4.2 Global Markets and Business Expansion

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Reasons for Targeting International Markets
Reduce dependence on domestic markets, Access faster-growing markets, Achieve economies of scale, Build brand value, Spread risk.
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Push Factors
Where businesses feel they have to expand internationally because of domestic market issues. E.g. Saturated markets and Increased competition.
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Pull Factors
Where businesses are attracted by compelling opportunities to grow by expanding internationally. E.g. Economies of scale and Risk spreading.
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Disposable Income
The amount of money that households have available after tax.
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Political Stability
The durability and integrity of a current government regime.
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Exchange Rate
The value of one currency for the purpose of conversion to another.
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Factors used to assess a country as a market
Level of growth, Disposable income, Ease of doing business, Infrastructure, Political Stability, Exchange Rate.
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Factors used to assess a country as a production location
Costs of production, Skills and availability of labour, Infrastructure, Location in trade bloc, Government incentives, Ease of doing business, Political stability, Natural resources, Likely return on investment.
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Labour Productivity
Productivity is measured by GDP per hour worked and per worker, and growth in GDP per hour worked.
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Return on Investment
(Gain from Investment - Cost of Investment) / Cost of Investment
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Offshoring
Occurs when a business relocates part of its business operations overseas.
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Outsourcing
Where a business function is contracted to a third party.
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Merger
When two companies agree to legally combine into one company, melding their management and structures.
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Joint Venture
A legal partnership between two or more companies.
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Licensing
A contract where another firm can use a company's brand.
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Franchising
Where one party, the franchisor, contracts with another, the franchisee, to operate under its brand name and use the firm's business model.
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Reasons for Mergers
Spreading risk, Customer base becomes larger by entering new markets and trade blocs, Acquiring national and international brand names, Securing resources, Increasing global competitiveness.
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Fixed Contracts
Companies use fixed contracts to peg the price of a particular product, avoiding the issues of exchange rate fluctuations.
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Sources of Cost Competitiveness
Raw material price and availability, Political stability, Low cost labour, Skilled workforce, Regulation, Better technology, Process innovation.
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Sources of Differentiation
Quality, USP, Price, Specification, Advertising/Branding, Ethics, Functionality, Product Innovation.
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Skill Shortage
A skill shortage exists when there are not enough people with a particular skill to meet demand.
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Other cards in this set

Card 2

Front

Where businesses feel they have to expand internationally because of domestic market issues. E.g. Saturated markets and Increased competition.

Back

Push Factors

Card 3

Front

Where businesses are attracted by compelling opportunities to grow by expanding internationally. E.g. Economies of scale and Risk spreading.

Back

Preview of the back of card 3

Card 4

Front

The amount of money that households have available after tax.

Back

Preview of the back of card 4

Card 5

Front

The durability and integrity of a current government regime.

Back

Preview of the back of card 5
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