
-Website crashes
-Highly competitive
-Less trust from consumers 
Customers
\+Fast/ convenient
\+Often cheaper
-Cant test the product before buying
-chipping times
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18
Q

How do markets change?

A

Size of market-
Nature of markets- Some markets are constantly changing
New Markets- advancements in technology can lead to new markets

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19
Q

What is primary and secondary research used for?

A
  • Identify and anticipate customers needs and wants
  • Quantify likely demand
  • Gain insight into customer behaviour
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20
Q

What is market segmentation?

A

Dividing your target market into similar groups

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21
Q

What are the limitations of market research?

A
  • Can be costly
  • Time consuming
  • Human behaviour can be unpredictable
  • Questions/ interviewer may have misleading questions
  • The sample size may not be an accurate representation of the whole population
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22
Q

What is market mapping and the advantages and disadvantages?

A

It’s how products/ businesses are viewed compared to competitors based on two characteristics

+Helps decide if a business should join a market (gap in the market/opportunity)
+Can compare businesses
+Helps better understand competitors
+Understand customers perspectives

  • Only based on two variables
  • Perceptions of customers are complex and may not fit the model
  • Stakeholders may have a different view of where the business is
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23
Q

What is market positioning?

A

Factors a business may consider when positioning a product in market maps.

  • Attributes of the product
  • The Origin of the product
  • The reputation of the business (The classification of the product)
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24
Q

Name the competitive advantages a business can have

A 
Product design - 
Product quality -
Promotion - 
Customer service - 
Delivery times - 
Economies of scale - 
Flexibility - 
Ethical stance - 
Focusing on a particular market segment-
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25
Q

What is the purpose of product differentiation?

A

To gain a competitive edge over their competitors. In competitive markets firms will try to make their product unique

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26
Q

What is the 5 reasons for product differentiation?

A 
Flexible pricing-
Recognition - 
Extend product range - 
Brand development - 
Overcome competition -
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27
Q

What is market size (how is it estimated) and market share?

A

Market size can be estimated by either the market value (total amount spent) or volume (physical products sold)

Market Share - the proportion of a particular market held by a business

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28
Q

What are the reasons why a market may grow?

A

Economic Growth - Global living standards tend to rise overtime
Innovation - Innovation can grow a market
Social Changes -
Changes in legislation - Laws can affect markets
Demographic Changes -

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29
Q

What is adding value?

A

Extra features that may be offered by the business

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30
Q

What is the purpose of product differentiation?

A
  • Have flexible pricing
  • Recognition
  • Out compete competitors
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31
Q

What are the advantages of using social media for market research?

A
  • Can reach millions of people around the world
  • Allows specific groups of people to be targeted
  • Free or relatively low cost
  • Data can be collected fast
  • Takes little IT skills
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32
Q

How is ICT used to support market research?

A

Company website - Create online service
Social Networking -
Database - Storing users info

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33
Q

What is demand?

A

What customers are able and willing to buy at a given price

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34
Q

What is supply?

A

What firms are willing to produce at a given time

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35
Q

What are the 7 factors that lead to a change in demand?

A

Substitutes - Eg buying Pepsi over coca cola
Complementary - Eg Buying milk with cereal
Consumer income - Inferior / normal goods
Preferences - Changes in consumer tastes
Advertising & Branding -
Demographic -
External stocks -
Seasonality - Eg garden furniture demand rises during spring

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36
Q

What are the 6 factors that lead to a change in supply?

A

Cost of production - Eg wages, maintenance, raw materials, energy, rent
Introduction of new technology - help lower costs
Indirect taxes - Eg VAT
Government subsidies - Money given to a firm from the gov
External stocks - Factors beyond the control of the business eg weather
Price of related goods - The price of the good could encouraged supply

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37
Q

What is Price Elasticity of Demand (PED)?

A

It indicates to firms how much demand will change when the price changes

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38
Q

What is the equation of Price Elasticity of Demand (PED) and how do you know if PED is elastic or inelastic?

A

(% Change in Demand) / (% Change in Price)

PED < 1 = Inelastic
PED > 1 = Elastic

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39
Q

What is the equation of Income Elasticity of Demand (YED) and how do you know if YED is elastic or inelastic?

A

(% Change in Demand) / (% Change in Income)

PED <= 1 = Inelastic
PED >= 1 = Elastic

Negative  = Normal Good
Positive = Inferior Good
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40
Q

What factors effect the PED?

A

Time (Customers Substitute) -
Competition -
Branding -

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41
Q

What factors effect the YED?

A
  • If the good is a necessity

- If its a luxury good

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42
Q

What is Income Elasticity of Demand (YED)?

A

It indicates to firms how much demand will change when income changes

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43
Q

What are inferior and normal goods with examples?

A

Normal goods - Increased income leading to an increase in demand
Eg cars, clothing , luxury goods

Inferior goods - Increase in income leading to an decrease in demand
Eg public transport, Tesco deals

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44
Q

What is equilibrium price?

A

When supply and demand are equal

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45
Q

What are firms likely going to do when the market price increases or decreases?

A

Increase - Firms will extend supply to the market

Decrease - Firms will contract their supply of a product

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46
Q

Which direction does a supply and demand cure face?

A

Demand slopes down and supply slopes up

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47
Q

What is the design mix and the three elements?

A

Three key elements that help a business find a gap in the market.

Aesthetics, Function, Cost

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48
Q

What is promotion?

A

The process of trying to encourage people to purchase a product

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49
Q

What are the three benefits of strong branding?

A
  • Added value
  • Ability to charge premium prices
  • Reduced price elasticity of demand
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50
Q

What are the ways to build a brand?

A
  • USP - helps be unique
  • Advertising - spreads awareness
  • Sponsorship
  • Use social media
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51
Q

What are the two types of promotion with examples?

A 
Above the line -  promotion that involves advertisements
Eg
-Informative advertisements
-Persuasive advertisements
-Reassuring customers
Below the line - promotion that does not involves advertisements
Eg
-Free gifts
-Coupons
-Loyalty cards
-Competitions
-BOGOF offers
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52
Q

What are the 3 types of branding?

A

Manufacturer brands - Brands created by the manufacturer

Own label brands - Products that are manufactured for wholesalers for other businesses

Generic brands - products that only contain the name of the actual product, eg carrot, aluminium

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53
Q

What are the 6 types of pricing strategies?

A

Cost plus - Adding a mark up (percentage of) to unit cost
Price Skimming - Starting high then low
Penetration Pricing - Starting low then high
Predatory Pricing - Charging extremely low (illegal)
Competitive Pricing - Pricing similar to competitors
Psychological Pricing - Eg 0.99

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54
Q

What is distribution and the aim of it?

A

Evolves where consumers are able to purchase products from.

Aim: To make the products as convenient as possible for consumers to buy

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55
Q

What are distribution channels?

A

The stages the products have to go through to get from the producer to the consumers

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56
Q

What are intermediary’s?

A

A link between the producer and consumer

57
Q

What are the 5 types of an intermediary?

A
  • Retailers
  • Wholesaling
  • Agent/Brokers
  • Dealers
58
Q

What is multi channel distribution?

A

When a business uses more than one distribution channel

Eg you can buy apples products many different ways(pc worlds, O2 ect)

59
Q

What is direct selling?

A

When a producer markets their products directly to consumers

60
Q

What are the 4 main factors to consider when choosing the appropriate distribution channel?

A
  • The nature of the product (Some products may be inappropriate)
  • Cost
  • The Market (Mass markets typically use intermediaries)
  • Control (don’t want to damage their image)
61
Q

What is online distribution?

A

Also known as e-commerce involves the use of electronic systems to sell goods and services

62
Q

What is the two types of online distribution?

A

Business to consumer (B2C)

Business to business (B2B)

63
Q

What benefits do consumers have because of online distribution?

A
  • Cheaper
  • Can shop 24/7
  • Large amount of choice
  • Can shop from anywhere
64
Q

What benefits do businesses have because of online distribution?

A
  • Lower start up costs
  • Lower processing costs
  • Less paper is needed to document
  • Can offer global shipping
  • Business can locate anywhere
65
Q

What factors determine the most appropriate pricing strategy for a particular situation?

A

USP - Can charge higher if USP is good
PED - If the product is inelastic you could raise price
Amount of competition - Low competition can allow you to have higher prices
Strength of the brand - strong brand can charge higher
Stage in the product life cycle - early stage may charge low or high depending on product
Cost and the need to make a profit - Many charge high to pay off debt or for shareholders

66
Q

What changes in pricing that reflect social trends?

A

Subscription pricing - adobe
Auction sites - ebay
Dynamic pricing - travel industry
Comparison sites - sites that look for cheapest prices of a good

67
Q

What changes in the design mix that reflect social trends and what is ethical sourcing?

A
  • Design for waste minimisation
  • Design for reuse
  • Design for recycling

Ethical sourcing - Only using materials, services ect from suppliers that respect the environment, treat workers well and provide a safe working environment

68
Q

What are the changes in branding and promotion to reflect social trends?

A

Viral marketing - Any strategy that encourages people to pass on messages to others through electronic messaging
Social Media -
Emotional Branding -

69
Q

What are the 4 changes in pricing to reflect social trends?

A

Online sales

  • Auction sites - eg Ebay
  • Personalised pricing - eg cookies
  • Subscription pricing - charging a monthly fee

Price comparison sites - Allowing customers to compare prices and choose the best deal

70
Q

What is an entrepreneur?

A

People who have a business idea and want ti make money working for themselves

71
Q

What is the roles of entrepreneurs?

A

Decision making
Innovating
Risk taking
Organising

72
Q

What is the 7 stages of setting up a business?

A 
Idea
Research
Planning
Financing
Location
Resources
Launch
73
Q

What is an intrapreneur?

A

Employees who use entrepreneurial skills to find and develop ideas that’ll have financial benefits for the business

74
Q

What are the advantages of the intrapreneurs?

A

Increase innovation in the business

Awards can be won if unique products are made - Improves business image/ reputation

75
Q

What are the financial and non financial reasons of people starting a business?

A

Financial

  • Profit maximisation
  • Profit satisficing (making enough to satisfy the needs of an business owner)

Non-Financial

  • Ethical stance
  • Social entrepreneurship (charity)
  • Independence
  • ome working
76
Q

What are entrepreneur characteristics?

A
  • Self confidence
  • Self determination
  • Perseverance
  • Commitment
  • Initiative
  • Judgment
  • Being a self starter
77
Q

What are the required skills of an entrepreneur?

A
  • Communication
  • Financial management
  • Organising
  • Decision making
  • Negotiating
  • IT skilss
78
Q

What is a sole trader and the advantages and disadvantages?

A

When a business is owned and run by one person

+Owner keeps all profits
+Owner has complete control

  • Unlimited liability
  • May struggle to raise finance as investors many think they’re too risky
79
Q

What is a partnership form of business and the advantages and disadvantages?

A

A business that has more than one owner

+Can raise more capital
+Shared responsibility

  • Unlimited liability (They can become a limited partnership)
  • Shared profits
80
Q

What is a private limited company (LTD) and the advantages and disadvantages?

A

A business owned by shareholders protected by limited liability

\+Limited liability
\+Control over who buys shares
\+Perceived as more reputable
\+Raising capital
\+Less chance of conflict between owners and shareholders

-Shared profits
-Financial documents are published
-Shares can only be traded privately
-

81
Q

What is a public limited company (PLC) and the advantages and disadvantages?

A

A business owned by public shareholders on the stock market who are protected by limited liability

+Raise large amounts of capital
+Has greater media exposure

  • Volatile share prices
  • Directors are accountable to thousands of shareholders
  • PLCs news can spread fast (negative or positive)
82
Q

What is a franchisee and the advantages and disadvantages?

A

A business that is allowed to use another businesses identity

+Lower risk as they are using someone else’s idea
+Are supported from the franchisor
+Start up costs are predictable
+Can benefit from the franchisors marketing

  • Have to pay royalty (Pay the franchisor their share)
  • Have to sign contacts which may reduce their independence
  • Can have high start up costs
83
Q

What is a franchisor and the advantages and disadvantages?

A

A company that owns the franchise and allows other business to use there identity

+Fast growth
+Less expensive as the franchisee takes some of the financial risk

  • Less profits as its shared with the franchisee
  • Franchisee may damage the reputation
  • Cost to support the franchisee may be high
84
Q

What are social enterprises?

A

Businesses that trade with the aim of improving human and environmental well being. (Just think of a charity)

85
Q

What is a lifestyle business?

A

A individual who aims to make enough money to sustain a particular lifestyle

-Small

86
Q

What is the stock market floatation?

A

When a business goes public and offers shares to the public for the first time

87
Q

What are the advantages and disadvantages of stock market floatation for a business?

A

+Can raise large amounts of capital as it is easy for the public to buy shares through a stockbroker or bank
+Shares don’t have to be repaid and no interest is applied
+The business can also gain recognition through this method

  • Time consuming
  • Expensive
88
Q

What are the cost/ process associated with the stock market floatation?

A

Lawyers
Business must have a minimum of £50,000 share capital

(Basically a lot of documentation is required)

89
Q

What is an emerging market?

A

An economy with low to middle per person income

A nation of a nation whose economy mimics that of a developed nation but does not fully meets the requirements to be a classified as one

Tries to transition from a closed market to an open market

90
Q

Which countries are emerging markets?

A

(Hint: The BRICS economy/ The MIST economy)

Brazil, Russia, India, China, South Africa

Mexico, Indonesia, South Korea, Turkey

91
Q

What are the advantages of merging markets?

A
  • Investors like merging markets
  • Better potential for returns
  • First mover advantage
  • They hope to invest early so that they benefit from rapid growth
  • Related to increasing incomes and an expanding middle class
92
Q

What are the 2 implications of economic growth for individuals and businesses?

A

Trade opportunities for businesses - consumption may be growing and is likely that consumers have more disposable income.

Employment patterns - unemployment rates, labour cost and productivity are good indicators for businesses. High unemployment rates in a country may not be worth exporting products to, however, they may be good for factory work.

93
Q

What is Trade Opportunities for businesses?

A

Consumption may be growing and is likely that consumers have more disposable income.

94
Q

What are the indicators of growth?

A

Gross Domestic per person (GDP) - A measure of economic activity. Can be hard to compare against other nations with different currencies
Literacy - educated employees lead to better quality workforce and products and service
Health - indicates living standards of people and how much money they may have
Human Develop Index (HDI) - eg life expectancy. Can be used to asses likely demand, income and skills within a country

95
Q

What is economic growth?

A

An increase in a country’s productive capacity

96
Q

What does a literate labour force offer?

A

They can work in white collar jobs and professions
They will make better Human Resources - can do more complex jobs and increased efficiency
They are successful and earn more - contributes more to the national income

97
Q

What is the equation for Net export?

A

Exports - Imports

98
Q

What is imports with examples?

A

Binging good and services from another country to the home county

Eg Foods: apples

99
Q

What is exports with examples?

A

Selling goods and services from the home country to other countries

Eg tourism: London

100
Q

What is the advantages and disadvantages of imports?

A

+fulfils the demand of goods and services that are lacking or not available in the home country
+increased competitiveness

  • Excessive import can have a negative impact on the home country
  • Businesses may use a country a a dumping ground for saturated products
101
Q

What is the advantages and disadvantages of exports?**

A

+creates more foreign income from the selling of home country products and increases the global presence of home country products and services
+benefits the home country since it increases the foreign income to the home country

102
Q

Why do we need to export and import?

A
  • Countries have specific natural recourses and lack others
  • Countries need foreign currency in order to grow
  • Countries access wealth from customers in other countries
  • Firms can get cheaper costs by importing raw materials
  • Increases sales potential (first mover advantage)
103
Q

What is specialisation?

A

When a business or country concentrates on a product or task but produces them at a higher quality and cost

104
Q

What is the Foreign Direct Investment?

A

When an investment is made by a company or individual from one country to another

Eg a person buying a company in another country

105
Q

What is the advantages and disadvantages of Foreign Direct Investment?**

A

+Creates jobs resulting in higher household incomes
+Higher government tax revenue to provide more subsidies and grants for businesses
+Businesses can invest in infrastructure to lower transport costs
+Businesses bring technology and innovation to the country to encourage research and development

  • High initial costs of moving and setting up
  • Businesses may bring their own workers or capital intensive systems so new jobs wont be created
  • Tax revenue may be lower due to MNCs having too much power
106
Q

What is globalisation?

A

The growing integration of the worlds economies (Goods and services are being traded around the world)

107
Q

What is Tariffs?

A

Tax imposed on imported goods

108
Q

What is Import Quotas?

A

Limits on quantity of goods that can be imported and exported

109
Q

What is the disadvantages of trade barriers?

A

Retaliation from the opposing country ‘Tit for tat’

110
Q

What is protectionism?

A

When a country restricts trade to try and protect its domestic industries

May offer help to exporters

111
Q

What is trading blocks?

A

A group of countries that have signed a regional trade agreement to reduce or eliminate tariffs, quotas and other protectionist barriers

112
Q

What are employment patterns for growing economies?

A

Unemployment rates tend to fall

Employment patterns - unemployment rates, labour cost and productivity are good indicators for businesses.

High unemployment rates in a country may not be worth exporting products to, however, they may be good for factory work.

113
Q

What are the 8 factors contributing to increased globalisation?

A

Reduction of international trade barriers - the removal or reduction of restriction on the free exchange of goods between nations

Political Change - changes on the movement of goods and services/ level of protectionist measures used. However tensions with other countries may also affect trade

Reduced Cost of Transport and Communication -

Increased Significance of global companies -

Increased Investment Flows (FDI) - when a business makes an investment in foreign country which could lead to increased employment. Allows business access to global markets and reduction of reliance on one revenue stream

Migration - supply of low cost labour and high skilled labour which can lead to cost competitiveness and improved productivity

Growth of the Global Labour Force - Trading blocs are reduced or removed among the member states

Technology advancements- improved communications at a lower cost

Structural Change -

114
Q

What is the advantages of trade barriers?

A

Protect Jobs - Strong competition can cause unemployment
Protect infant Industries - Help domestic businesses gain EOS however governments have a poor record for identifying new industries with potential
Prevent dumping - Foreign producers sell products below cost
Raise Revenue - can be spent on improving living
Prevent the entry of harmful or undesirable goods - keep civilians safe
Improve the balance of payments - the gov may want to reduce their imports (country’s outflow) and increase there exports (country’s inflow)

115
Q

What is domestic subsidies as trade barriers?

A

Giving financial support to domestic exporters or producers who have strong competition from imports.
This will allows domestic producers to provide lower prices
This allows domestic exporters to expand into foreign country’s

116
Q

What is government legislation for trade barriers?

A

Making sure that imported good meet strict requirements. Eg toys may have to meet strict safety requirements to be imported

117
Q

What are the advantages of trading blocs?

A
  • Opportunities to expand into new markets
  • Allows businesses to benefit from comparative advantage - cheaper and better quality products
  • Free movement of goods…Enables firms to be cost competitive internationally…able to reduce prices without reducing profit margins
  • Aligns international legislation making markets more efficient
  • Access to larger market…benefiting from economies of scale…lower cost per unit
118
Q

What are the disadvantages of trading blocs for a business?

A

• Increased size of market means more competition : Constantly have to innovate and
invest to maintain competitiveness : Financial strain and potentially lower profits
• Less resilient to economic shocks (e.g. EU recession) : Will have a knock on effect to all
businesses/branches of business within the trading bloc : Significant fall in profits and
sales
• Firms may not get an agreement that suits them : Competitive disadvantage to other
multinational corporations (e.g. Higher costs with regulations or taxes) : Loss of global
market share

119
Q

What are the different types of trading agreements?

A

Customs Unions - Free trade between members but an agreed set of tariffs against non members
Common Markets - free trade and free movement of labour and capital
Preferential Trade Areas - Certain products from certain countries receive reduced tariff rates
Free Trade Areas - No trade barriers between countries
Single Markets - Free trade and common laws are adopted to harmonise standards and tax
Economic Unions - everything of the above and uses same currency

120
Q

What is the definition of push factors?

A

Negative factors within the uk that push a uk business to look overseas

121
Q

What are 6 push factors?

A
  • Saturated domestic markets
  • Competition
  • Low growth opportunities
  • End of the product lifecycle at home
  • Need to diversify
  • Need to reduce risk
122
Q

What is the definition of pull factors?

A

Positive factors overseas that entice a uk business to look outside the uk

123
Q

What are the 5 pull factors?

A
  • Risk spreading
  • Opportunity to gain EoS by expanding overseas
  • Attraction to new overseas markets in emerging economies eg Brazil
  • Opportunity to exploit competitive advantages in new markets
  • Ways to expand the product lifecycle
124
Q

What is offshoring?

A

The moving of operations of a business to another country with lower costs

Eg Apple moving their manufacturing operations to china

125
Q

What are the potential risks associated with offshoring?

A
  • Language difficulties
  • The process may increase management costs
  • Reduce efficiency or quality
126
Q

What is outsourcing?

A

This is where a business function, such as payroll, is contracted out to a specialist external provider

127
Q

Why outsource?

A
  • Reduce costs
  • Specialise areas of the business ie focus on core areas
  • Comply with rules or regulations
128
Q

What are the 5 factors to consider when assessing a countries market when looking to expand internationally?

A

Levels and growth of disposable income - Do customers have enough money for the product
Ease of doing business - Problems can cause delays in sales, increase costs
Infrastructure - eg communication and transport
Political Stability -
Exchange Rates - depending on the exchange rates it can make importing/ exporting expensive or cheaper

129
Q

What are 9 factors to consider when assessing a country as a production location?

A

Costs of production - eg low wages, material costs, land

Skills and availability of labour force - the workers must be skilled otherwise training could be costly

Infrastructure - Eg roads, broadband, transport, education

Location in trade bloc - to avoid trade barrios such as tariffs and quotas

Government incentives - Eg tax breaks, lower rates of company tax, interest free loan, cheap land

Ease of doing business - Problems can cause delays in sales, increase costs

Political stability - Eg dangerous to work there for employees/ civilians

Natural resources - Some businesses requires lots of natural resources

Likely return on investment -

130
Q

What are the 5 reasons for global mergers or joint ventures?

A

Spreading risk over different countries/regions -
Entering new markets/trade blocs -
Acquiring national/international brand names/patents -
Securing resources/supplies -
Maintaining/increasing global competitiveness -

131
Q

What is global competitiveness and how can it be done?

A

The ability of a business to perform better than its rivals across markets in different countries

Measures a business’s ability to compete both at home and abroad against foreign firms

Through

  • Cost competitiveness
  • Differentiation
132
Q

Why may a business off-shore?

A

A business could:

  • Reduced cost
  • Hire workers with particular skills
133
Q

How might a business use the product life cycle (Consider the Offshoring)?

A

If a product has reached its declined stage in one market it may be in the introduction stage in another therefore a business may move operations to another market (country) in order to reduce cost/expand market share etc

134
Q

What is the impact of changes in exchange rate on a business?

A

Cheaper import costs and more expensive exports if the pound became strong.

Eg for appreciation:
• Imports become cheaper :. Lower raw material costs for businesses :. Lower cost per
unit. Able to lower prices whilst maintaining profit margins : Increased sales volume and revenue … More globally competitive
• Exports more expensive: Foreign buyers need more of their currency to purchase
goods : Deterrent for value conscious customers :. Lower sales :. Less globally
competitive

135
Q

What is the impact of skill shortages on international competitiveness?

A

Advantages:
• Access to cheap and/or high skilled labour gives firms a competitive advantage
• Cheap labour. Lower total cost per unit :. Lower prices whilst maintaining profit
margins: Higher sales and increased global competitiveness
• High skilled labour:. More efficient and higher quality products :. Lower cost per unit with
increased output via HR economies of scale and can now command higher price due to quality :. Increased sales and profit

Disadvantages:
• Due to a lower supply of high skilled labour, firms may have to pay higher salaries to
attract them to work for them which increases the financial burden on the business and
cost per unit
• A business may be forced to employ low skilled labour who are inefficient (wasteful) and
less productive. This would cost per unit to rise (D.O.S) and higher prices wouldn’t warrant
higher sales due to a lack of customer satisfaction

136
Q

What is a joint venture?

A

Involves two separate businesses collaborating to achieve a shared goal

137
Q

What are the barriers to entry for global mergers and joint ventures?

A

Low brand awareness
Cultural and language difference
Knowledge of the market
Additional cost through exporting

138
Q

What is the benefits of global competitiveness for MNCs?

A

• Larger economies of scale from global operations:: Cost competitive
• Global sourcing of materials : Best quality materials/most cost effective
• MCs can diversify risk : Reduce dependence on one revenue stream :. Increase
resilience to economic shocks
• Brand strength :. Price inelastic demand with better reputation

Business (30 decks)

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