useful extra knowledge theme 4

Question 1

define saturated market

Answer 1

when a market is not generating new demand for a product or service

Question 2

How product life cycle can prompt trade

Answer 2

Product life cycle can be extended by releasing or rebranding in another country
-product starts again from Launch stage (extending the life cycle of the product)

(e.g. Kitkat was starting to enter decline and so launched in Japan and now is growing again)

Question 3

Factors affecting a country’s suitability as a market

Answer 3

• ease of doing business - levels of bureaucracy, government restrictions/ support, leniency of regulations
• levels and growth of disposable income (leads to growth of middle class)
• political stability - corruption, civil wars and poor governance can make successful trading difficult
• levels of infrastructure- facilities that support everyday economic activity
• exchange rate - if exchange rate are higher, imports become cheaper but exports more expensive

Question 4

define ethics

Answer 4

ethics are moral principles that underpin business decision making

Question 5

Positives and negatives of ethical behaviour

Answer 5

POSITIVES

• USP
• higher employee motivation
• better reputation so easier to attract investment and to recruit
• modern social trend of higher demand for ethical products (consumerism)

NEGATIVES

• expectation built up (pressure to maintain)
• clash with shareholders (due to increased costs)

Question 6

State the common ethical issues with MNCS

Answer 6

• pay and working conditions - less established legislations can be exploited (pay and conditions legislation is weaker in less developed countries)

• environmental impact
> high emmisions
> unsustainable waste disposal

• supply chain - any unethical practice in the supply chain makes the MNC unethical

• sweatshops
• child labour
• ignoring health and safety, and basic workers rights

• marketing
> misleading marketing - criminal act to make false statements about a product (includes labelling, price, quantity, ingredients, health claims)

> inappropriate promotional activities

• promoting directly to children
• aimed promotion at cultures or religions

Question 7

Impact of social media on MNCs generally

Answer 7

+ allow for immediate customer service

+ improve brand image and emotional branding (brand has a persona online)

+ cost efficient way to gain awareness

X can build momentum behind consumer action

X can be at risk of false information spreading

X business operation are fully transparent- may lead to controlling measures from pressure groups or government