4 2 global markets and business expansion

Push factors are factors that drive a business to expand outside of its domestic country.

A saturated market is where demand for goods and services has reached a peak. It becomes challenging for businesses to grow and expand within the local market.

True. Intense competition can prompt businesses to explore new markets to increase sales.

Pull factors are factors that encourage businesses to operate within markets that present significant growth opportunities abroad.

Economies of scale are the cost reductions achieved as a result of expanding production. They can arise when a business expands its production in new markets abroad.

Risk spreading is when a business accesses multiple markets to diversify their customer base. This reduces their exposure to risks associated with operating in a single market.

Offshoring is when a company moves part of the production process, or all of it, to another country.

True. Outsourcing occurs when a business hires an external organisation to complete certain tasks or business functions.

An extension strategy is a method used by a business to extend the life cycle of a product or service.

Offshoring is carried out within the same business, albeit in a different location. Outsourcing refers to tasks undertaken by a completely different business.

Infrastructure refers to the basic physical and organisational systems and facilities needed for the operation of a society, such as roads, transportation networks, power and communication (mobile coverage/internet).

Ease of doing business refers to the presence or absence of rules and regulations involved in establishing a business in a particular market.

Disposable income is the income individuals have left after paying direct taxes and other deductions, such as pension contributions.

An exchange rate is the price of one currency in terms of another.

True. A country or region that offers a stable political environment is less risky for businesses to invest in. They are less likely to be subject to corruption, crime and a lack of law enforcement.

PESTLE is a model used by businesses to assess the external factors at play in a market. These factors are categorised as political, economic, social, technological, legal and environmental.

True. Ease of doing business can include factors such as accessing credit, registering properties, and enforcing contracts.

False. Businesses should consider both financial and non-financial factors when assessing a country as a market.

Factors to consider for a production location include:

A trade bloc is a group of countries that have agreed to remove barriers to trade, such as tariffs and quotas, among themselves.

A government grant is a sum of money given to a business to encourage them to invest, create jobs or operate in a particular location. A grant does not need to be repaid.

Political stability is important to avoid disruptions in production. Unstable political environments can have high levels of corruption, crime and a lack of effective law enforcement.

True. Businesses often choose to locate production in a region where labour costs are lower as this reduces production costs.

Bureaucracy is a system where many rules and processes exist that slow down decision-making, making it less easy to conduct business affairs.

A tax break is a financial benefit offered by the government that reduces the tax liability of a business. Tax breaks are sometimes available to businesses that agree to locate to a particular region.

A global merger is a permanent agreement between two or more businesses from different countries to join together.

A joint venture is when two businesses join together to share their knowledge, resources, and skills to form a separate business entity for a limited period of time.

A patent is the legal right for an individual or business to make, use or sell an invention and exclude others from doing so.

True. Mergers and acquisitions can be used to acquire national or international brand names or patents.

True. In many emerging economies, governments insist that foreign businesses can only operate as joint ventures, as this can benefit domestic businesses.

Global competitiveness refers to a business's ability to perform better than its rivals across markets in different countries.

Diversification is when a business varies its range of products or services, alongside its core business, to provide additional income

True. When two businesses join together, redundancies can occur as job roles are duplicated.

A culture clash is a conflict that arises between workers from combined businesses as a result of different working norms or organisational processes.

False. Diseconomies of scale can occur due to communication issues and a lack of control as the business expands through global mergers.

Exchange rate fluctuations refer to the changes in the value of one currency in relation to another currency over time.

True. Exchange rate fluctuations can influence the competitiveness of businesses operating in different countries.

Currency appreciation is when the value of one currency increases in relation to another currency over time.

True. If there is a currency appreciation, businesses that import raw materials and components from abroad will pay less for them.

Currency depreciation is when the value of one currency decreases in relation to another currency over time.

False. Cost leadership is achieved when a business becomes the lowest cost producer in their industry.

Competitive advantage refers to the ability of a firm to outperform its competitors in a particular industry by offering superior products or services.

False. If there is a currency depreciation, businesses that export products will become more competitive because their products will be cheaper for overseas buyers to purchase.