THEM 4: SECTION 2 (GLOBAL MARKETS AND BUSINESS EXPANSION) Flashcards
Identify and explain the 2 ‘push’ factors that prompt trade
- Saturated markets- When almost all consumer needs and wants are being met and there is not much room for growth or differentiation.
- Competition - When competition is very intense or so high that profits are affected the firm might decide to develop in other markets or look for competitive advantages to gain.
Identify and explain the 2 ‘pull’ factors that prompt trade
- Economies of scale: Certain countries and markets have access to particular goods and resources that aren’t easy to obtain in others. It’s a common factor and enables more growth.
- Spreading risks: Working in more than one market means that the risk of failure is not as large. The more a firm can spread risks the more stable it is.
Define Offshoring
Offshoring = Relocating parts of the business to another country ( manufacturing or customer service done abroad)
How does trading internationally extend a products life cycle?
creates an extension strategy, having products in more than one market means that in each of them it will be at a different stage in its life cycle.
What factors are considered when assessing a country as a market?
- Political Stability
- Infrastructure
- Ease of doing business
- Disposable income
- Exchange rates
What factors are considered when assessing a country as a production location?
- Infrastructure
- political stability
- Ease of doing business
- Costs of production
- Skills and the labour force available
- Return on investment
- Resources available
- Trading Blocs
- Government Incentives
Define global merger
Global Merger = when two businesses join together under one management beyond the boundaries of one country.
Define Joint Venture
Joint Venture = 2 or more businesses based in different areas, agreeing to use their recourses together to complete a task/project
What are the main reasons for global mergers and joint ventures?
- Spreading risks
- Entering new markets and trading blocs
- Acquiring nation/international brands and patents
- Securing recourses/ supplies
- Maintaining /increasing global competitiveness
What are some possible disadvantages of global mergers and joint ventures?
- A culture clash between business cultures and the countries culture
- Joining with a business that doesn’t offer much, could lead to increased debts
Define Global competitiveness
A businesses ability to compete in an international market and to become a market leader in a given industry
What are the 2 main methods of gaining a competitive advantage?
- Cost competitiveness (cost leadership) = producing generic products with as little costs as possible in order to stay profitable
- Differentiation = creating unique products with features that other businesses haven’t done before and charging higher prices for them.
What is the impact of skill shortage on International competitiveness?
A country or business not being able to find the right skills they need could lead to extra costs or poorer quality items.
What effect does appreciation have on a business?
- One currency appreciating against another, the pound against the euro could affect competitiveness.
- Exports become more expensive, so UK businesses would not be as competitive internationally
- Imports become cheaper, so UK businesses that import will have lower costs. But it also means foreign competitors have lower costs so the UK business will lose competitveness.
What effect does depreciation have on a business?
- affect competitiveness
- W,P,I,D,E,C
