4.2.1

Question 1

Why would a business want to stay in UK

Answer 1

-History of business
-Maintain control over quality
-Lower Lead Time
-Part of trade bloc
-Better customer service
-close to customers
-Reduction of transportation to domestic consumers

Question 2

Why would a business want to manufacture in other countries

Answer 2

-Lower production costs
-Falling Demand in home market
-Supply of workers
-Lower wage costs
-Access to raw materials
-Access to new market

Question 3

What are push factors

Answer 3

Factors that encourage a business to leave the UK- they push the business out of the country

-Saturated domestic markets
-Low growth opportunities
-End of the product lifecycle at home
-Need to diversify
-Government Policies that encourage trade

Question 4

Pull Factors

Answer 4

f8actors that encourage a business to enter new markets- they pull companies towards them

-Attraction to new overseas markets in emerging economies
-Opportunity to gain Economies of Scale by expanding overseas
-Untapped markets
-Ways to extend the product lifecycle

Question 5

Offshoring

Answer 5

-A business may decide to relocate its business overseas
-This is to take advantage of low labour costs in manufacturing, cost efficiencies and supply chains

Question 6

Outsourcing

Answer 6

-Tasks that could be carried out by a business are contracted out to a third party business.
-This third party business may or may not be located abroad
-Marketing research and call centres are often contracted out.
-Some businesses also outsource manufacturing

Question 7

What is in the product life cycle

Answer 7

-introduction
-growth
-maturity
-decline or product extension

Question 8

Ways to extend the life cycle

Answer 8

-Rebranding
-Price discounting
-Seeking new markets
-Advertising – try to gain a new audience or remind the current audience
-Price reduction – more attractive to customers
-Adding value – add new features to the current product, e.g. video messaging on mobile phones
-Explore new markets – try selling abroad
-New packaging – brightening up old packaging, or subtle changes

Question 9

Advantages of International Expansion

Answer 9

-access to new customers
-resources
-natural materials
-labour markets
-increased market share, rev/profit
-spreads risk
-economies of scale

Question 10

Disadvantages of International Expansion

Answer 10

-new customer wants/needs
-loss control through outsourcing
-lack of knowledge of market
-different regulations

Question 11

Factors that need to be considered when assessing a country for trade

Answer 11

-ease of doing business
-natural resources
-infrastructure
-legislation (red tape)
-trade agreement/trade blocs
-exchange rate
-political stability
-growth rate of a country- disposable income and increased GDP

Question 12

Factors affecting country as a market

Answer 12

-levels and growth of disposable income
-exchange rate
-ease of doing business
-infrastructure
-political stability

Question 13

Factors affecting country as a production

Answer 13

-costs of production
-skills and availability of labour force
-location in trade bloc
-government incentives
-natural resources
-likely return on investment
-ease of doing business
-infrastructure
-political stability

Question 14

Ease of Doing Business

Answer 14

-The ease of doing business looks at regulations and policies that are important for starting and growing a business
-It looks at issues such as taxes, trading, contracts, permits and labour regulations
-Ease of doing business is important to attract more firms to a country, reduce costs and encourage faster growth

Question 15

Political Stability

Answer 15

Businesses prefer to operate in political systems that are stable
-Changes in business taxation and regulations can impact business operations
-More serious instability such as riots, civil war and terrorism can impact on business and it may make them reluctant to invest in new capital or enter new markets

Question 16

Infrastructure

Answer 16

-An adequate road, rail, sea and air transport systems so goods can be exported and imported easily
-Buildings and premises where the goods could be manufactured
-Reliable power system

Question 17

Disposable Income

Answer 17

-Disposable income is defined as the total amount of household income that’s available for spending and saving after paying income taxes.
-If disposable income increases, households have more money to either save or spend, which naturally leads to a growth in consumption.

Question 18

Position in a Trading Bloc

Answer 18

-A trade bloc is a type of government agreement, where barriers to trade (tariffs and others) are reduced or eliminated among the participating states.
-Positioning within a country that is part of a trade blocs gains many benefits to firms
-Firms will be attracted to countries within trading blocs as costs and administration will be lower

Question 19

Financial Considerations

Answer 19

-Natural resources in the country will lower production costs
-Government incentives such as lower taxes can attract foreign companies
-Likely return on investment will impact on the willingness of firms to invest

Question 20

Skills and Availability of Workforce

Answer 20

-Low unit labour costs
-High productivity
-Skills and levels of education
-Size of the workforce and any shortages there may be in key areas

Question 21

merger

Answer 21

-is a deal to unite 2 exiting companies into the new company

Question 22

joint venture

Answer 22

is an arrangement in which 2 or more businesses agree to create a new business that they own in partnership
(project together)

Question 23

Reasons for merger and joint venture

Answer 23

-Spreading risk over different countries/regions
-entering new markets/trade blocs
-acquiring national/international brand names/patents
-securing resources/suppliers
-maintaining/increasing global competitiveness

Question 24

Competitive advantage

Answer 24

-Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals.
-having something that other businesses can’t replicate

Question 25

Factors influencing competitiveness

Answer 25

-brand name
-product reliability
-quality and design
-lower labour costs
-investment in tech
-R+D
-lower price due to value of currency
-customer service
-global supply chain
-economies of scale

Question 26

2 strategies to build competitive ad

Answer 26

-cost leadership
-differentiation

Question 27

how can you use cost leadership to build competitive ad

Answer 27

-with this strategy a business will seek to produce the same quality products as it competitors at lower price
-the industries typical of this strategy are standard mass produced items
-larger businesses typically do well as they can benefit for the largest reduction in average costs and E of scale
-they may gain cost leadership due to:
-good resource management
-efficient production methods
-waste minimisation

Question 28

how can you use Differentiation to build competitive ad

Answer 28

-with this strategy a business will produce a unique product or give a unique service
-with a uniqueness the business can change a premium price to its market segment
-(Kotler) suggests:
-performance
-style
-design
-consistency
-durability
-reliability

Question 29

how can fluctuating exchange rates affect competitiveness

Answer 29

-movements in the exchange rate will determine competitiveness
e.g. sharp depreciation makes exports cheaper and more competitive

Question 30

Advantage of fall in value of £

Answer 30

-exports cheaper

Question 31

Dis of fall in value of £

Answer 31

-imports more expensive

Question 32

fixed contact

Answer 32

-contracts fixed over set years (12-18 months)
-helps stabilise uncertainty of fluctuating exchanger rate

Question 33

Benefits of fixed contracts

Answer 33

-no affect of fluctuating exchange rate
-demand won’t fluctuate
-no loss of custom

Question 34

what is a devaluation

Answer 34

means fall in the value of a currency
(£ worth less)

Question 35

how can a devaluation make uk businesses more competitive

Answer 35

-exports cheaper so consumers abroad can buy goods from uk business for cheaper
-goods may be more attractive to domestic consumers as it may be cheaper than importing

Question 36

how can a devaluation make uk businesses less competitive

Answer 36

-imports more expensive may be more expensive to get raw materials from abroad

Question 37

What are skill shortages

Answer 37

-is when there is a lack of workers with the right qualifications in the industry

Question 38

how can fluctuating exchange rates affect competitiveness

Answer 38

-movements in the exchange rate will determine competitiveness

Question 39

calculating exchange rates

Answer 39

pounds to foreign currency:
-multiply amount of £ by exchange rate

foreign current to pounds:
-foreign currency divided by exchange rate