3.2: Economic factors in business expansion Flashcards
(27 cards)
why might a firm aiming to provide goods in a new country take into account GDP per capita?
what should they price the product at - YED + average income - purchasing power - will there be demand
more important for firms selling inferior, mass goods than luxury, niche goods
low income: backwards innovation - big mass markets - sell mass market goods - economies of scale - cheaper costs - lower price - consumers more price sensitive - can maximise capacity utilisation - fixed costs spread over larger output
HOWEVER, income can be unequally distributed - not everyone on low income - significant high income consumers, like India
why might a firm aiming to provide goods to a new country take into account the economic growth rate?
more growth - more consumer confidence - more spending - more sales
more growth - higher incomes - more purchases of normal goods - more demand - more dd pull inflation - trade off - purchasing power of disposable income falls - less money to spend
important for normal and luxury
why might a firm aiming to provide goods to a new country take into account the degree of urbanisation?
low urbanisation - higher costs for firm delivery - low accessibility - may be looking at price sensitive consumers
IT DEPENDS - technology means they are ordered online - no longer need for physical infrastructure
why might a firm aiming to provide goods to a new country take into account transport and infrastructure?
low accessibility - low sales - high transport costs
low value high bulk items need effective infrastructure
easier to move mobile phones around, compared to planes etc
why might a firm aiming to provide goods to a new country take into account manufacturing and available raw materials?
increased manufacturing - lower costs - economies of scale etc - passes low prices to consumers
why might a firm aiming to provide goods to a new country take into account cultural similarities or differences?
clothing: more bikinis sold in Australia than China - cultural differences
why might a firm aiming to provide good to a new country take into account existence of competitors?
saturation of market - more likely to happen in developed markets - developing/emerging smaller, domestic firms + more likely to have gaps in market
penetration pricing till brand loyalty
especially China - jvs with local competitors - brand loyalty
why might a firm aiming to provide goods to a new country take into account demographics and age distribution?
population ageing - japan/germany very different to a young one like brazil
no need for care homes in younger population
why might a firm aiming to provide goods to a new country take into account sophistication of advertising media?
promotion - social media - can target audience more effectively
China govt control over social media - slightly different - more control
can gain competitive advantage
why might a firm aiming to provide goods to a new country take into account exchange rates?
weaker domestic currency - higher price of foreign goods
SPICED - want strong pound so imports are cheap
why might a firm aiming to provide goods to a new country take into account barriers to trade like tariffs or quotas?
mass markets with price sensitive consumers will matter more
BHM - 10% or 400%
China US tariff war good example here
why might a firm sell across many markets?
SPREADS RISK
why might a company aiming to manufacture goods in a different country take into account the availability of low cost labour?
firms want to keep costs low - low costs - higher profits - can keep prices low for consumers - important for price sensitive consumers
important for labour intensive firms - specifically firms where demand is elastic - normal goods - SHEIN
why might a company aiming to manufacture goods in a different country take into account the level of education and skilled labour?
increased productivity - more specialised workers - more division of labour - lower cost per unit output - more demand - more sales - more revenue - more profit
why might a company aiming to manufacture goods in a different country take into account the accessibility of transport modes?
need to transport manufactured goods - good transport links - can easily transport - increased reliability - competitive advantage - increased demand - increased revenue - increased profit
why might a company aiming to manufacture goods in a different country take into account the telecommunications infrastructure?
need to communicate with various production sites around the world
what is market saturation?
occurs when it becomes impossible to expand sales further in that particular market
growth will be difficult
why might some firms look to emerging markets for business expansion?
market saturation in developed markets, rising incomes in emerging markets
offer good opportunities for expansion and competition is less of a problem than it is in developed markets
what does competition policy do for firms and consumers?
keeps prices down for consumers
gives businesses an incentive to produce efficiently
what might happen to market share when there is healthy competition?
market share in the domestic economy may be insufficient to allow the business to reach the MES –> output for domestic market not high enough to reap all potential economies of scale
why might innovations be linked to economies of scale?
new product developments or improvements in design of existing products could cut costs by finding better production strategies
what is offshoring?
locating all or part of the production process in a foreign economy where costs are low
why might offshoring enhance competitive advantage?
can yield substantial cost savings
unskilled labour may be cheaper, more available, and less regulated
what is outsourcing?
general term for buying inputs from independent supplies
