4.2 (MR A)

push factors

• factors that push a business to expand outside of their domestic market

• force a business to cinsider selling abroad

examples of push factors

• saturated markets

• intense competition

pull factors

• encourage businesses to operate within markets abroad which present significant growth opportunities

examples of pull factors

• risk spreading

• economies of scale

• new tech

• raw materials

• cheap labour

what is off shoring

• when a company moves part of production process or all of it to another country

reasons for off shoring

• lower labour costs

• access raw materials

• access skilled labour

pros and cons of off shoring

• + low labour costs, access to raw materials, access skilled labour

• - consumer preferences, new/different regulations

• possibly bad customer service (language and culture)

what is outsourcing

• occurs when a business hires an external organisation to complete certain tasks or business functions

pros and cons of outsourcing

• + reduces operational costs, access to specialist skills and expertise

• - loss of control over quality, communication barriers, potential damage to reputation

assessment of a country as a market

• means we are thinking to trade with businesses in that country

factors to consider

• disposable income- if you’re selling in one country you will want locals to have high disposable incomes to crate high demand

• ease of doing business- are regulations minimal or simple? Low levels of corruption?

• infrastructure- road, rail and communications? Easy to access consumers?

• political stability- want stable policies to give business confidence to invest

• exchange rate- want it to be stable

assessment of a country as a product location

• looking to offshore in another country for various reasons such as cost of production

factors to consider

• SPELLING

• Skills and availability of labour force- do the correct skills exist in this country? Large pool of available labour?

• Political stability- more stable= lower risk

• Ease of doing business- does it have excessive regulations?

• Location in the trading bloc- if it is then much easier to export into other countries in that trade bloc

• Likely return on investment- is it positive?

• Infrastructure- does this location have necessary road, rail, airports? Better infrastructure= higher efficiency

• Natural resources-

• Government incentives- tax breaks? Subsidies?

what is a merger

when two or more businesses agree to become integrated into one business

what is a joint venture

• a business agreement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task

reasons for global mergers and joint ventures

• spread risks across different countries/ regions- lower economic risk, some countries may be experiencing a boom while others have recessions

• enter new markets

• access new technology

• eliminate competition (higher market share)