theme 4.2 Flashcards
how could a joint venture or merger reduce risk? (1)(1-3)
- the cost of mistakes would be spread over 2 parties not only one
- a firm that is in the local market should be able to bring:
-local knowledge
-local customs
-legal requirement - exposure to different markets reduces risk
why would a business want to invest through a joint venture or merger? (4)
1) spreading of risk
2) access to different markets
3) securing knowledge, resources and suppliers
4) increase capital available
what are mergers?
when 2 or more firms agree to become a single business
what is a joint venture?
A legal agreement between two or more firms to work together on a joint project. the business shares the equity and profits in the venture.
in assessing a country as a production location what are the infrastructure requirements? (3)
1) can the roads, railways and ports cope with the firm’s imports and exports?
2) are security and law enforcement adequate
3) utilities like energy supply and waste disposal.
negatives of a politically unstable in assessing a country as a production location. (3)
1) government may seize assets
2) cooperating with bribe culture will hurt public image
3.) uncertainty in longevity of the government legislation
what would a business look for when deciding where to locate production? (7)
1) cost of production
- good for firms who need a low skilled labour firms
2) skills and availability of labour force
- some firms need skilled labour so relocate to countries with a high supply of skilled labour e.g India has a high supply of engineers.
3) infrastructure
e.g
- ports roads railways to cope with firms imports
4) trading blocks
- avoiding tariffs e.g EU
5) ease of doing business
6) political stability
- government may seize assets
- cooperating with bribe culture will hurt public image
7) government incentives
benefits of reshoring (3)
increased reputation ‘made in Britain’
improved quality control
decreased lead time, therefore increasing reactivity
offshoring positives and negatives (2)(2)
positive:
1) cheaper labour
2) specialisation in the region (e.g India and telecommunications):
- better service
- lower prices due to high competition in the
region
- a large pool of highly skilled labour
negatives:
1) loss of jobs in the domestic country - bad
publicity
2) loss of control over quality (reputational damage)
(regions can specialise resulting in high competition, better service and lower prices e.g India with communications
2) loss of control over quality can lead to reputational damage )
what is one way to extend a product life cycle?
move abroad
(a new market may have not been exposed to a product or service yet. so the product could extend its life cycle by entering new markets abroad.)
pull factor (5)
- spreading of risk
- economies of scale
- new and untapped market
- more profitable market
- lower production coasts
(spreading of risk - A company will not be as affected to a downturn in one market as another market may have an upturn)
name some push factors (2)
saturation - all consumer demands has been or is being met
1) few opportunities for growth
competition -
1) high competition can reduce sales or decrease profit margins reducing profit
also caused by unfavourable government policies or consumer trends
