Key terms in Unit 3

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These are most of the definitions that are needed for the Business unit 3 module.

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Harry Bindloss
UNIT 3 ­ Key terms
Ansoff's Matrix: A method by which businesses can classify their strategies for expansion.
It includes; Market Penetration, Product Development, Market Development and
Backwards innovation: establishment of a product that is coming to the end of its
product life cycle in one market but can be launched into a new market to start a product life
Backwards vertical merger: A firm merges with a firm closer to the suppliers in a
production process.
Barriers: There are tariffs and non-tariff barriers that are important to consider when moving
into international trade with countries.
Comparative advantage: The idea that countries can benefit from specialising in the
production of goods at which they are relatively more efficient. In this way consumers within
each country gain the maximum benefit from international trade
Diseconomies of scale: The negative effects of increasing the scale of production that
results in higher unit costs.
Dumping: Selling goods on a foreign market below their costs of production. This could be
in order to destroy the domestic competition and create a monopoly position in which
prices can be raised.
Economies of scale: These are the benefits of producing on a large scale resulting in lower
unit costs. If nations specialise in what they are best at not only will output rise due to
comparative advantage but unit costs will fall due to economies of scale. Therefore prices
are lower and consumers are better off.
Emerging Markets: Those that are not yet fully developed but have a group of middle class
consumers that is large enough to provide a market for developed country products.
Ethnocentric: Looking at markets from primarily the perspective of one's own culture. A
business believes that what was a success story in its domestic market will also be so in
other countries in which it operates.
FDI: Foreign Direct Investment is the flows of private capital from one country to another,
normally funding for business ventures.
Forwards vertical merger: A firm merges with a firm closer to the market or consumers in
a production process.

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Harry Bindloss
Geocentric: The potential market has both similarities and differences in domestic and
foreign markets.
Global Marketing: The marketing strategies used by businesses when operating in global
Global sourcing: This means a business can manufacture components in overseas countries
where labour is cheap before assembling the final product domestically.
Globalisation: The internationalisation of goods, services, labours and financial markets
which has led to businesses being active in a global economy.…read more

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Harry Bindloss
Protectionism: The intervention by governments in the free trade between nations. The
methods available usually attempt to reduce imports (to protect domestic production) and
are therefore often referred to as trade barriers, although other methods may seek to
encourage exports.
Stakeholder: A person or group or organisation that has direct or indirect stake in an
organisation because it can affect or can be affected by the organisations actions, objectives
and policies.…read more


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