4.2 Global Markets and business expansion - Knowledge Check

State 2 push factors​

saturated markets ​

competition ​

extending the product life cycle

State 2 pull factors

economies of scale ​

risk spreading ​

possibility of off-shoring

State 3 factors an MNC might consider when assessing a country as a market

levels and growth of disposable income;

ease of doing business;

infrastructure;

political stability;

exchange rate

State 5 factors an MNC might consider when assessing a country as a production location

costs of production ​

skills and availability of labour force

infrastructure​

location in trade bloc ​

government incentives

ease of doing business

political stability​

natural resources ​

likely return on investment

Consider an MNC seeking competitive advantage through cost competitiveness (E.g. IKEA, Toyota or Lidl). ​How might going global support this?

Off-shore production to a low-cost location,

take advantage of economies of scale by targeting a larger global market/exporting within a trade bloc

Consider an MNC seeking competitive advantage through differentiation (E.g. Apple, Tesla or Nike). ​How might going global support this?

Take advantage of more skilled labour/overcome skill shortages; build a global brand and benefit from marketing economies

List 3 reasons why an MNC might pursue further growth via a global merger or takeover.

- Spreading risk over different countries/regions

- Entering new markets/trade blocs

- Acquiring national/international brand names/patents

- Securing resources/supplies

- Maintaining/increasing global competitiveness

Identify 3 factors contributing to globalisation that have led to the growth in MNCs

Trade liberalisation > easier/cheaper to trade across borders​

Political change >opening up markets and production locations​

Cheaper/easier reduced cost of transport and communication > e.g. containerisation> cheaper to move goods; internet>easier to operate around the globe​

Growth of the global labour force/Migration>access to cheaper and/or more skilled labour/consumers, increasingly urbanised

How do MNCs contribute towards globalisation?

Move inputs and outputs around the world > increasing international trade​

Carry out FDI e.g. building factories, sales outlets etc around the world > skill and technology transfer ​

Move managers into other countries> spread ways of working>cultural integration

How would an appreciation of the £ against the $ affect a UK based producer exporting to the USA?

Make their product less competitive on price in $ reducing sales.
Extent of the effect will depend on PED

NB Business may decide to lower price in £ to maintain price in $ > lower margin

How would an appreciation of the £ against the $ affect a UK based retailer that imports stock from the USA.

Reduce variable costs - scope to lower price or increase margin.

How would a depreciation of the £ against the € affect a UK based retailer that imports stock from the Germany?

It would make stock more expensive to buy (assuming the German producer passes on the cost).

May decide to increase selling price, reducing competitiveness.
BUT - if rival retailers are also importing from Europe, may not affect competitiveness much.

PED very important here.