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| show | Disposable income is the total income an individual has available to spend after paying income taxes and any other statutory payments.
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| show | Those countries with high levels of disposable income will be seen as attractive to UK businesses as they can target them with highly differentiated products.
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| Why is China perfect for new market development? | show 🗑
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| show | The ease of doing business is how accessible markets are for a business. For example is their excessive bureaucracy, where rules and regulations increase the time taken to do business e.g. paperwork when exporting products.
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| What is Infrastructure? | show 🗑
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| Any profit made in the foreign country from providing goods and services will be more expensive to repatriate (send back) to the UK . Why? | show 🗑
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| What factors have to be considered when locating abroad? | show 🗑
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| show | We have to import a great deal of the raw materials that do not naturally occur in this country e.g. Cocoa
We have a high standard of living and a high national minimum wage in comparison to other countries
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| show | Does the country have adequate road, rail, sea and air transport systems so goods can be exported and imported easily?
Does the country have suitable buildings and premises where the goods could be manufactured?
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| show | Locating in a trade bloc such as ASEAN allows easier access to markets within those countries, with lower export taxes.
For example Nissan and Toyota all have manufacturing plants in the UK to gain access to the rich and developed EU market for cars
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| show | In the UK there is often a shortage of suitably skilled workers i.e. a lack of availability. This can be resolved by locating in other countries and utilising the skills of workers there.
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| What makes Egypt a politically unstable country in which to locate a business? | show 🗑
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| What makes Thailand a politically unstable country in which to locate a business? | show 🗑
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| show | Tax incentives are given to companies in the hope that foreign investors will bring in capital to support economic development and create local employment. Nissan were given a grant by UK government to locate in the unemployment blackspot of Sunderland.
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| show | Setting up production in another country is expensive e.g Moving factory/Setting up new production/Buying machinery/ Hiring key staff with local knowledge (language).
Investors will need to know that these expenses will be returned with profits
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| What happens when the pound appreciates (gets stronger)? | show 🗑
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| What happens when the pound depreciates? | show 🗑
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| show | Keep prices to other countries the same and enjoy the higher profit
Lower prices to other countries and gain market share and more revenue from extra sales
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| show | Recession - a weak £pound is great for exports at lower prices but if there is a recession in the country buying the goods then demand will still be low
PED - If good are price inelastic then the lower price due to the weak pound won’t effect demand
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| What is a competitive advantage? | show 🗑
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| show | With this strategy a business will seek to produce the same quality products as its competitors at a lower price
Large businesses typically do well as they can benefit for the largest reduction in average costs and EOS
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| show | High levels of productivity
High capacity utilisation
Use of bargaining power to negotiate the lowest prices for production inputs
Lean production methods (e.g. JIT)
Technical Economies of Scale
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| What is a purchasing economy of scale? | show 🗑
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| What are technical economies of scale? | show 🗑
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| show | With this strategy a business will produce a unique product or give a unique service. They may be similar products but each will have some attributes which set it aside from the competition.
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| show | Performance
Style – TGI restaurants
Design
Consistency
Durability
Reliability – Eveready battery bunny
Reparability
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| show | A skills shortage is where there is a shortage of individuals in the labour market with skills to meet labour market demand. Businesses which follow a differentiation strategy are more vulnerable to skills shortages as they require more skilled staff
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| show | A skills gap means that current employees do not have the necessary skills that employers require.
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| What is a global merger? | show 🗑
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| show | A joint venture occurs when two or more business agree to act collectively to set up a new business venture with all parties contributing equity to fund the set up and purchase of assets.
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| How are joint ventures different to mergers? | show 🗑
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| What are the reasons for a joint venture/global merger? | show 🗑
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| What is spreading risk over different countries/regions? | show 🗑
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| What are the benefits of spreading risk over different countries/regions? | show 🗑
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| What is the benefit of Acquiring national/international/brand names/patents? | show 🗑
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| What is a benefit of securing resources/supplies? | show 🗑
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| What are push factors? | show 🗑
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| What is market saturation? | show 🗑
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| show | Maturity
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| show | Diversifying their range/Seeking new Markets
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| show | Purchasing Economies of Scale
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| What is risk spreading? | show 🗑
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| show | When a business contracts out production to another business.
This might lead to a loss of quality control but can allow the business to match supply to meet demand. Apple outsources the production of the iPhone to Foxconn in China.
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| show | Microwaves
Fridges
TV's
Washing Machines
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| show | Offshoring involves the relocation of business activities from the home country to a different international location.
Offshoring is common with business services (e.g. UK financial services using call centres based in India).
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| Push factors are factors that push a business to expand outside of their domestic country. The UK leaving the EU is an example. State three businesses that have been affected. | show 🗑
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| show | Pull factors encourage businesses to operate within markets abroad which present significant growth opportunities e.g. economies of scale/risk spreading
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| show | Usually occurs when a business expands its production in new markets abroad (able to purchase raw materials & labour at lower prices) e.g. Ikea expanded into China following removal of the their one-child policy (furniture sales increased)
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| Risk spreading is a pull factor. Explain this with an example. | show 🗑
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| show | (1) Access to specialised suppliers in countries abroad who provide better quality service, raw materials or components
(2) Lower labour costs may be available in other countries which help businesses to keep costs down and increase profitability
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| show | (1) Public relations and employer/employee relations may suffer due to relocation as domestic workers lose jobs
(2) Possibly poor customer service due to language and cultural differences between the domestic consumers and foreign workers
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| show | Damage to brand image as the values of the two businesses may not be in alignment E.g. Foxconn workers producing Apple products were committing suicide due to the low pay and poor working conditions
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| State two benefits of Outsourcing | show 🗑
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| show | Infrastructure/Ease of doing business/Levels of growth and disposable income/Exchange rates/Political stability
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| show | Ease of doing business is how accessible markets are for a business e.g. is there excessive bureaucracy, where rules and regulations increase the time taken to do business e.g. paperwork when exporting products
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| show | Businesses may be at risk of not gaining a return on their investment in a country with political instability/A country with political instability will be subject to corruption, lack of law enforcement and higher levels of crime
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| show | Costs of production/Government incentives/Natural resources/Skills and availability of labour force/Location in trade bloc
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| show | The quality of the workforce is important as this will directly impact the quality of the goods and services produced in an economy/Businesses may choose to locate production in a market where the labour costs are lower
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| show | A business located in a market within a trade bloc will be able to access many advantages such as reduced protectionist measures
E.g. Japanese Co. Toyota invested in manufacturing facilities in the UK (prior to Brexit) to gain access to the EU market
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| State why access to natural resources is an important factor when assessing a production location | show 🗑
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| State four reasons for a Global Merger | show 🗑
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| show | (1) The initial costs of merging can be significantly high.
There is no guarantee a business will gain a return on their initial investment
(2) A culture clash between the two businesses can affect the quality of the business, leading to poor sales
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| State two benefits of a Global Merger or Joint Venture | show 🗑
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| Define Cost Leadership and explain two ways it can be achieved | show 🗑
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Created by:
durquhart1
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