theme 4 business Flashcards
what is the definition of economies of scale ?
economies of scale - proportionate savings in cost when production is increased
what is a push factor ?
A push factor is something which forces a business to consider trading in another country
what are some examples of push factors which may force a business to persue trading options in other countries?
- saturates markets/market saturation
- high levels of competition in domestic (home) market/s
- product life cycle extension strategies
what are some pull factors for expansion into foreign markets ?
- economies of scale to gain
- ability to spread risk
- offshoring and outsourcing
what does it mean when a market becomes saturated and why is this a push factor for foreign expansion of a business?
- when a market becomes saturated it means that a business has reached the greatest amount of people that they can sell their products and services to. Therefore their sales levels are likely to stay relatively the same.
- This may encourage a business to expand into foreign markets as their product/service will be seen as new and exciting in these new markets.
- R+D is still taking place and a business needs to continue to trade and expand into markets abroad at the same time.
eg. Ansoff’s matrix market development
why may competition in the domestic market lead to a business expanding into foreign markets?
- high levels of competition in a domestic market may mean that a business looks to expand abroad where there is a lower level of competition as they may be able to compete more successfully with domestic businesses in that market rather than their own home/ domestic market
why may product extension strategies be a reason for expansion into foreign markets?
- a mature or declining product could be sold on an international scale as a new and exciting product - may generate more sales and more sales revenue in this way.
- product design, packaging design + logistics
- eg. SPAM
why may economies of scale be a pull factor for a business to expand into foreign markets?
- can drive production to a level to gain economies of scale more easily in foreign countries, which may be due to the lower minimum wage levels which leads to a significant cut in costs
- can paticularly benefit from economies of scale if a product is standard and can be sold in a range of countries with minimal adptations being made to it
- purchasing,technical,marketing,financial and risk bearing economies can be gained in this way
why may the ability to spread risk be a pull factor for a business to expand into a foreign market?
- by selling to other countries a business is less vunerable to changes in the domestic economy
- balanced product portfolio
- different growth rates experienced in countries at the same time - risk is spread as eggs aren’t all in one basket
what is offshoring ?
offshoring is when a business relocates dome of it’s business processes to another country eg. manufacgtiring or supporting processes such as accounting
why might offshoring be a pull factor for expansion into foreign economies?
- can benefit from lower minimum wage levels
- trade blocs and trade deals which can be made that a business can benefit from
- tax offered by host nations may be lower than in the domestic market
- access to a much larger talent pool for recruitment
what are the BRICS countries ?
Brazil
Russia
India
China
South Africa
- the BRICS are a group of emerging economies
what are the MINT countries
- the MINT countries are a group of emerging economies
Mexico
Indonesia
Nigeria
Turkey
what does GDP mean?
GDP - the total value of all goods and services in a market/economy measured over a period of time which is usually 1 year
what is an emerging economy ?
emerging economy - a country developing from an LIC to a HIC, due to the rapid growth of GDP in that country
