Theme 4 Flashcards
What is a push factor
Where the businesses domestic market motivates them to enter new markets
What are the push factors that would cause a business to seek international markets
- Domestic reccession
- Increased levels of competiton
- Being in a saturated market
- To extend the product lifecycle
What is a pull factor
Where the business is drawn to a new market
What are the pull factors that would make a business want to seek a new market
- Economies of scale
- Spot a gap in an emerging market
Advanatges of trading in the EU
- Within the CET, trade creation, more competitvie
- Access to a larger market, economies of scale
- Access to raw materials
- Free movement of labour -> fill skills gap -> wages decraese, firms can hire more workers
- Increased FDI from firms wanting to sell to the bloc
- Access to collective bargaining
Disadvanatges to trading in the Eu
- Cant protect domestic firms with protectionism (includes dumping)
- Domestic firms face more competition
- Need to pay to follow rules and regualtions
- May become to Eurocentric , focused on the EU
- A worker will see their wages fall, from excess upply of labour
What is the aim of the WTO
To promote and police the reduction in protectionst measures between countries
What is the most favoured nation principle (WTO)
Where the lowest tariff you charge to one country ( most favoured nation) is the tariff that you charge to all other countries that you trade with
Critisisms of the WTO
Seen as favouring the Western countries
HUGE time lag in setting these up
What is an absolute advanatge
When you are the only country that can produce the good
E.G. the UK cant produce Lithium, only Bolivia can
What is comparative advantage
When the country produces the good for the lowest oppotunity cost
Allows for specialisation -> world ouput increases -> S.O.L increases -> able to afford more things
What can distort advanatges
Protectionism (increases COP)
Subsidies (decreases COP)
How does a company choose which countires to sell in
- Levels of disposable income
- level of competition
- Availability of resources
- Tastes/ fashions/ culture
- Infrastructure
- Ease of doing business
- Political stability
How can countries gain a comparative advantage
- Access to raw materials
- Skill level of the workforce
- Productivity of workforce
- Quality of infrastructure
- Regulation
- Cost of workforce
Barriers to entry in entering a new market
- Lack of information on the competitiom
- Lack of established competition
- Legal adminsistartion
- Lack of established brand image
- Cost of setting up distrubtion network
- Cultural differences
In the LR due to globalisation and the homogenisation of tastes and fashions these effects are less significant
