4.2.1 Conditions that prompt trade Flashcards
What are push factors?
Where businesses feel they have to expand because of domestic market issues
What is a pull factor?
Where businesses are attracted by compelling opportunities to grow by expanding internationally
Give three examples of push factors for UK business considering international trade.
1) Bexit-Acces to EU single market
2) Small population- 67.5million
3)Corporation tax increase-19%»25%
What are the two main push factors for businesses in general?
1) Saturated markets
2)Increased competition
What is a saturated market?
•A feature of markets where sales growth has stalled or is falling.
•Difficult for firms to grow revenue other than by taking market share from competitors.
What is increased competition?
•Domestic firms may be faced with new market entrants who take market share
•Results in lower streams of revenue
What are the two main Pull factors?
1)Economies of scale
2)Risk spreading
What is economies of scale?
•getting the lowest cost per unit possible by mass producing
What is risk spreading?
•Trading internationally can spread the activities and revenues of a business over a wider range of markets, making the business less dependent on domestic demand
What is Off-shoring?
•Occurs when a business relocates production and o another country
What is the main reason for off-shoring?
•Cost minimisation
What is Outsourcing?
•Occurs when a business contracts out production to another business.
Why do businesses outsource?
•Business may be specialist
What is Re-shoring?
•The reverse of off-shoring
•Bringing back respiration of business activities to the home country
Why would a business re-shore?
•Minimise risk to supply chain
•Less complex
•Easy to collaborate
•Certainty on warranty
