4.2

Question 1

push factors

Answer 1

factors that push a business to expand outside of their domestic country

Question 2

pull factors

Answer 2

encourage businesses to operate within markets aborad which present growth opportunities

Question 3

push factors - increased competition

Answer 3

• exploring new markets to expand customer base
• reduce relliance on single market + diversify revenue stream by exporting to new markets
• reduces exposure to competition

Question 4

push factors - saturated markets

Answer 4

• prompts business to explore other opportunities in global markets to sustain growth

Question 5

pull factors - economies of scale

Answer 5

• occur when a business expands production in new abroad markets
• may be able to purchase raw materials and labour at lowest prices than domestic market

Question 6

pull factors - risk

Answer 6

• diversify customer base and reduce risk of operating in single market
• economic risks, political risks and others that impact operations and profitability

Question 7

offshoring

Answer 7

when a company moves parts of its production process, or all, to another country
- could be due to lower labour costs, access to raw materials or skilled labour

Question 8

offshoring - benefits

Answer 8

• lower labour costs to keep business costs down
• access to specialised suppliers in countries that may provide quality service, better raw materials or components
• economies of sale due to selling to larger market

Question 9

offshoring - drawbacks

Answer 9

• PR and employee/employer relatons may suffer due to relocation and job loss
• increased short term costs eg, relocation, premises and hiring
• poor customer service due to language and cultual differences

Question 10

outsourcing

Answer 10

when a business hires an external organisation to complete certain tasks or business functions
- factors include: reduced costs, business focus on core compentencies, easier to comply with rules in other countries as they are less demanding

Question 11

outsourcing - benefits

Answer 11

• can take advantage of specislist skills another business has
• cost effective as no investment in foreign facilities
• higher labour productivity, thus lower costs

Question 12

outsourcing - drawbacks

Answer 12

• damage to brand image if values of businesses dont align
• poor communication can cause inefficiences and disruptions that raise costs

Question 13

product life cycle extension

Answer 13

method used to extend life cycle
- eg. selling product in new internatonal markets to extend life of product, thus generating more revenue

Question 14

factors to consider before entering new countries - infrastructure

Answer 14

• good infrastructure improves production process and delivery of goods, whcih reduces costs and increases sales

Question 15

factors to consider before entering new countries - ease of doing business

Answer 15

• rules and regs of establishing a business in a new global market may be simple or hard
• issues may regard registering properties and enforcing contracts
• operations may delay and prevent sales

Question 16

factors to consider before entering new countries - levels of growth and disposable income

Answer 16

• selling products where consumers have higher disposble income leads to more sales
• should evaluate trends in income levels over time

Question 17

factors to consider before entering new countries - exchange rates

Answer 17

• subject to extreme fluctuations
• businesses moving to countries with stronger currencies can import raw materials and components for production at a lower price

Question 18

factors to consider before entering new countries - political stability

Answer 18

• may risk no ROI if country is politically unstable
• subject to corruption, lack og legality and high crime rates
• likely to disrupt trading

Question 19

factors to consider when setting up production in other countries - cost of producition

Answer 19

• aim to keep low to increase profit margin
• aim to keep low to sell at lower price to gain competitive advantage

Question 20

factors to consider when setting up production in other countries - skills and availability of labour force

Answer 20

• directly impacts quality of goods and services
• may choose to locate where labour costs are lower

Question 21

factors to consider when setting up production in other countries - infrastructure

Answer 21

• roads etc affect transport of goods and raw materials in production

Question 22

factors to consider when setting up production in other countries - location in trading bloc

Answer 22

• business located in a market within a trading bloc will be able to access advantages such as reduced protectionist measures

Question 23

factors to consider when setting up production in other countries - return on investments

Answer 23

• reduces risk of intial investment not being paid for
• investment appraisal techniques can be used to identify potential ROI

Question 24

factors to consider when setting up production in other countries - natural resources

Answer 24

• business must have easy access to raw materials to reduce transportation costs and reduce potential delays

Question 25

factors to consider when setting up production in other countries - political stability

Answer 25

- risk investment as country may be subject to corruption, lack of law enforcement and crime - this may disrupt production

Question 26

factors to consider when setting up production in other countries - ease of doing business

Answer 26

- aim for area that is limited in bureaucracy (complciated administrative procedures) so establishing production isnt delayed or costly

Question 27

factors to consider when setting up production in other countries - government incentives

Answer 27

- may be offered incentives by governments that help set up production process

Question 28

global mergers

Answer 28

agreement between two businesses from two different countries to join together

Question 29

joint venture

Answer 29

when two businesses join together to share theit knowledge and resources to form a new business entity eg. EE

Question 30

reasons for jGM and JV - spreading risk

Answer 30

- operating in different markets disperses risks associated with fluctuating economic conditions - if there is economic downturn in one market, they can still gain sales elsewhere

Question 31

reasons for jGM and JV - entering new markets/trading blocs

Answer 31

- quicker method to enter market than organic growth - emerging economies may have govs that insit on joint ventures, as these benfit domestic business - JV with a local company allows business to gain knowledge of local markets

Question 32

reasons for jGM and JV - aquiring global brand names and patents

Answer 32

- excludes others from selling an invention - process can be long and expensive, but using a merger can get access to a business with a strong rep

Question 33

reasons for jGM and JV - securing resources and supplies

Answer 33

- strategic to merge with business that has important access to materials - have to be ethically aware of resources to avoid damaging reputation

Question 34

reasons for GM and JV - maintaining/ increasing global competitiveness

Answer 34

- increase global dominance by merging or joining another business - expansion can promote economies of sale and thus lower costs - can reduce prices and increase sales, leading to higher market share

Question 35

GM + JV - benefits

Answer 35

- economies of scale gained from costs spread over large outputs, can increase profit margins - diversified risk - opportunity to enter new markets that may otherwise be closed

Question 36

GM + JV - drawbacks

Answer 36

- high initial costs - no guarantee of ROI if unsuccessful - diseconomies of scale can occur due to communcation issues and lack of control when business expands - culture clashes -redundancies of workers, demotivating

Question 37

exchange rate fluctuations

Answer 37

- can promote global competitiveness

Question 38

currency appreciation

Answer 38

- value of currency increases against another currency

Question 39

currency appreciation - benefits

Answer 39

- import of raw material become cheaper, reducing costs and increasing profit margins

Question 40

currency appreciation - drawbacks

Answer 40

- exports more expensive for international consumers - sales may fall as demand shifts to domestic business

Question 41

currency depreciation

Answer 41

the value of a currency decreasing against another currency

Question 42

currency depreciation - advantages

Answer 42

- business exports become more competitive as products are cheaper to purchase - domestic markets may have less competition from foreign firms as imports are expensive for domestic consumers to buy

Question 43

currency depreciation - drawbacks

Answer 43

- imports from abroad become expensive, increasing costs which are then passed onto customers as high prices

Question 44

competitive advantage - cost leadership

Answer 44

when a business becomes the lowest cost producer in the industry - methods such as: increasing labour productivity, ushing machinery, outsourcing, offshoring - can utilise to reduce prices or keep prices the same for larger profit margins

Question 45

competitive advantage - differentiation

Answer 45

when a business makes the characteristics of their products different to competitors - methods: strong brand, better design, quality and customer sevice

Question 46

impact of skills shortages

Answer 46

- if business cant find labour required, ability to gain comp adv is affected

Question 47

impact of skills shortages - cost leadership

Answer 47

- cost leadership could be difficult if workers lack skill and arent productive, thus increasing unit costs due to waste

Question 48

impact of skills shortages - differenetiation

Answer 48

- less likely to occur when workers lack skill and expertise to produce highly differentiated products - business can use outsourcing and offshoring to overcome