PPQ - EXTERNAL - Asian

Question 1

2018 - Explore the benefits to UK organisations of increased foreign direct investment in China and the Association of South East Asian Nations. (6 marks)

Answer 1

• The ASEAN market alone has 600 million customers leading to increased sales.
• ASEAN consists of 10 countries which organisations can trade freely between and the introduction of the AEC (ASEAN Economic Community) has established ASEAN as a single market.
• ASEAN has created agreements for trade with Australia, New Zealand, India and Japan which allows access to these markets, tariff free.
• Large number of raw materials available to access in ASEAN; oil, gas, palm oil, rubber which can be exported cheaply.
• UK firms can take advantage of lower labour costs in Asian countries which increases competitiveness.
• Ability to spread the risk eg companies can raise capital in Singapore and set up factories in low-cost locations like Vietnam.

Question 2

Specimen - Explain the challenges for UK organisations of trading with the Association of South East Asian Nations (ASEAN). (6)

Answer 2

• Increased competition from organisations in ASEAN — UK
  companies may have to lower prices to remain competitive - reduction in profitability
• Distance from suppliers in ASEAN — transport costs increase - less environmentally friendly
• ASEAN remains very diverse in terms of religion and culture.
  For example, Indonesia’s population is 90% Muslim and
  Thailand’s 95% Buddhist. UK organisations need to be aware of local preferences and cultural sensitivities
• There are 13 official languages in ASEAN which may present communication difficulties between countries

Question 3

2016 - Describe the aims of The Association of South East Asian Nations (ASEAN). (6 marks)

Answer 3

• Free movement of goods promoting trade between countries
• Free movement of workers prevents shortages
• Becoming collectively more powerful compared to individual economies
• Can increase competitiveness against Western and Chinese organisations
• To improve the standards of living within the member countries
• To improve infrastructure between/within the countries

Question 4

2016 - Analyse the reasons for Chinese organisations expanding production in recent years. (4 marks)

Answer 4

• Traditionally low wages (relative to western wages) has allowed Chinese organisations to have lower operating costs
• Steady reduction in transport costs due to mega-tankers (ships) has increased profitability
• Growing middle class – as wealth grows so does demand for goods
• Growing economy means the government can afford to invest in manufacturing