3.9.3 Assessing globalisation and internationalisation

Question 1

direct investment

Answer 1

investing overseas, perhaps to establish outlets or production facilities

Question 2

exporting

Answer 2

where a business produces domestically and then sell overseas

Question 3

off-shoring

Answer 3

the relocation of business activities from the home country to a different international location

Question 4

re-shoring

Answer 4

when a business moves production back to the domestic country

Question 5

internationalisation

Answer 5

relates to businesses moving operations or sales into different international markets

Question 6

alliances / ventures

Answer 6

occurs when a domestic firm works in a partnership with an overseas business. the risk is shared as are the profits

Question 7

licensing

Answer 7

when a business sells the right to an overseas business to produce and/or sell its products. most of the risk is taken by the firm buying the licence

Question 8

the reasons for operating in international markets

Answer 8

• accessing demand in suitable markets
• cost reduction
• exchange rates
• trade barriers
• political stability

Question 9

key reasons for offshoring

Answer 9

• to access lower manufacturing costs
• to access potentially better skilled & higher quality supply
• to make use of existing capacity overseas
• to take advantage of free trade areas and avoid protectionism
• to make it easier to supply target international markets

Question 10

potential drawbacks to offshoring

Answer 10

• longer lead times for supply & risks of poorer quality
• implications of CSR
• additional management costs
• impact of exchange rates
• communication: language & time zones