Unit 3 - 3.3.4

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  • Created on: 11-01-13 07:57
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3.3.4. ­ Other considerations before trading internationally
Ethical decisions regarding what and where to manufacture:
- How good the legal protection in enforcing the contract is
- How easy is it to obtain credit
- How easy is it to buy property
- How easy is it to build a property
- How easy is it to trade across country barriers
- How easy is it to close a business
- How well are investors protected
- How easy is it to start a business
- How easy are the taxation processes
Capital Vs Labour intensive:
Companies need to find a balance between being capital or labour intensive they shouldn't be completely capital
or labour orientated
- Capital: (machinery, products, etc)
· Lower production costs
· Higher production capacity
· More consistent level of quality
· Fewer jobs created
- Labour: (workers)
· More skilled jobs in the local area
· Easier to build relationships with local community
· More expensive
Where to sell:
- Education level, low education level easier to target however unfair to exploit them e.g. cigarettes
- Civil unrest, target areas where there is civil unrest with weapons? As there is market available but would
be encouraging the unrest
- Natural resources, should a company take advantage of the natural resources available in a country e.g.
oil in Africa
Pay and working conditions:
- Need a balance between sweatshop and fair trade
- Costs kept low to keep prices low so cheaper wages needed
- Sweatshops = low wages, long working hours and poor working conditions
- Fair Trade = high wages, fair hours and good working conditions
- Sweatshops are cheap but unfair whereas fair trade is expensive and very fair
- A balance is needed so the company is seen as ethical but also have low prices
Environmental factors:
- Global warming is becoming increasingly more important in the developed world
- Some countries are introducing laws, taxations and limitations on CO2 emissions and pollution
- Companies who use high levels of CO2 are moving to countries with less strict laws regarding pollution to
keep costs low and therefore prices lower
- As companies are choosing to move to these countries rather than lower emissions they impact stays
the same and there is no overall reduction
Corporate Social Responsibility (CSR):
An ongoing commitment by a business to behave ethically and contribute to economic development, while
improving the quality of life for staff and their families as well as the local community and society at large.
- Companies must conduct their business ethically
- Take into consideration the interests of all stakeholders
- The business must act as a good citizen helping people as much as possible
- Action must be taken before it is required
Advantages of CSR:
- Encourages customers to buy more from the company, increases profit

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Employees are a companies most valued asset, treated well so morale and team work improved
- Helps local community and stakeholders as much as possible gaining a better reputation leading to
increased sales
- Taking action before needed reduces the risk of major problems occurring later which could have high
costs
Disadvantages of CSR:
- Can be expensive so costs are increased
- Some shareholders not approving of the CSR guidelines so won't invest in the business
- Taking action early can lead to conflicts…read more

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Local Knowledge
o Problems avoided if you know the area
o Joint ventures can be useful as one partner knows more about the country then the other e.g.…read more

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